Corporate disclosure on climate change: where Aussie businesses stand

We can debate the causes and granular details of climate mechanics all we like, but the reality is that our world is changing, and we’re going to need a lot of conference lanyards in Australia to put the right heads together in one place to change with it.

To that end, the Australian government has committed to Net Zero emissions by 2030 - an ambitious and admirable goal. It also has adopted the Commonwealth Climate Disclosure, or CCD. 

The purpose of the CCD is to enact public climate reporting requirements for specific classes of business and government entities to ensure that those in Australia who have the highest potential for an outsized environmental impact are doing their part to stem the tide of the impacts that atmospheric CO2 is having on our climate, and are held to public account for their impact.

It doesn’t matter if you’re mining coal or selling lanyards in Australia - if you’re big enough, you will eventually need to report to the public on the environmental impact your business has.

The NGER and the history of Australian climate reporting

The CCD only came into force in 2024, but prior to adopting the CCD, the Australian Government’s Clean Energy Regulator was tasked with defining the National Greenhouse and Energy Reporting Scheme, or NGER, in the 2007 National Greenhouse and Energy Reporting Act.

The NGER provided a policy framework for the CCD, as it had already defined the types of entities whose emissions the government would monitor, the types of emissions to be reported on, the types of energy and relevant technologies creating such emissions that are included in the assessment, and how those energy types are used to estimate their respective emissions, and the climate impact of their production and/or consumption.

Unlike the CCD, the NGER did not require public disclosures.

Who will be reporting?

Not all businesses fall into the categories defined by the NGER, but companies of any size aren’t the first to be held to public account regardless.

The program is being phased in in three tranches, and tranche 0, the pilot tranche, saw reporting requirements set in place for all Departments of State in FY 2023 to 2024 - that means every department in the Australian federal government now needs to keep track of their emissions, and will disclose them publicly.

Tranche 1 begins in FY 2024 to 2025, and includes only the largest Commonwealth businesses and their controlling entities.

This includes businesses that have 500 or more employees, $500 million or more in annual expenses, or controls assets worth $1 billion or more.

It also extends to entities that meet the criteria of a “controlling corporation” as defined by the NGER, which includes businesses that own or manage other businesses with a total of 50,000 tonnes or more of CO2 in direct or indirect emissions, or consume or produce 200TJ or more of energy.

Finally, tranche 1 includes “all Commonwealth entities with responsibility for climate change or climate risk disclosure policy design or implementation, not otherwise covered by the previous criteria”.

Tranche 2 begins in FY 2025 to 2026, and comp Commonwealth businesses.

It includes entities that fulfill two or more of the following criteria; entities referenced in Part 1 of the Climate Change Act of 2022, has over 250 employees, controls over $500 million in assets, or has annual expenses of $200 million or more.

Tranche 3 begins in FY 2026 to 2027, and includes the remainder of all large Commonwealth businesses that do not meet the above criteria.

This includes any and all CCEs, NCEs, or Commonwealth companies, as defined by the PGPA Act.

The complete list of those entities can be found in the PGPA Act Flipchart and List.

It’s clear that this act is designed to hold large corporate, government, and hybrid institutions accountable to the public, and it appears well equipped to do just that.

But even these definitions don’t constitute the limit of the businesses that will be monitored and have information disclosed within the scope of these requirements. 

The NGER defines three scopes of emissions to be tracked by these companies, which must now be reported publicly; scope 1 consists of “direct” emissions, scope 2 “indirect emissions,” and scope 3 addresses “broader indirect emissions”. Scope 3 includes all emissions in every step of a business’s supply chain.

A supply chain is an entire system that comprises every input that goes into the production of the goods or services managed by a business or other entity.

Many outfits that don’t meet the reporting threshold on their own still make up parts of the supply chains that support larger businesses and government organisations.

 That means that obligated businesses will need to estimate the relevant emissions of smaller companies in their supply chains, whether those smaller companies meet the reporting thresholds or not.

Where are we now?

Despite going into effect for FY 2023 to 2024, which has recently ended, the Departments of State obligated by the CCD have not yet completed their initial public disclosures.

This information could take some time yet, and of course it will be years before we have an idea of where all of Australia’s large companies and government-affiliated entities stand in terms of emissions.

What we do know is roughly where Australia stands as a whole. The government reports total emissions as part of the National Greenhouse Gas Inventory Quarterly Update.

The most recently published report gives data ending in December 2023, and preliminary data on the quarter ending in March 2024.

The total number for annual CO2 emissions in Australia currently sits at 432.9 megatons, down roughly .5 per cent from the previous measure of the year ending in September 2023.

This does, fortunately, represent a substantial 29 per cent reduction from the year ending in June 2005, when Australia first began taking comprehensive account of such emissions.

Where are we headed?

Australia is one of the most ambitious countries in regards to meeting benchmark goals established by the Paris Accords.

After the International Energy Agency’s most recent review in 2018, Australia increased commitments to reduce emissions to include net zero emissions by 2050, and to reduce methane emissions by at least 30 per cent by 2030.

The plan to achieve this goal centres largely around plans to encourage adoption of rooftop solar through subsidies, mandates to reduce coal use, and fast tracking adoption of renewables in grid-related projects.

We can only hope that Australia’s ambitious goals serve as an example to other countries, and continue to play our part in reducing the rate of climate change.