The new Australian climate-related financial disclosures legislation, due to be implemented from July 1, 2024, will eventually mandate reasonable assurance on all climate-related financial disclosures. This legislation represents a fundamental shift in how companies will need to verify and assure disclosures, requiring upgrades in internal and external processes.

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Assurance and verification: what’s the difference? 

Verification is the last line of defence in ensuring the accuracy and integrity of company reporting before assurance—it confirms that each statement in a published document is accurate and not misleading. In the context of assurance, verification ensures that the data being put in front of external auditors is high-quality and robust. As the AICD states, “Internal verification is a necessary step to meeting the preconditions of external assurance.”

Assurance—which builds on verification—requires an independent and accredited auditing professional to conduct data checking processes in accordance with the necessary ethical, independence, and quality standards. There are two main kinds of assurance: limited assurance and reasonable assurance. The AICD outlines that the key difference comes from the level of rigour required for each: 

Limited assurance—mandated for Group 1 entities on climate-related financial disclosures from July 1, 2024 with Groups 2 & 3 to follow—“requires similar rigour to a financial statement review (as distinct from an audit).”

Reasonable assurance—mandated on all climate-related financial disclosures no later than July 1, 2030 across Groups 1, 2 & 3—involves “a similar rigour to the financial statement audit.”

Navigating the challenges of climate-related disclosures

The new legislation will place strain both on internal teams and external assurers—companies that act now to upgrade their internal processes will be ahead of the game when it comes time for assurance. 

In a recent whitepaper co-produced by Atticus and AIRA, 80% of ASX 200 companies reported that their highest priority preparation step is to upgrade and automate data collection and assurance processes. 60% of companies report that their data collection and verification are currently conducted manually, creating several challenges including: 

• Processes are time consuming and resource-intensive.
• Information is inconsistent across departments.
• Sources are difficult to verify.
• Reports have a higher likelihood of human error.

To be ready for the rollout, companies need to invest in streamlining internal processes. The new requirements will increase team workloads as climate-related reporting becomes nearly as demanding as annual reports. Usage data from Atticus indicates that sustainability reporting typically requires twice as many users and nearly 160% more verified annotations when compared to all other document types aside from annual reports. 

Using automation to gain efficiencies

Meredith Banks, Head of Sustainability at Vicinity Centres, recognises this urgent need. She says that automated verification software has been “a game changer” for their data verification processes. “In the past, I might have had a conversation with the internal audit team and then my team would have a conversation with different internal audit members and get a different message.”

The benefit of using Atticus means that there is a centralised point of truth: “everyone sees the one thing, so it cuts out the back-and-forth and becomes very clear what’s remaining for us to do in terms of the assurance piece.”

Streamlined internal systems also improves Vicinity Centre’s experience of the external assurance process. “Manual processes are no longer appropriate; a quick, easy, streamlined process makes it easier for everyone.” 

Effective ESG strategy starts with robust internal processes

Upgrading internal processes is not simply about gaining efficiencies or being prepared for formal assurance; it’s about better strategic planning. Internal verification improves the accuracy of claims by ensuring every statement is linked to high-quality evidence. 

The result? Enhanced social licence to operate, improved market reputation, stronger investor-company dialogue, and more effective ESG strategies. 

To gain these benefits, companies need to invest in internal processes. Verification is a good place to start, because it is a necessary precursor to assurance. Getting verification right not only saves time and money, but sets up companies to thrive in the evolving ESG landscape. Change is coming—and those who act now will reap the rewards.

How to verify sustainability reports

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