Draft Sustainability reporting legislation released: Good News for Smaller Companies

Kristen Haines

15 January 2024

Treasury has released the draft climate-related financial disclosures legislation. The proposed legislation is broadly in line with Treasury’s earlier consultation, and will see the largest corporate reporters commence sustainability reporting for years ended 30 June 2025 and will be brought in gradually for smaller companies until the last cohort will first report for 30 June 2028.

Proposed Sustainability Reporting Thresholds

The thresholds for the final group that will commence reporting at 30 June 2028 is consistent with the financial reporting thresholds that identify a large proprietary company who are required to prepare financial reports in accordance with the Corporations Act (2001). NGER Reporters (National Greenhouse Emissions Reporters) will be required to report earlier if they meet the NGERs publication threshold. All thresholds in the draft legislation must be determine in accordance with the Accounting Standards.

How should sustainability reports be prepared?

The sustainability reports will have to be prepared in accordance with the Australian Sustainability Reporting Standards (ASRS) to be issued by the Australian Accounting Standards Board. These standards will be based on the International Sustainability Standards Board’s (ISSB’s) finalised standards.

Whilst Scope 1,2 & scope 3 Green House Gas (GHG) emissions reporting will be required, Scope 3 emissions will not need to be reported in the first year an organisation has to prepare a sustainability report, giving entities an additional year to establish that reporting process.

Smaller companies without material climate-related risk

The draft legislation does contain some good news for smaller companies.

For smaller companies who do not have material climate-related risks and opportunities for the year the sustainability report will merely include a statement to that fact. This would need to be accepted by the auditors as it would still be subject to the assurance requirements. Materiality in the context of sustainability reporting is a broader concept than that which is used for financial reporting and assurance and should be determined based on the guidance in the (draft) ASRSs.

How do I know if I am a small company?

In order to be able to be considered a small company, the reporter would be required to:

Have consolidated gross assets of less than $500 million
Have less than 250 employees in the consolidated group
Not be a registered corporation under the NGERS Act
Not be an asset owner with a value of assets greater than $5billion

This allowance will potentially significantly reduce the burden on smaller companies with limited exposure to climate-related risks and opportunities, who will effectively merely have to do sufficient work to convince their auditor that there is no material risks or opportunities.

Is sustainability reporting subject to Assurance?

The reports will be subject to assurance, which must be carried out by the financial statement auditor with the appropriate use of experts. This assurance will build over time from limited assurance (review) of the scope 1 and scope 2 GHG emissions in the initial stages, to full reasonable assurance (an audit) over the whole sustainability report by 2030. The draft legislation is open for comment until 9 February 2024.

Where can I find help with sustainability reporting?

If you would like to further discuss the proposed legislation or start considering how you may implement the requirements in your organisation, please contact your local Moore Australia advisor.

Reporting Sustainability

Good News for Smaller Companies