Stepping stones as mandatory disclosures heat up

There is a lot of ‘noise’ around climate disclosures for boards. How can directors remain focused on delivering value to stakeholders, while also ‘doing the right thing’ and making a start where it is sensible for the business? It’s a bewildering equation. While conservatives in Australasia, the US and beyond are resisting new climate disclosure regimes, forward-looking scientists, investors, businesses and households are leaning into the certainty of a low-carbon, circular economy on a warmer planet.

Climate reporting regimes push capital towards early contributors to a net zero world. Trump 2.0 notwithstanding, disclosure heat is coming to all business in a globalised world.

Mandatory climate reporting requirements in Australia are being phased in. As of 1 January 2025, annual reporting of Australia’s large companies (ASX 200-type scale) incorporates material climate-related risks and opportunities, metrics on GHG emissions and associated processes, plus scenario analysis of resilience.

Next out of the blocks, medium-sized and smallish companies above thresholds will have to report on this from 1 July 2026 and 1 July 2027 respectively. Direct emissions (Scope 1) and indirect purchased energy (Scope 2) emissions are mandatory from the start. Then, from the second reporting year, other indirect emissions across the value chain such as activities of suppliers and customers (Scope 3) are added to the scope. This reporting pressure on larger companies will inevitably be passed through the value chain to the rest of business.

Lost yet?

Globally and in Australia, regardless of federal election outcomes, escalating transparency around climate risk and responses is a solid bet. In 2024, Google roughly trebled its previous contracted investments (to $100 million+) in carbon removal.

Mandatory climate regimes are complex yet core to business resilience and fortunes. Half the job in big change is starting; the other 50% is about breaking it down into manageable chunks. Here are three first steps for directors:

1. Think opportunity, manage time

Climate reporting brings into play compliance, legals, insurance, reputation, strategy — but fundamentally it is about opportunity. The more an enterprise leans into the planet’s greatest challenge, the greater the returns and the less pain ahead — from resilience to transitioning to disclosures to liabilities. Customer demand and capital will flow in the direction of decarbonisation.

Overarching questions for boards are: “Are we adopting linear or circular practices?” “How does climate change materially impact us?” “What is our climate strategy and state of sustainability reporting?” “What do customers expect from us?” “Are we doing the right thing?”

Directors face a host of reporting considerations around capabilities, resourcing, targets, declarations, liabilities, exemptions and outside support. Moving early is the best risk management strategy, then knowing your compliance exposure and milestones.

Key timings are: the organisation’s reporting year; other entity demands (if you are outside-scope or across borders); Scope 3 timing (2026 onwards); phased assurance and key liability dates — liability settings for Australian directors are tough from the outset while there is a modified liability period in some areas (Directors, time for a coffee with your insurers).

2. Build confidence, take lessons

Ramp up your organisation’s ESG management and transparency by starting with small, easy, cost-neutral steps, and inspiring team involvement. For example, re-use of IT hardware (around 15% of a company’s climate emissions come from its ICT equipment) is the simplest circular strategy. Transparency steps upfront include voluntary reporting, a gap analysis (actions vs incoming obligations), and sorting your climate plan, records, targets, metrics and data.

Countries’ mandatory climate reporting regimes are roughly similar and will soon standardise and simplify. Observations and learnings from New Zealand, which pioneered mandatory reporting, include: prepare early — this suggests Australian directors should double down given our regime has stricter liabilities; reporting rules and climate risks must strike a sensible balance; collecting reliable data is hard work; Scope 3 is complex; strong governance and board expertise on climate is key; and collaboration is a key enabler.

3. Manage the supply chain

Value chain emissions are coming to a spreadsheet near you. They represent roughly 70–90% of a company’s emissions, its biggest climate-related risks and opportunities, and are most difficult to measure — overall, they will be paramount. Scope 3 targets apply pressure to small companies, a future multiplier effect on decarbonisation.

Scope 3 includes everything from investing, operational waste and business travel to product purchasing, use and disposal. Critically, managing Scope 3 emissions involves working closely with internal and external stakeholders to determine boundaries, gather relevant data, set emissions reduction targets and deliver sustainable practices.

For example, Greenbox Group provides customers with a carbon-neutral supply chain for IT equipment to reduce their carbon footprint. The IT lifecycle solutions they provide (particularly end-of-asset-life services) are designed to help users with their heightened ESG/sustainability reporting requirements along with sensitive IT asset management.

Scanning the near future, directors should be asking what the plan is for Scope 3 to support the decarbonisation strategy, who their partners are, and how they will realise this opportunity.

Ross Thompson is Group CEO of sustainability, data management and technology asset lifecycle management company Greenbox.

Top image credit: iStock.com/Tatiany Kazmierczak