By Sam Robinson
The Australian Institute of Company Directors (AICD) has released “A Director’s Guide to Mandatory Climate Reporting,” providing essential guidance for directors in Australia on the new climate reporting requirements. Key messages from the guide include:
- Introduction of Mandatory Climate Reporting: Australia’s mandatory climate reporting regime was legislated in September 2024, requiring entities meeting certain size thresholds to disclose their climate-related risks and opportunities.
- Director Responsibilities: Directors are expected to oversee the implementation of these reporting requirements, ensuring that their organisations accurately disclose climate-related risks and opportunities. This includes understanding the legal duties related to climate reporting, such as due care and diligence, and overseeing appropriate processes to avoid misleading or deceptive conduct.
- Governance and Competency: Boards should assess their current climate governance structures and the level of climate competency among directors and management. Identifying gaps may require upskilling, technological investments, or external support to meet reporting obligations effectively.
- Strategic Opportunity: Approaching climate reporting as a strategic opportunity can demonstrate an organisation’s value and resilience, rather than viewing it merely as a compliance exercise. Effective reporting can enhance stakeholder trust and potentially provide a competitive advantage.
- Material Impact Consideration: Regardless of whether an organisation is currently subject to mandatory reporting, directors should evaluate how climate change materially affects the organisation’s financial position, performance, or prospects, and determine the necessary disclosures to present a true and fair view of financial reports.
- Legal Implications: The guide outlines the legal context of directors’ duties concerning climate change, including potential penalties for misleading disclosures. Understanding these implications is crucial for directors to manage liability risks effectively.
In summary, the guide emphasises the importance of proactive engagement by directors in implementing mandatory climate reporting, highlighting the need for appropriate governance, strategic consideration of climate impacts, and adherence to legal responsibilities to ensure accurate and meaningful disclosures.
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