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What you need to include in your ASRS sustainability report and additional voluntary reporting options to consider

Join Barbara Albert, our Co-CEO, as she discusses the ASRS sustainability report and director liabilities

Previously in the series

Before we look at what you need to include in your ASRS sustainability report, ensure you’re up to date with our discussion on climate risks and opportunities, developing a carbon footprint, crafting a transition plan and setting effective metrics and targets under ASRS.

Introduction

As Australian Sustainability Reporting Standards (ASRS) approach full implementation, it’s vital for your organisation to fully understand and prepare for the changes these standards bring. These changes are not merely procedural but are designed to integrate climate-related financial disclosures deeply into the corporate governance framework of Australian organisations.

This blog post provides a detailed overview of the mandatory disclosures required in the ASRS sustainability report, including governance, risk management, and emissions metrics, as well as director liabilities. It also explores how you can enhance your sustainability reporting by considering additional voluntary frameworks and initiatives like GRI, SDGs, SBTi, TNFD, B Corp or Climate Active, extending beyond compliance to strategic environmental leadership.

Reporting content and requirements

Under the upcoming ASRS, your organisation is mandated to report on climate-related risks and opportunities. This comprehensive reporting begins in the first year with mandatory disclosures on governance frameworks, strategic planning, risk management, and specific metrics and targets, including Scope 1 and Scope 2 greenhouse gas emissions. The reporting requirements extend in the second year to include Scope 3 emissions, which cover indirect emissions related to your organisation’s value chain and financing or investment activities.

The annual ASRS ‘sustainability report’

To facilitate understanding and compliance, these disclosures will be part of a broader sustainability report embedded within your annual report. The ASRS sustainability report will be one of four key sections in your annual report, alongside the directors’ report, financial report, and auditor’s report. If you already issue a voluntary sustainability report, consider integrating it with the ASRS report, renaming it, or continuing with dual reporting. Make sure to include an index table within your annual report to allow users to easily navigate to the climate disclosures.

Timing of annual report lodgement, including for those required to lodge with Australian Securities and Investment Commission (ASIC), will stay consistent with current requirements under section 319 of the Corporations Act. You must make the sustainability report publicly available on your website the day the report is lodged with ASIC.

Here is what the sustainability report is expected to contain:

➡️ A climate statement for the year, which covers:

    • Material climate-related financial risks and opportunities
    • Details of any governance and risk management processes
    • Controls and procedures
    • Metric and targets related to climate, including Scope 1, 2 and 3 GHG emissions

➡️ Notes to the climate statement

➡️ Any statements required by a legislative instrument relating to matters concerning environmental sustainability

➡️ Notes to those prescribed statements (if any)

➡️ A directors’ declaration about the compliance of the statements and notes with the relevant sustainability standards

Ensure your climate statements comply with the sustainability standards set by the Australian Accounting Standards Board (AASB) to meet ASRS requirements.

With the disclosure of the mandatory sustainability report, the responsibility for climate-related reporting is now no longer just with the sustainability or ESG team. The directors’ declaration is a declaration by the directors of their opinion on whether the substantive provisions of the sustainability report are in compliance with the Corporations Act, including that the report complies with the Australian Sustainability Reporting Standards. These declarations must be made with a resolution of the directors, dated, and signed. In the first three years, a transitional provision allows directors to declare simply that your organisation has taken reasonable steps to ensure the substantive provisions of the sustainability report are in accordance with the Act.

If your company is publicly listed, the sustainability report must be presented at the Annual General Meeting (AGM). This allows shareholders to ask questions about the report, and it also requires auditors to be ready to answer any queries concerning the audit of the sustainability report.

Group materiality and exemptions

An interesting aspect of ASRS is its approach to materiality, particularly for Group 3 organisations. If your organisation falls under Group 3, you are only required to make climate-related financial disclosures if you face material climate-related risks or opportunities. If no material risks are identified, you must issue a simple statement indicating this fact. However, a directors’ declaration must still be made.

Legal framework and director liabilities

To ensure directors engage fully with climate disclosure obligations, the disclosures under ASRS are subject to Australia’s robust legal framework, which includes the Corporations Act and Australian Securities and Investments Commission Act 2001 (Cth). Directors must navigate these requirements with precision, as they encompass traditional director’s duties, misleading and deceptive conduct provisions, and general disclosure obligations.

To support organisations during the initial stages of these new reporting standards, a modified liability regime will be in place. For a fixed three-year period, only the regulator can initiate actions for non-compliance related to Scope 3 emissions disclosures and forward-looking climate statements, with the available remedies to the regulator limited to injunctions and declarations. Beyond this period, the existing liability arrangements will apply.

Join Barbara Albert, our Co-CEO, as she discusses voluntary sustainability frameworks and initiatives to enhance your environmental leadership

Voluntary disclosures and strategic reporting

The Draft Legislation allows and anticipates future expansion of mandatory ESG reporting requirements, an example of which could be nature-related financial disclosures.

