February 01, 2024
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This week, I had the privilege of moderating a live webinar on ‘Navigating the New ESG Reporting Standards’ hosted by the Australasian Investor Relations Association (AIRA). I was accompanied by a panel of sustainability and investor relations experts who shared their insights into this topic, including:

Fran van Reyk GM of IR and Sustainability, Ampol
Alicia Burgmann Head of ESG, WiseTech Global
Andrew Gray Head of ESG & Stewardship, Investments, AustralianSuper
Terence Jeyaretnam Asia-Pacific Climate Change and Sustainability Services, EY and AASB Board Member

Read on for a recap of the discussion or watch a recap of the discussion on-demand.

What are the facts?

To kick us off, Terence provided an update from Treasury’s recent Climate-related financial disclosure: exposure draft legislation. He outlined four major areas of changes based on the consultations:

Classification of reporting entities and phasing: Terence noted that whilst Group 3 only needs to report if climate risk is material to them, auditors may still require a significant amount of information to confirm this—so regardless of exposure, Group 3 should be as prepared as possible.

Mandatory reporting timeline shift: The new legislation extends the start time to 30th June 2025 year end, providing an extra year to those in Group 1. Group 2 and Group 3 entities will commence reporting 2 years and three years later respectively.

Reasonable assurance extension: Limited assurance over Scope 1 and 2 greenhouse gas emissions reports will be required from 1 July 2024. AUASB is setting a pathway to phase reasonable assurance for all climate disclosure by 1 July 2030, an extension on the original four year timeframe.

Reporting language and location: The final major change is related to the language and location of the sustainability reporting material, making the nature of this reporting much more formalised compared to voluntary reporting guidelines.  Sustainability reports now must be published and lodged with ASIC alongside financial reports, audit reports and the directors reports.

Learn more about the proposed changes in this factsheet produced by EY here. 

Practical takeaways from the panel

1. Context matters

I asked the panel to reflect on the industry-specific nuances that the mandatory climate reporting regime has within their unique industries:

Understand the costs: Preparedness is, in some parts, a recognition of the financial implications of climate change and reporting, according to Fran from Ampol. Fran notes the considerable effort and increase in costs will be unavoidable, and has been preparing extensively this year to improve data integrity and consolidate systems to maximise efficiencies.

There’s no better time than the present: As a software company, and an ASX100 listed business, WiseTech Global is a Group 1 reporter despite having relatively small climate exposure. With their first emissions inventory reported in FY21, they are comparatively early in the journey. Alicia started in her role by formalising and documenting data collection processes, and by talking to the board about incoming changes. One benefit of being in the early stages is starting from scratch without legacy frameworks meant they could lean into the TFCD-aligned framework from outset.

Embrace consistency: From an investor perspective, AustralianSuper uses sustainability reporting information to price assets and allocate capital. Andrew welcomes the benefits to be gained by a consistent and internationally comparable framework, allowing for better investment decisions in relation to an organisation’s risk and opportunity toward climate change.

“We recognise the cost and complexity that companies need to face in order to do this … noting that the implementation is slightly blunt … [so], we’ll be more focused on more exposed companies. But ultimately, everyone should be prepared”.

Andrew Gray
Head of ESG & Stewardship, Investments, AustralianSuper

2. Data, data, data

When asked about their approach to data collection and verification, the panel advised starting with the most material and relevant data, followed by gradual improvements in the process and scope of the reporting. 

Prioritise based on materiality and relevance: Remember that companies do not need to report 100% of the data under 100% of the categories with 100% accuracy as of January. Start by reporting what you can, then work toward an improved process and expanded scope. Eat the elephant one bite at a time. 

Don’t forget the narrative: Narrative statements are just as much as risk as the financial data, especially considering ASIC’s 2024 enforcement priorities around greenwashing (and ‘greenhushing’). If you say it, make sure you can prove it. If you can’t prove it, don’t say it. If you don’t say it, say why not. As a customer of Atticus, Fran remarked that utilising verification software across all their market-facing disclosures is critical in helping mitigate the narrative risk of greenwashing.

Ensure accuracy and completeness: Everyone needs to have a compliance lens on to reach the next standard of quality in the data. How are you ensuring the numbers you are capturing are correct? How are you documenting them and consolidating them?  From Terence’s perspective, there’s a vast array of maturity in the market.  “We have clients for whom we’ve provided reasonable assurance for over a decade, and there are companies of similar profile that have effectively no process for this currently.” You’re not alone if you’re just starting out.

“Greenwashing and greenhushing statements are key areas of concern for directors.”

Fran van Reyk
GM of IR and Sustainability, Ampol

3. Collaboration is key

When it comes to managing internal and external resource constraints, the resounding advice from the panel was to lean on your internal network:

Find alignment with the CFO: Operating under the CFO has advantages for many. Being in the same business unit not only provides direct access to vital cross-functional collaborators (i.e. the accountants producing the financial reporting that you’ll be aligning to), the position often provides a strong conduit for implementing sustainability-focused business changes across the enterprise.

Make friends with accountants: Get to know how a financial statement is put together. “Try and really understand all elements of your reporting, including the financial side” says Alicia. “It’s ‘accountants to the rescue’ time. Tap into your internal networks and really embrace each other.” Increasing your communication with others and general stakeholder management is going to be critical to make integrated reporting possible.

Share the load: You don’t necessarily need an army for your sustainability team—a small core group can focus on understanding the requirements, translating that into standards, and then managing a distributed process to collate data and produce reporting can be just as effective.

“This is an organisation-wide issue. The earlier you raise the profile of this risk [the better]. Engage the board in it… to influence the top echelons of the organisation in order to get the help and resources. Make sure it’s on the agenda.”

Terence Jeyaretnam
Asia-Pacific Climate Change and Sustainability Services Leader at EY and AASB Board Member

Final thoughts

Reflecting on the conversation, what stands out to me is how nuanced and industry-specific the challenges are. The conversation really revealed how tightly enmeshed climate reporting, financial reporting, sustainability experts, investor relations professionals, capital allocators, and investors all need to be. Collaboration, processes, and technology are going to be crucial to getting everything working with accuracy and completeness, even with the extended deadlines in the legislation.

Getting some of these systems in place early, especially lightweight technology like Atticus that require little change management and no systems integration work, can be a really powerful way of getting teams ready for a more centralised process.  If you’d like to hear more about how Atticus can help your team get prepared, please get in touch with us directly.

I’ll end the recap here with this fitting quote from Alicia:

“The fundamental challenges remain the same—we’ve got to get it right. It’s too important not to.”  

Alicia Burgmann
Head of ESG, WiseTech Global