Australia’s mandatory climate risk reporting requirements are now in effect, and will capture most medium to large organisations over the next 3 years. Businesses must prepare for a new era of accountability and transparency. We recently attended a Sustainability Reporting Conference in Sydney where this was the hot topic. Here are my observations from the many good sessions I had the chance to attend.
Understanding the Complexity
The new regulatory framework demands a level of specificity that requires a shift in approach. Climate risk reporting isn’t just another checkbox exercise—it necessitates a robust blend of financial, operational, and sustainability expertise. Organisations should begin by assessing their current state, identifying gaps, and establishing a clear roadmap toward compliance.
A well-structured working group with executive sponsorship is crucial. This ensures that accountability is embedded at all levels and that reporting doesn’t remain siloed within sustainability teams. While external consultants can provide valuable insights, upskilling internal teams is equally important to sustain long-term reporting capability.
Accountability as a Driver of Action
Effective reporting is not just about producing an annual document—it’s about continuous performance management. CFOs can play a key role in driving accountability by linking climate-related targets to executive remuneration. Embedding climate considerations into corporate governance frameworks ensures they become integral to business strategy rather than an isolated compliance function.
Audit and risk committees should also provide a critical ‘cold’ assessment of data accuracy and materiality, ensuring that reporting is not only compliant but also decision-useful. Moreover, organisations should implement year-round reporting processes to monitor progress, manage gaps, and refine climate transition plans for long-term resilience.
Data Quality and Supply Chain Integration
One of the biggest challenges in climate risk reporting is ensuring high-quality, reliable data—especially when it comes to Scope 3 emissions, which cover indirect emissions in a company’s value chain. Many businesses rely on the spend-based method for Scope 3 calculations, but this approach offers limited control over emissions management. Shifting to higher-order calculation methods improves accuracy and drives meaningful action.
Bringing suppliers along on the reporting journey is essential. Raising awareness, providing education, and aligning methodologies before requesting data from SMEs can prevent inconsistencies and inefficiencies. Organizations should also determine when it makes sense to transition from industry averages to primary data sources for greater precision.
The Role of Finance Teams in Climate Reporting
Finance teams bring strong reporting frameworks, but alignment is needed to ensure climate risk reporting integrates seamlessly with financial disclosures. Many finance professionals encounter different acronyms and varied interpretations of the same terms, leading to potential confusion. Businesses should engage finance teams early, identify what matters most to them, and ensure that materiality serves as the guiding principle for climate-related disclosures.
Beyond Compliance: The Innovation Opportunity
Evidence-based climate reporting is more than just a regulatory requirement—it can be a catalyst for business innovation. High-quality climate data enables organisations to conduct deeper assessments, enhance decision-making, and uncover efficiency improvements. By embedding sustainability into core business strategies, companies can enhance resilience and gain a competitive edge.
Climate transition plans, for instance, are not just compliance artifacts but powerful tools for long-term risk management and strategic planning. Organisations that integrate climate-related financial risks into their broader business models will be better positioned to navigate regulatory scrutiny and market expectations.
Collaboration and Competition Law Considerations
Collaboration can play a pivotal role in improving the accuracy, comparability, and efficiency of climate data collection. However, competition laws add a layer of complexity. The Australian Competition and Consumer Commission (ACCC) session was enlightening. They outlined collaboration exemptions if there is an identifiable net public benefit, which can extend to sustainability reporting efforts. Cross-sector partnerships can enhance data reliability while ensuring compliance with competition regulations.
Avoiding Greenwashing and Green-Hushing
We’ve all heard and are cautious of greenwashing—making misleading claims about sustainability efforts. But the fear of scrutiny has also led to ‘greenhushing,’ where companies under-report their climate commitments to avoid potential backlash. A balanced, transparent approach to climate risk reporting fosters trust with stakeholders and minimises reputational risks.
Conclusion: A Strategic Approach to Compliance
The shift to mandatory climate risk reporting is a significant milestone for Australian businesses. While compliance may initially feel like a burden, it presents a valuable opportunity to enhance business resilience, drive operational efficiencies, and unlock new growth avenues. By investing in the right people, processes, and technologies, organisations can transform climate reporting from a regulatory obligation into a strategic asset for long-term success.
Are you ready to meet your mandatory climate risk reporting obligations?
Contact us for a discussion about how we can help.
