Implementation of mandatory climate reporting in Australia faces delay

The timeframes for businesses to add climate reports to their annual reporting is up in the air, but now is the time to ensure it can be included in any financial reports.

Apr 08, 2024, updated Apr 08, 2024

On March 27, the Australian Government followed its promise to mandate climate reporting in Australia by introducing the “Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill” into parliament.

The bill mandates climate reporting for entities required to prepare and lodge financial reports with the Australian Securities and Investments Commission (ASIC) under Chapter 2M of the Corporations Act 2001.

Significantly, the bill delays the start date for Group 1 entities by at least six months, from 1 July 2024 to 1 January 2025 at the earliest.

What is the start date?

The start date outlined in the bill may vary depending on when it passes through both Houses of Parliament.

While the government announced that the new climate reporting requirements will commence on 1 January 2025 rather than 1 July 2024, the bill anticipates that the start date could be later.

For example, if the necessary amendments proposed in the bill:

  • Commence on or before 2 December 2024; the start date will be 1 January 2025
  • Commence between 3 December 2024 and 1 June 2025; the start date will be 1 July 2025
  • Commence on or after 2 June 2025; the start date will be the first 1 January or 1 July to occur 29 days or more after the day the amendments commence.

If the amendments don’t pass by June 2025, mandating climate reporting will fall to the next government, as a Federal election is due no later than May 2025.

What do these changes mean for your entity?

A six or 12-month delay in the start date will not affect the timing of mandatory climate reporting for Group 2 and 3 entities.

First-time reporting for Group 2 entities will be for financial years beginning on or after 1 July 2026 and for Group 3 entities, on or after 1 July 2027.

However, some Group 1 entities will receive extensions for mandatory reporting timeframes. Group 1 entities with a 30 June or 30 September year-end will get a one-year reprieve if the start date is delayed from 1 July 2024 to 1 January 2025, and all Group 1 entities will get a one-year reprieve if the start date is delayed by one year to 1 July 2025.

Who must report?

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The bill does not change the types and sizes of entities required to prepare climate reports. The following table outlines the thresholds for reporting:

Source: Mandatory climate-related financial disclosures – Policy position statement

Other matters

The Bill also contains various additions and amendments from the Exposure Draft.

ASIC may give written notice to an entity if it considers a statement in the sustainability report incorrect, incomplete, or misleading. ASIC will have the power to direct the entity to ‘please explain’ and, if necessary, to correct, complete or amend the statement.

For years commencing on or before 30 June 2030, the Auditing and Assurance Standards Board (AUASB) must make auditing standards under section 336 that specify the extent to which the sustainability report must be audited or reviewed (the Exposure Draft previously specified that only Scope 1 and Scope 2 emissions would be subject to review for this period).

In addition to covering statements about Scope 3 emissions and scenario analysis for the first three years, the limited immunity provisions for directors have been expanded to include statements about the entity’s transition plans.

The drop-dead 30 June 2027 end date for limited immunity provisions for directors proposed in the Exposure Draft is removed and now applies to financial years commencing during the first three years from the start date of the legislation.

Further immunity is provided for ‘protected statements’ made during financial years commencing during the 12 months from the start date of the legislation for forward-looking climate statements. This includes immunity for protected statements made in the auditor’s report.

Do you need help with your climate reporting?

BDO’s sustainability reporting team can help you understand what this might mean for your organisation, contact BDO today.

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