The Australian Government has recently introduced a significant initiative aimed at enhancing climate disclosures among Commonwealth entities and companies. This new policy mandates that all Commonwealth entities and companies, irrespective of their size or function, publicly disclose their climate-related risks and opportunities. The policy is organized into two main streams based on the entity’s size, structure, and financial scope, signifying a broad-reaching impact that extends beyond federal entities to include businesses in governmental supply chains and local city councils.

Overview of the Policy Streams

Stream 1 encapsulates large Commonwealth companies already meeting proposed thresholds for climate-related financial disclosure. These entities are poised to adhere to rigorous standards being developed in alignment with international practices, reflective of the policy’s ambition to foster transparency and accountability in managing climate impacts.

You can refer to the Flipchart of Commonwealth entities and companies to determine whether a government body is an NCE, CCE or Commonwealth company.

Stream 2 covers a wider array of Commonwealth entities, including non-corporate Commonwealth entities (NCEs), corporate Commonwealth entities (CCEs), and smaller Commonwealth companies. Unlike Stream 1, these entities are scheduled for a phased implementation over four years, with requirements tailored to their specific operational contexts. These disclosures will be integrated into annual reports, ensuring stakeholders are well-informed of the entities’ climate risk management strategies.

Stream 2 will commence with a Commonwealth Climate Disclosure Pilot for all Departments of State in their FY2023-24 annual reports (tranche 0).

Phased Implementation and Its Implications

The phased approach, spanning from FY2023-24 through FY2026-27, allows entities to prepare and comply with the disclosure requirements progressively. This graded implementation underscores the government’s acknowledgment of the varied capacities across its departments and affiliated bodies to meet these new standards.

For businesses within government supply chains, this policy signals a shift towards more stringent climate accountability measures. Companies engaging in or aspiring to enter into contracts with the government may need to align their own climate disclosure practices with these emerging standards, enhancing their climate risk management and reporting capabilities to maintain or achieve compatibility with governmental expectations.

Local city councils will also feel the impact of this policy, especially those in the latter phases of implementation. Councils will need to develop or refine their approaches to identifying, assessing, and disclosing climate risks and opportunities, potentially necessitating new systems or processes to ensure compliance and effective communication with their constituents.

Alignment with Global Initiatives

The Commonwealth Climate Disclosure Policy shares similarities with the International Financial Reporting Standards (IFRS) International Sustainability Standards Board’s (ISSB) Mandatory Climate Disclosures for the private sector. Both frameworks emphasise governance, strategy, risk management, and the metrics and targets essential for comprehensive climate disclosures. This alignment underscores an overarching move towards greater consistency in how Australian entities, public or private, account for and communicate their climate impacts, risks, and readiness.

Not sure what to report?

Whether your organisation operates in the public or private sector, identifying climate risks can be a challenge. Tools such as NettZero’s Environmental Double-Materiality Assessment Workbook are a free and straight-forward way to get the ball rolling and identify material climate risks relevant to your organisation.

Building Capability and Assurance

Recognising the challenges entities may face in meeting these new requirements, the Australian Government says they are committed to providing support through tools, guidance, training, and a community of practice. This initiative aims to elevate the quality of climate disclosures across the board, enabling stakeholders to make informed decisions based on reliable and standardised information.

Furthermore, a verification and assurance regime is being designed to ensure compliance and enhance the credibility of the disclosures, with annual monitoring by the Department of Finance.

Summed Up

The Commonwealth Climate Disclosure Policy represents a significant step forward in embedding climate considerations into the operational and reporting practices of government entities and companies. For businesses in government supply chains and local city councils, the policy not only necessitates readiness for compliance but also offers an impetus to embed sustainable practices into their core operations. As the policy progresses towards full implementation, its alignment with international standards paves the way for a more resilient and climate-aware Australian public sector, setting a benchmark for climate governance worldwide.