The Australian Standard for Financial Disclosure of Carbon Emissions and Associated Opportunities and Risks
The Australian government is introducing a statutory framework for emissions and climate related disclosures. The standard has been developed by the Australian Accounting Standards Board (AASB), and is currently in exposure draft.
A reporting entity will disclose its greenhouse gas emissions, scope 1, 2 (and 3 in some circumstances), and segment its greenhouse gas emissions by the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes.
The standard sets thresholds for corporate compliance. The proposed threshold for reporting is met if entity satisfies any two of the following for a given financial year:
FY2024-2025 onwards:
Over 500 employees
Asset value $1 billion
Consolidated revenue $500 million
FY2026-27 onwards:
Over 250 employees
Asset value $500 million
Consolidated revenue $200 million
FY2027-2028
Over 100 employees
Asset value $25 million
Consolidated revenue $50 million
The requirements listed below are currently in draft form, but if legislated, will need to be included in high level financial statements of all companies operating in Australia that meet a threshold.
In addition, the new standard provides an excellent template for governance structures of entities of all sizes to consider, document and reduce their emissions; as it is designed to be the de facto standard in use by corporations and other large entities across Australia.
Implementation - Governance
The standard guides an entity to define which actors in its governance structure are responsible for managing the entity’s emissions reporting and disclosure. The entity should assign individual responsibilities, allocate roles and resources, and ensure emissions reduction target setting occurs and is tracked.
Implementation - Strategy
The standard guides an entity to disclose how climate-related risks and opportunities will affect the entity’s current business model, value chain, prospects, and the financial implications these have on the entity. In addition, the disclosure should include information about the entity’s climate-related transition plan.
Implementation - Climate-related Risks and Opportunities
The standard guides an entity to disclose each physical and transition climate-related risk and opportunity vector; specify in each instance the time in which the vector can reasonably be expected to impact the entity; and provide the entity’s definition of short, medium and long term vectors.
Implementation - Financial Performance
The standard guides an entity to disclose the effect of climate-related risks and opportunities on financial position, financial performance, cash flow, and the future effect of climate-related risks and opportunities on these things; and whether the entity has included these effects in its financial planning.
Implementation - Metrics and Targets
The standard guides an entity to disclose progress toward climate-related targets it has set, either voluntarily or mandatory [e.g. under the safeguard mechanism].
Whilst reporting does not in of itself lead to emissions reduction, it is an essential first step on the journey.
Jack Redpath is the the Principal at Carbon Zero Initiative.
