Australia’s multi-billion dollar forest industry risks being caught out by ambiguous and largely misunderstood climate reporting requirements, with the federal government introducing new mandatory disclosure requirements for the country’s largest companies starting July 2024.
Born out of the Taskforce for Climate-related Financial Disclosures (or the TCFD), many of the world’s largest forest asset managers, including Manulife Investment Management and New Forests, have prepared disclosures to meet the new requirements.
Already, the building and construction industry – among Australia’s heaviest emitters – have embraced the changes, with Lend Lease and Brookfield Multiplex leading the charge to introduce the new frameworks into their ESG reporting requirements.
However, it’s the businesses that sit in the second (starting from 2026) and third cohorts (from 2027) – which capture the vast majority of Australia’s timber supply chain – that now risk being left behind.
According to Damien Walsh, Director for Margues Groome Consulting, much of the confusion stems from the terminology used in the thresholds.
“Many of the companies I have spoken to, who are not NGERS-controlling corporations, believe they are excluded from mandatory reporting altogether.”
NGERs, or the National Greenhouse and Energy Reporting Scheme, is Australia’s national legislative framework for reporting and publishing company information about greenhouse gas (GHG) emissions – in any case, most businesses in the Australian forest supply chain do not participate in this scheme.
However, according to Mr Walsh, “this interpretation is incorrect,” with the Australian Institute of Company Directors (AICD) confirming that all businesses, regardless of whether they are NGERS-controlling or not, must still meet the requirements if they fulfil two of three requirements relating to employee levels, consolidated assets and revenue.
“The advice of the Australian Institute of Company Directors (AICD) is that this interpretation is incorrect. They are independent criteria,” he said, “to be read as ‘OR’ in the Table below.”
According to Mr Walsh, the disclosures must appear in the company’s Annual Report – covering governance, strategy, risk management, and metrics and targets, which build on the four pillars of the TCFD.
“These require detailed and quantitative disclosures of climate impacts by companies that are decision-useful for the primary users of general-purpose financial reports (i.e. investors and shareholders) based on IFRS S2 as adapted to the Australian context by the Australian Accounting Standards Board (AASB),” he said.
“We believe a few larger forestry and wood products companies will qualify as Cohort 1 reporting entities,” Mr Walsh said in a new report on the Margues Groom Consulting website.
“They must get across the new reporting regime quickly if the Australian Government sticks to its implementation timeline. Most will need to be reporting by 1 July 2027 and should start preparing sooner rather than later.”
In any case, the new reporting regime could, according to Mr Walsh, “provide a marvellous opportunity for the forest and wood products industries to showcase their carbon-positive credentials.”
And with the push to embrace Scope 3 emissions – particularly in industries like construction, mining, retail and energy, the disclosures could act like an Environmental Product Declaration (EPD).
“The sooner you start, the greater the opportunity to build out the governance, strategic and risk management requirements,” Mr Walsh said.
- For further information about TCFD and mandatory climate-related reporting, contact Damien Walsh from Margules Groome.
