Mandatory Climate Disclosures: A Strategic Opportunity for Australian Businesses
From next year, Australia is poised to usher in a new era of corporate transparency with the advent of mandatory climate disclosure requirements. While some businesses might view this as a regulatory hurdle, it presents a unique opportunity to leverage climate reporting as a tool for enhancing commercial value. By starting now and taking incremental steps, companies can not only ensure compliance but also integrate climate considerations into their broader strategic, governance, and reporting frameworks.
Start Small
Too often, businesses delay climate reporting preparation until the last minute, resulting in a rushed and superficial approach. FTI Consulting advocates for early preparation. Even if your company isn’t required to report for several years, now is the time to begin.
Effective climate risk management necessitates involvement across all organisational levels, including education, training, and comprehensive engagement with climate risks and opportunities. Early action is crucial, involving a thorough assessment of current reporting practices, understanding industry best practice, and potentially restructuring organisational roles to effectively address climate concerns.
Leverage Existing Structures
The task of integrating climate-related risks into business planning might seem daunting, but it’s important to remember that this process doesn’t require starting from scratch.
Many frameworks for managing climate risks and opportunities build upon familiar business concepts and language. If your organisation already manages non-financial sustainability risks, you can adapt these existing structures to include climate considerations. If your company has established risk management practices for other areas, these can serve as a foundation for incorporating climate risks as well.
Identify and Address Gaps
For companies already engaged in climate reporting, the next step is to identify gaps in their current practices. Here’s a brief guide to help with this process:
- Regulatory Requirements: Start by assessing regulatory and market reporting requirements relevant to your organisation. Depending on your geographical and operational reach, you may need to comply with international standards like the Corporate Sustainability Reporting Directive (CSRD) in Europe or local standards such as the Australian Sustainability Reporting Standards (ASRS).
- Gap Analysis: Perform a gap analysis to identify missing disclosures and determine the necessary actions to address them. This analysis will help you understand where your current reporting falls short and what additional workstreams might be needed.
- Industry Benchmarking: Understanding what your peers and industry leaders are doing can provide valuable insights. While climate reporting is relatively new and evolving, robust examples from other organisations can guide you in refining your own disclosures.
- Organisational Readiness: Beyond detailing climate risks and strategies, you will need to demonstrate effective governance structures. It is important to evaluate to what extent your Board has the necessary oversight of climate risk, if your executive team is equipped with the relevant skills to deliver, and how your employees are prepared to support these initiatives.
Foster Internal Knowledge
Initial stages of climate risk assessment and strategy development may largely involve leadership, but successful implementation requires widespread organisational engagement. Employees at all levels should understand and contribute to the company’s climate resilience planning. Early involvement can facilitate smoother integration and foster a culture of climate awareness and proactive engagement.
Communicate Early and Often
Transparency is key. Companies don’t have to wait until mandatory reporting deadlines to start communicating about their climate efforts. Publishing preliminary climate disclosures in your company’s reporting suite can demonstrate progress, gather stakeholder feedback, and benchmark against industry standards.
Openly addressing climate-related plans in communications and marketing materials builds trust and enhances your company’s reputation. Furthermore, collaborative efforts on sustainability initiatives can drive industry engagement, garner government support, and boost community involvement, all of which are essential for effective climate action.
By taking proactive steps now, your business can turn mandatory climate disclosures into a strategic advantage, driving value, enhancing governance, and building trust with stakeholders. Start small, stay informed, and embrace the opportunity to lead in climate resilience and sustainability.
More information, and a brief video by FTI Consulting can be found here.
