As the global focus on climate change intensifies, businesses face increasing pressure to be transparent about their climate-related risks and opportunities. In Australia, the government is taking significant steps towards implementing mandatory climate-related disclosures for all entities. The roll out will happen gradually, but it is important to start preparing as soon as possible. This will also help organisations better understand their role in addressing climate change, and start taking action.
To help businesses navigate these upcoming reporting requirements, we have outlined ten essential steps to establish a climate reporting process.
Step 1: Understand the Requirements
Familiarise yourself with the proposed reporting guidelines, which will require climate-related disclosures for all entities preparing annual reports under the Corporations Act. This includes private and public unlisted companies, starting as early as 1st July 2024, subject to size and revenue thresholds.
Step 2: Conduct a Climate Risk Assessment
Identify and assess your organisation's exposure to both physical and transition risks resulting from climate change. Understanding these risks will be crucial for accurate and comprehensive reporting.
Extra tip: this exercise should be integrated into your existing Risk Management Framework, and consider your existing strategic and operational risks.
Step 3: Align Strategy and Reporting
Ensure that your climate-related disclosures align with your business strategy. Incorporate climate risks and opportunities into your Horizon Map, which incorporates both short-term and long-term initiatives and goals.
Step 4: Establish Governance Frameworks
Implement robust governance structures to monitor and manage climate-related risks and opportunities effectively. Assign clear responsibilities to key stakeholders within the organisation.
Extra tip: this should be incorporated into your Risk Management Framework and your strategic planning and execution processes.
Step 5: Set Targets and Metrics
Develop clear and measurable climate-related targets and metrics in line with the proposed reporting standards. Regularly monitor and track progress towards achieving these targets.
Extra tip: it is critical to define targets and metrics, as they will ensure you know how you're tracking against your goals. But make sure you only measure what matters - "the more, the merrier" doesn't apply here.
Step 6: Integrate Climate Scenario Analysis
Conduct climate scenario analyses to evaluate your organisation's resilience under different climate change scenarios. Use the insights from this analysis to inform your decision-making and risk management processes.
Step 7: Engage with Stakeholders
Collaborate with internal and external stakeholders to gain a deeper understanding of your organisation's climate risks and opportunities. Their insights will contribute to more effective disclosures and strategies.
Extra tip: collaboration is key. Remember that this is relatively new for most organisations, so sharing and leveraging each others learnings and ideas can make this process less complicated to manage.
Step 8: Prepare for Auditing
Auditing of climate-related disclosures is still a little while away, but you can start preparing now. Develop robust documentation and streamlined processes to ensure a smooth and accurate audit process.
Extra tip: keep an eye out for ASIC's media releases on climate-related reporting and disclosures.
Step 9: Collect and Analyse Data
Establish data collection and analysis processes to capture relevant climate-related information. High-quality data is critical for credible and accurate disclosures.
Extra tip: instead of seeking a new data collection system, explore leveraging your existing data collection methods and current systems to capture relevant climate-related information effectively.
Step 10: Invest in Training and Awareness
Educate your employees about the importance of climate reporting and their role in the process. Create awareness about climate-related risks and opportunities across the organisation.
By following these ten essential steps, businesses can be confident that they are ready mandatory climate reporting requirements. Embrace this opportunity to demonstrate your commitment to sustainability and transparent climate practices.
At OmniStrategic, we can support you throughout this process. Explore our Business Transformation Hub and our Risk Management Hub to find out how we can help you prepare your organisation for future climate-related mandatory reporting..
Don't delay; start preparing today to secure your business's future in a changing climate!
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