New Climate Reporting Laws Passed: Businesses Face New Disclosure Requirements

The Opposition has warned the new measures could create an extra $2.3 billion in compliance costs for Australian businesses.

Wind turbines are seen on the horizon at sunset in Albany, Western Australia, on May 19, 2024. Susan Mortimer/The Epoch Times

Mandatory climate reporting laws sailed through the Australian Senate on Aug. 22 with the Labor government obtaining support from the Greens and independents.

The law will enforce climate reporting for large companies from January 2025 and extend to more companies over time.

Treasurer Jim Chalmers said the regime would improve investment in “cleaner, cheaper energy” in the move towards net zero.

“We’re taking action on climate reporting to support more investment in cheaper and cleaner energy and help companies and investors manage climate risks,” he said.

“These critical reforms provide investors and companies the clarity and certainty they need to support the net-zero transformation, and further strengthen Australia’s reputation as an attractive destination for international capital.”

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 passed the upper house with 35 in favour and 27 against.

Labor obtained support from the Greens, and independents Jacqui Lambie, former Liberal Senator David Van, and Senator David Pocock (pdf). The Liberal-National Coalition were united in opposing the law, along with One Nation Senator Malcolm Roberts.

Opposition Concerned About Regulatory Burden

Shadow Treasurer Angus Taylor and Shadow Minister for Financial Services Luke Howarth said Labor and the Greens had teamed up to “ram through” the laws.

Both pointed to Treasury analysis that revealed a $2.3 billion (US$1.5 billion) compliance burden on Australian businesses.

“The United States, Canada, Japan, and most of Australia’s trading partners do not require the reporting of scope three emissions,” the Coalition adding, noting the costs would be passed down the supply chain to smaller businesses.

This could include a “farmer banking with a big company” to a “cafe owner in the lobby of a big company.”

The explanatory memorandum for the Bill (pdf) says “scope three” emissions are “indirect greenhouse gas emissions” that occur in the value chain of an entity.

Shadow Treasurer Taylor was concerned this could see the scope of “green tape” expand.

“A tradie doing office fit outs may have to work out the emissions from their ute and report it to the company they’re doing the fit out for,” he said.

How Will it Work?

The new climate reporting regime requires companies to make climate-related disclosures in a new sustainability report each financial year.

These disclosures will include climate risks, governance, and strategy, and will be phased in in three stages, according to Treasury (pdf).

The first stage (pdf) will apply to companies that meet two out of three criteria: revenue exceeding $500 million, gross assets surpassing $1 billion, and a workforce of 500 employees or more.

The second applies for companies fulfilling two out of the following three: revenue of more than $200 million, assets of $500 million, and 250 employees or more.

And the final stage will apply to companies that satisfy two of the following: revenue exceeding $50 million, gross assets exceeding $25 million, and 100 or more employees.

Small and medium businesses that are below these thresholds will be exempt at this stage, however, this could change.

As the Australian Securities and Investment Commission (ASIC) noted in March, many small businesses are part of the supply chain of larger businesses, which could require them to engage with climate reporting over time.

“This is because the scope 3 emissions of a large business with reporting obligations may include the emissions of its small business suppliers. Scope 3 emissions are those emissions that occur up or down a company’s supply chain,” ASIC explained

The Australian Accounting Standard Board will unveil internationally aligned standards in the near future, the government said.

Meanwhile, the law that passed the Senate also provided the Reserve Bank of Australia with more power to step in during a crisis to protect the nation’s critical financial market infrastructure.

ASIC and RBA’s powers have been “strengthened and streamlined,” which will help them to manage risks, Chalmers noted.