The Australian Government is planning to implement mandatory climate-related financial disclosure requirements for companies and financial institutions, according to a new consultation paper launched by the Treasury detailing and seeking feedback on the proposed reporting rules.
Mark Segal of ESG Today reported that reporting requirements would apply as soon as 2024 for larger businesses with smaller entities phased in over the three years after that.
Reporting requirements would apply as soon as 2024 for large businesses, with smaller entities phased in over the following three years.
ESG reforms an opportunity for forestry and forest products
On the surface, the reforms provide a real opportunity for Australian forestry and the forest products industry.
In May 2023, Wood Cental’s publisher, Jason Ross, attended the Responsible Investment Australia 2023 conference, the main event for sustainable business and responsible investment in the southern hemisphere.
In a report published in Wood Central, Mr Ross noted that the ESG community largely misunderstood sustainable forestry and its benefits for carbon.
“This shows the need for the industry to communicate its role in the sustainability transition more effectively.”
“The industry needs to articulate better the benefits of carbon sequestration and the production of carbon-dense products.”
According to the consultation paper published on Tuesday:
“The Government has committed to ensuring large businesses and financial institutions provide Australians and investors with greater transparency and accountability when it comes to their climate-related plans, financial risks, and opportunities.”
“As part of this commitment, the Government will introduce standardised, internationally-aligned reporting requirements for businesses to make disclosures regarding governance, strategy, risk management, targets and metrics – including greenhouse gasses.”
The announcement follows the release of a ‘Discovery consultation’ launched by the Treasury in December 2022 on developing a climate risk disclosure framework and plans for mandatory reporting.
The paper notes that stakeholders responding to the initial consultation “were almost universally supportive of the Government mandating climate-related risk disclosures.”
It also identified the importance of aligning reporting requirements with international frameworks, including new standards developed by the IFRS Foundation’s International Sustainability Standards Board (ISSB).
ESG Today reports that the ISSB released the finalised versions of its new sustainability and climate-related reporting standards earlier this week.
Australia’s proposed climate-related disclosure requirements focus on core elements of governance, strategy, details of risks and opportunities, metrics & targets.
In March 2023, Wood Central reported on the crackdown by the ACCC around false and misleading ESG claims.
The ACCC found that over 30% of Sustainability Managers have never worked in sustainability before taking on senior management positions.
According to Mr Segal, the proposals include information on offsets, target-setting and mitigation strategies, processes used to monitor and manage climate-related risks and opportunities, and scenario analysis.
The rules would require companies to report Scope 1 and 2, material Scope 3 emissions, and industry-specific metrics.
Earlier this month, Wood Central reported on four of the UK’s largest construction companies pushing for automated, real-time embodied carbon reporting.
Why do Scope 3 emissions matter?
Scope 3 emissions are indirect carbon and greenhouse gas emissions from an organisation’s supply chain. In the case of construction, for example, this could include the embodied carbon from the production and transport of concrete, steel, and timber.
The accurate measurement of scope 3 emissions is seen as the biggest challenge to reducing the construction industry’s carbon footprint on the road to net zero.
In Australia, MECLA (the Materials and Embodied Carbon Leaders Alliance) has committed to reducing scope 3 emissions by 12.% to 25% by 2030 with a 1MT/year reduction in scope 3 materials by 2030.
The NSW Government and the Government of South Australia fund MECLA. It is managed by WWF, Presync, and Climate-KIC Australia and has a dedicated Engineered Timber working group (5f).
It is focused on mapping pathways for further uptake of engineered timber in the construction industry.
According to Simpson, the mission for the group is “to finally break down the barriers to source, procure and secure built form with the product that most naturally aligns itself with the environment: timber, the preferred embodied carbon alternative.”
In a statement announcing the launch of the new consultation, Australian Treasurer Jim Chalmers said:
“Our changes will give companies the confidence, clarity and certainty they need to invest, creating more jobs and opportunities for people in more parts of the country.”
“The consultation paper released today is the next step in delivering the Government’s commitment to ensuring Australia’s large business and financial institutions provide more information and greater transparency on how they are responding to climate change and contributing to the net zero transformation.”
- Click here to access the consultation paper.
Sustainable Finance Taxonomy – a real opportunity for forestry investment?
It comes as the Australian Government, in April 2023, announced that it will co‑fund the initial development phase of an Australian Sustainable Finance Taxonomy.
Wood Central understands that this will be delivered with industry through the Australian Sustainable Finance Institute.
The taxonomy will help attract more green investment to Australia by helping investors target particular sustainability objectives and ensuring investments deliver on their sustainability claims.
According to Wood Central’s publisher, the new instrument is expected to mirror its EU counterpart, highlighting the trend of adopting voluntary standards to meet threshold standards for investors.
Could this allow forestry to use third-party certification and standards – like FSC and PEFC – to attract investment?