“Proposals from both the Coalition and the Government to streamline climate-related financial disclosure for Australian industry represent a welcome but rare convergence in the ongoing debate over climate and energy,” said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
“There is definitely a case for providing clear warnings to investors where a company faces a serious commercial issue from climate impacts or climate policies. The challenge is to ensure the cost of gathering that information doesn’t exceed the benefits.
“Early feedback from Australian Industry Group’s members is that reporting under the accounting standard mandated in 2024 has been too clunky and excessively labour intensive. That is mostly because the requirements are so new to companies and their advisers, meaning concepts are interpreted widely and there is instinctively conservative over-reporting to avoid breaches.
“Some of this will shake out with experience. But many more businesses will have to start reporting from mid-2027 on current law. This system needs to deliver actionable information at the lowest possible cost, not generate report attachments destined to languish unread.
“Scope 3 emissions reporting is a particular flashpoint. Emotions in the energy debate run hottest over emissions from the combustion of coal and gas exported overseas, though these are not hard to estimate and may be significant commercial indicators. The real problem is all the potential Scope 3 information that could be gathered but which no investor materially cares about – for instance, embodied emissions in the hundreds of low emissions-intensity inputs a manufacturer may have. Materiality rules are meant to sort the wheat from the chaff, but so far this remains the biggest headache for reporting businesses.
“Now welcome proposals are emerging from both the Government and the Opposition to that end. Both would raise the size thresholds at which businesses need to make these disclosures. And both would reduce the extent or onerousness of some of the disclosures, including on Scope 3.
“The details differ but the intent is the same: focus disclosures on information that matters, from businesses in a position to provide it. There is surely room to find a positive compromise and a stable basis for businesses and investors to get on with the job.
“Agreeing on a basic policy framework while competing to streamline and improve it would be a great precedent. Major industrial or energy investments last for decades but cannot be assured if key policies are written in the sand,” Mr Willox said.