The ASRS framework allows your organisation to include voluntary information that may not be strictly required by law but is deemed relevant to your sustainability practices. This could include information on your diversity strategy, First Nations engagement, or broader environmental sustainability efforts. It is crucial, however, that you clearly mark such voluntary information to distinguish it from mandatory disclosures, ensuring clarity for all stakeholders.

Beyond compliance: Embracing voluntary sustainability frameworks and initiatives

While compliance with ASRS is mandatory if your organisation meets the threshold criteria, it marks just the beginning of your organisation’s sustainability journey. Voluntary sustainability frameworks such as GRI or the SDGs, and leading initiatives like the Science Based Targets initiative (SBTi) and the Climate Active program offer further opportunities to demonstrate environmental leadership, enhance stakeholder trust, and drive sustainable innovations.

Examples of voluntary frameworks and initiatives you can consider

Global Reporting Initiative (GRI):

GRI is a widely recognised international framework for sustainability reporting. It provides a comprehensive set of standards that can help your organisation report on its economic, environmental, and social impacts.

CDP (formerly the Carbon Disclosure Project):

CDP runs a global disclosure system that enables companies to measure and manage their environmental impacts. It is highly respected by investors and customers who are increasingly making decisions based on environmental criteria.

Taskforce on Nature-related Financial Disclosures (TNFD):

TNFD provides a framework for organisations to report and act on evolving nature-related risks. Joining TNFD can guide you in assessing and disclosing environmental risks not just limited to climate change but also biodiversity loss and ecosystem degradation, positioning your organisation as a leader in comprehensive environmental stewardship.

Sustainable Development Goals (SDGs):

Aligning your sustainability strategy with the SDGs can provide a clear roadmap for addressing global challenges and can enhance your strategic positioning by linking your business operations to broader societal goals.

Science Based Targets initiative (SBTi):

Facilitates organisations in setting ambitious and meaningful carbon reduction targets in line with the latest climate science. SBTi encourages organisations to set near-term and long-term targets, aligning their strategies with the goals of the Paris Agreement.

Climate Active program:

An Australian government-backed initiative that enables businesses to reduce carbon emissions associated with their operations, products/services, events, buildings and precincts. By becoming Climate Active certified, your organisation can achieve and be recognised for carbon neutrality, demonstrating environmental leadership.

B Corp Certification:

B Corp is a certification program that assesses the overall impact of a company on its workers, customers, community, and environment. Achieving B Corp status signifies a high standard of social and environmental performance, transparency, and accountability. It helps organisations stand out as leaders in sustainable business practices, fostering a more inclusive and sustainable economy.

Integrating these frameworks into your strategy

To effectively integrate these voluntary frameworks and initiatives into your sustainability strategy, begin by evaluating which aspects are most aligned with your business objectives and stakeholder expectations. Establish a dedicated team to manage the adoption and reporting processes, ensuring that your efforts are cohesive and strategically aligned with your overarching business goals.

Leveraging expert support to integrate these frameworks into your strategy

Navigating the complexities of voluntary sustainability frameworks and initiatives like the SBTi and Climate Active programme can be challenging. To streamline this process and ensure strategic alignment with your business goals, consider partnering with our consultancy. We specialise in helping organisations like yours not only meet ASRS compliance but also excel in broader sustainability efforts.

How our consultancy can help:

1️⃣ Strategic assessment and alignment: We can help you identify which frameworks and initiatives best align with your sustainability objectives and stakeholder expectations, ensuring that your efforts deliver maximum impact. Our expertise extends to developing full carbon footprints, inclusive of value chain emissions, which provides a comprehensive view of your environmental impact.

2️⃣ Implementation support: Our team offers comprehensive support in integrating these frameworks into your operations, from setting science-based targets to achieving Climate Active certification. We specialise in the assessment and management of climate risks and opportunities, as well as the development of robust investment-ready transition plans.

3️⃣ Continuous improvement and reporting: We assist in establishing ongoing processes for monitoring and reporting on your sustainability performance. Our experts provide insights and updates to keep your strategies responsive to new regulations and scientific findings. We can help prepare your organisation for detailed reporting requirements, ensuring compliance and strategic advantage.

4️⃣ Stakeholder engagement: We help facilitate meaningful engagement with all your stakeholders, ensuring that your sustainability efforts are transparent, well communicated and have the necessary buy-in.

By partnering with our consultancy, you ensure that your approach to sustainability is not only compliant but also innovative and aligned with global best practices. Let us help you transform these challenges into opportunities for growth and leadership in sustainability.

Contact us today to learn how we can help you navigate the complexities of ASRS compliance, ensuring that your organisation not only meets the required standards but also benefits from enhanced strategic positioning in a competitive global market.

Our ASRS complimentary course

In our ongoing dedication to assist businesses in their sustainability endeavours, we’ve revamped this multi-part blog and video series into a complimentary online course. Alongside the video content, the course offers additional resources and quizzes designed to enhance your comprehension of the ASRS.

Kickstart your journey towards mastering the ASRS. Join now by following this link. Don’t hesitate to share this opportunity within your network to collectively advance the climate agenda.