Over the past decade or so (even longer, for some), sustainability reports have become a priority for more and more businesses. There are lots of reasons for this: some companies want to show they’re good corporate citizens, and others are responding to the demands of investors or customers. But what’s really interesting to observe is how drastically sustainability reporting has changed, both in form and function.
When I wrote my first sustainability report in 2014, this type of document wasn’t too common. In the business and investor community, ESG was seen as a ‘nice to have’, rather than a necessity, and while some consumers saw the value in sustainable brands and products, few were actually willing to pay for them.
In this kind of business context, why would you bother going to the trouble of producing a sustainability report? For most businesses, the answer was, well… you wouldn’t. Either because they weren’t doing enough to talk about, or no one cared enough to read the thing. Generally speaking, content around sustainability was seen as well-intentioned fluff; a handy way to market to greenies, but nothing to do with the business-end of business.
In spite of this, there were corporate trailblazers who began talking about sustainability surprisingly early on. These companies essentially took a punt: hedging their bets that sustainability would become a big issue in the not-too-distant future, even if it wasn’t now. Emerging frameworks like GRI (Global Reporting Initiative) (still in its infancy) provided reassuring guidance. But the gamble to go ‘green’ still came at a cost: not just the investment made in prioritising sustainability, but the risk of being wrong about it.
Good news (and bad news): those trailblazers weren’t wrong.
If you’re reading this article, I probably don’t need to bang on about the realities of climate change and the critical need for sustainable business practices. Safe to say, the evidence is abundant that sustainability is now an issue of huge importance.
At the ASX-listed end of town, the driving force for this shift in focus was investor interest. Suddenly, investors were asking questions about things like emissions, materials, waste and biodiversity. How would severe weather affect their property portfolio? Could supply chain disruption spell the end of a product, or a whole industry? And most importantly, what was being done about all this???
I, for one, was very pleased to see this particular lightbulb switching on. Because, as people saw the connection between sustainability and money, they finally started to care in a whole new way – and sustainability reporting took on sudden new significance.
Organisations like Mirvac, Cleanaway, Macquarie Group and Telstra have been on the front foot, integrating ESG into their business strategies, and proactively sharing their progress. Guided by GRI or other reputable frameworks, their reports have become increasingly rich in substance, meaningful data and a balanced picture of both progress and lessons learnt. The ACCC’s Greenwashing guidelines have supported this shift towards transparency, and made businesses really watch their Ps and Qs.
Being ahead of the game is certainly paying off now – because from January 2025, sustainability reporting will be mandatory for thousands of businesses across Australia. Reporting will need to be in accordance with the new Australian Sustainability Reporting Standards (ASRS), which set out detailed requirements for the information and data that reports need to contain.
The first type of mandatory reports that companies will have to prepare are climate-related financial disclosures. The finance factor should come as no surprise, given the rise in investor scrutiny mentioned earlier. And once again, some forward-thinking companies have been anticipating the new standards for some time, producing voluntary TCFD reports that explore the potential impacts of climate on their business operations.
Like the TCFD and the IFRS Standards (gotta love the acronyms), Australia’s new climate disclosure standards demand a lot of information – and require a fair whack of specialist expertise to even comprehend. There are a whole host of new concepts that companies will be expected to know about, from scenario planning to materiality reviews. And inputs are required from many, many people, so it can’t just be one person (or team’s) problem.
For the sake of those who haven’t had their head down a climate reporting rabbit hole for the last few years, I’ll attempt to explain what the point of these reports actually is.
For example, could rising sea levels make their assets uninsurable? Could supply chain disruption make materials impossible to get? What about renewables – how are they planning their transition (and funding it)?
The company also needs to make future projections about how these impacts could unfold over time, and (importantly) they have to explain what they’re doing in response. They also need to share the methodology and processes used to reach their conclusions – plus a bunch of targets and metrics.
In a nutshell: how do you think climate will affect the financial health of your business? What are you doing in response? How are you measuring your progress? And how did you get to all these conclusions in the first place?
And while I’m delighted that organisations are being held to account for their management of climate issues, I am somewhat terrified for the many who are unprepared to do so.
There are three ‘groups’ who will be expected to start reporting over the next three years – this has been a kind concession to make the whole thing more feasible. But, even for those who’ll start in 2027, time is of the essence. There’s a lot to learn, and a lot to do. The best time to start is right now.
Yes, these new requirements are complex. Yes, compliance will require time, money and expertise that you may not have to spare. And yes, you may be tempted to stick your head in the sand. But trust me: you’ll regret it – and the longer you stay down there, the hotter that sand will become.
Don’t know where to start? Words By Nuance is here to help. Drop us a line for an initial chat, and we’ll help get you on the road to reporting readiness.
