Australian firms ill-prepared for new climate disclosure laws

Most Australian companies are not ready for groundbreaking climate disclosure laws that came into effect on 9 September, Lisa Zembrodt, principal and senior director of sustainability consulting at Schneider Electric, said.

The new legislation, set to be implemented from 1 January 2025, mandates public disclosure of a wide range of climate-related information, including emissions reduction plans and performance.

"This is a positive move which will drive corporate action on climate change and Australia's journey to net zero," Zembrodt said.

"But many businesses lack the tools and plans that this new era of accountability requires," she added.

The laws, described by Australian Securities and Investment Commission chairman Joe Longo as the biggest change to corporate disclosure in a generation, will initially apply to large companies with turnovers exceeding $500 million, and superannuation funds managing over $5 billion.

These entities will be required to provide an annual sustainability report, including a climate statement, risk assessment, and emissions reduction targets.

Zembrodt highlighted findings from Schneider Electric's recent 'Sustainability Index' survey, which revealed that less than one in five companies have comprehensive decarbonisation roadmaps, while 40 per cent have yet to begin decarbonisation efforts.

She warned that many firms lack the necessary data and digital technology to comply with the new regulations.

"A large proportion of businesses are failing to grasp the urgency of climate action," she noted.

"With these new climate-related financial disclosure regulations, having a credible plan to transition a business to the low-carbon economy is essential."

The legislation also requires companies to report on their suppliers' and customers' emissions, effectively extending the impact to smaller businesses.

Zembrodt said conducting gap assessments and educating executives and boards about their new responsibilities was important.

"These disclosure requirements will drive businesses to invest more in energy management and sustainability initiatives and adopt new technology practices," Zembrodt added.

She stressed that while initial costs may be significant, the long-term benefits of increased efficiency outweigh the investment.

The Sustainability Index also found that two-thirds of respondents still rely on basic methods like energy bills and spreadsheets to monitor energy usage.

Using digital technology in collecting and reporting ESG data to meet the new requirements and manage the transition to net zero was critical.