Estimated figures from EY Australia suggest that over 600 of Australia's largest companies will be among the first to report on their response to climate change, providing valuable insights into their progress towards environmental targets.

According to the proposed timeline, mandatory reporting would be implemented from July 1, 2024, for the largest listed and unlisted companies, as well as financial institutions. Smaller businesses and entities would gradually follow suit as part of a phased rollout.

Meg Fricke, a partner at EY Climate Change and Sustainability Services, explained that the consultation paper offers clarity on the reporting schedule for different entities by establishing disclosure thresholds based on factors such as employee numbers, owned assets, and revenue earned.

"It provides a clear indication of which companies will be affected and when," Fricke stated in an interview with The Wall Street Journal.

On a global scale, there has been a growing demand for more consistent and comparable corporate sustainability information. With a lack of consensus on reporting standards and an abundance of differing guidelines, these reforms aim to address the issue.

Fricke revealed that, according to EY's estimates, it is anticipated that around 600 companies in Australia, spanning various sectors, will fall into the first reporting cohort known as Group 1. These companies are likely to commence disclosures from 2024-2025 onwards.

However, Fricke noted that these estimates are subject to final guidance from Australia's Treasury, particularly regarding the inclusion of entities in consolidated groups.

The Treasury has yet to comment on these estimates.

Although some potential companies in the initial reporting cohort already report on their climate change efforts, Fricke stressed the need for further action.

Climate Reporting Gaps Remain for Companies: Proposed Australian Reforms Aim to Introduce Mandatory Disclosures

Many companies in Group 1 are still lagging behind in reporting climate risk, despite the recent increase in reporting aligned with the Task Force on Climate-related Financial Disclosures (TCFD). Furthermore, it is worth noting that most companies that do report on climate risk do not obtain assurance, which will be required under the proposed standard.

The TCFD framework is widely used for disclosing climate-related risks, although it is just one of many frameworks available. Currently, corporate climate reporting remains largely voluntary, although several governments are taking steps towards mandating these disclosures.

Under Australia's proposed reforms, entities in other cohorts will have a longer period to prepare for disclosures.

Katelyn Adams, a corporate advisory partner at advisory and accounting firm HLB Mann Judd, expressed that businesses in Group 3 are not yet ready for climate disclosures. She recommended that they start preparing and highlighted the importance of establishing ESG (environment, social, corporate governance) committees to align business and ESG principles.

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