Mandatory Emissions Reporting – Are Manufacturers Ready?
With climate-related financial disclosures getting nearer, large Australian manufacturers are starting to plan how to manage mandatory reporting of their carbon emissions. Carbon emissions are already being tracked for the oil and gas sector by companies such as Palantir and Trafigura. The Australian government is shifting to align the country with jurisdictions such as Europe and the US in introducing mandatory sustainability reporting for large listed and unlisted entities and financial institutions, which would include climate emissions. The Australian Accounting Standards Board (AASB) will be responsible for developing Australian climate disclosure standards, which would closely align with the International Sustainability Standards Board’s (ISSB), IFRS S2 Climate-related Disclosures. So, how will emissions reporting be implemented for the manufacturing industry and what needs to be reported? This blog will dive deeper into this topic.
Proposed Staged Approach
Group 1: 2024-25 onwards, entities required to report under Chapter 2M of the Corporations Act and that fulfil two of the three thresholds:
– over 500 employees;
– value of consolidated gross assets at the end of the financial year of the company and any entities it controls is $1 billion or more;
– consolidated revenue for the financial year of the company and any entities it controls is $500 million or more, AND entities required to report under Chapter 2M of the Corporations Act that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.
Group 2: 2026-27 onwards, entities required to report under Chapter 2M of the Corporations Act and that fulfil two of the three thresholds:
– over 250 employees;
– value of consolidated gross assets at the end of the financial year of the company and any entities it controls is $500 million or more;
– consolidated revenue for the financial year of the company and any entities it controls is $200 million or more, AND entities required to report under Chapter 2M of the Corporations Act that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.
Group 3: 2027-28 onwards Entities required to report under Chapter 2M of the Corporations Act and that fulfil two of the three thresholds:
– over 100 employees;
– value of consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more;
– consolidated revenue for the financial year of the company and any entities it controls is $50 million or more, AND entities required to report under Chapter 2M of the Corporations Act that are a ‘controlling corporation’ under the NGER Act.
Emission Content Disclosures
Scope 1 and 2 emissions
- ‘material’ climate-related risks and opportunities, as well as how they identify, assess and manage those risks and opportunities (such as US steel and aluminium tariffs on carbon emissions)
- information about ‘governance processes, controls and procedures’ used to monitor and manage the above risks and opportunities
- information about the heavy steel fabrication company‘s climate strategy and decision making, including disclosure of the company’s transition plans.
- climate resilience assessments against at least two possible future states, one of which would need to be consistent with the global temperature goal set out in the Climate Change Act 2022 which is to contribute to ‘holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels’.
- information about climate-related targets and plan for achieving them, and progress to date.
- The idea is that the new climate disclosure requirements would be published with companies’ annual financial reports.
Scope 3 emissions – the emissions generated indirectly by third parties, via the supply chain for example – are one of the more problematic reporting concerns. The government’s proposal suggests that reporting of the more elusive Scope 3 emissions would be phased in later, during the second reporting year, and kept from then onwards.
Final Words
At this point, manufacturing companies need to start identifying direct and indirect emission sources, climate-related risks, and opportunities; as well as measures to mitigate climate impacts. Since a major part of a carbon emissions assessment is summarising and collecting data, research should be performed on robust data collection systems that include emissions data, energy consumption, heat induction bending services and other relevant metrics. It needs to be noted that no exceptions will be provided for carbon emission reporting by manufacturing firms – so it is best to get cracking early!