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The climate reporting legislation mandates that organisations meeting certain size thresholds must produce annual disclosures in line with the Australian Sustainability Reporting Standards (ASRS). These disclosures are to be included within a separate ‘Sustainability Report’ as part of the company’s Annual Reporting suite delivered to the Treasury department.

The legislation will roll out in three phases:

• Group 1 (from January 1, 2025):
  • Entities with $500 million+ consolidated revenue, $1 billion+ EOFY consolidated gross assets, or 500+ employees.
  • Reporting entities which are registered corporations under the NGER Act which are above the NGERs publication threshold.
• Group 2 (from July 1, 2026): 
  • Entities with $200 million+ consolidated revenue, $500 million+ EOFY consolidated gross assets, or 250+ employees.
  • Reporting entities which are registered schemes, registrable superannuation entities or retail CCIVs where the value of assets at the end of the financial year (including entities it controls) is equal to or greater than $5 billion.
  • Reporting entities which are registered corporations under the NGER Act, regardless of publication threshold.
• Group 3 (from July 1, 2027):
  • Entities with $50 million+ consolidated revenue, $25 million+ EOFY consolidated gross assets, or 100+ employees.
  • Group 3 entities need to report under AASB S2 if they have material climate-related risks and opportunities. Entities without material risk must 
  • However, a statement of ‘no material climate-related risks and opportunities’ still needs to explain the reasoning for this conclusion and be subject to a director declaration and mandatory audit requirements.

This legislation represents a significant shift in how businesses approach climate risk management, demanding a higher level of transparency and accountability.

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All entities that may need to report under the mandatory climate reporting legislation ought to complete a series of steps to prepare their organisation for this significant change to corporate risk management and reporting practices.

A mandatory climate reporting readiness assessment can clearly identify gaps in your organisational readiness to comply with the new standards. The Trace mandatory reporting readiness assessment typically occurs in three phases:

1. Carbon emissions assessment: conducting a carbon footprint analysis requires the collection of much of the same data that informs the broader mandatory climate reporting disclosure. Conducting this assessment is a great way to understand your data availability, your organisation's understanding of basic sustainability concepts and your carbon intensity relative to industry benchmarks.
   
   
2. Mandatory climate reporting gap analysis: performing a gap analysis to assist your executive team and board of directors to understand the organisation’s readiness to comply with the australian mandatory climate reporting legislation is an important next step. The gap analysis will help to define and create the program of work to prepare your organisation to comply with mandatory climate reporting.
   
   
3. Climate risk assessment: many directors and executive teams have thought about measuring their carbon emissions but fewer have a working understanding of the concept of climate-related financial risks. Mandatory climate reporting puts climate-related financial risks front and centre so the earlier your organisation can assess and document your climate risks the longer you have to build a credible mitigation plan prior to publicly disclosing to customers and investors your climate-related risks.

These are our recommended steps for all organisations to take at least 18 months prior to their first reporting period to ensure the organisation has sufficient time to fill gaps in capability

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How Trace Can Support You : As a leading carbon accounting firm, Trace is uniquely positioned to support businesses in meeting these new regulatory requirements. Our platform and expertise will help you navigate the complexities of climate reporting by:

1. Ensuring Accurate Data Collection: Accurate measurement of your carbon footprint is the foundation of any climate disclosure. Trace’s platform is designed to simplify and automate the data collection process, ensuring your reports are based on precise and reliable data.
   
   
2. Comprehensive Reporting: Trace’s platform aligns with the ASRS and ISSB standards, providing you with the tools needed to produce detailed and compliant sustainability reports. From scope 1, 2, and 3 emissions to scenario analysis and transition planning, we’ve got you covered.
   
   
3. Training and Capacity Building: The introduction of these new standards may feel overwhelming, especially in the early years of the regime. Trace offers training programs, including our Carbon Accounting Fellowship, to equip your team with the skills needed to confidently manage and report on climate risks.
   
   

Net Zero Transition Plan Creation: the mandatory climate reporting standards require more than just disclosure - they require action. To comply with the Australian Sustainability Reporting Standards your business will need to produce a plan to reduce your carbon emissions and Trace can help you to produce that plan.

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With the legislation set to take effect on 1 January 2025, the time to act is now. Waiting until the last minute could result in non-compliance, which carries significant penalties, including civil liability and potential reputational damage. More importantly, proactive compliance offers an opportunity to build trust with stakeholders, improve your business’s resilience, and contribute to a sustainable future.

Trace is committed to being your partner in this journey. Our expertise in carbon accounting, coupled with our robust platform, will ensure that your business not only meets but exceeds the new climate reporting requirements.

Conclusion

The passing of the mandatory climate reporting legislation is a clear signal that the future of business lies in sustainability. At Trace, we believe that transparency and accountability are the cornerstones of this future. Measuring your carbon footprint is the first step toward achieving this transparency and making meaningful progress towards decarbonisation.