ASIC Introduce Mandatory Sustainability Reporting Requirements

ASIC has introduced new mandatory sustainability reporting requirements that could impact organisations in Australia who are ASIC-regulated. These compulsory sustainability reporting requirements are being rolled out on a phased basis over 3 years with the first companies having to comply by January 2025.

In this blog we’ll explain which companies will likely be impacted by these new sustainability reporting mandates, how the phased approach is working, and what should be included in your sustainability report to meet the requirements. We’ll also explain how software can support you to collate the relevant sustainability data from across your organisation and automate your reporting outputs.

Who do the new ASIC sustainability reporting requirements apply to?

If you are regulated by ASIC and are required to prepare an annual financial report under Chapter 2M of the Corporations Act 2001, the new guidance will likely apply to your organisation if you meet 2 of the following criteria in one of these groups:

Group 1 – ASIC sustainability reporting becomes mandatory FY2024–25

• Over 500 employees
• Consolidated gross assets of $1 billion or more
• Consolidated revenue of $500 million or more

Group 2 – ASIC sustainability reporting becomes mandatory FY2026–27

• Over 250 employees
• Consolidated gross assets of $500 million or more
• Consolidated revenue of $200 million or more

Group 3 – ASIC sustainability reporting becomes mandatory FY2027–28

• Over 100 employees
• Consolidated gross assets of $25 million or more
• Consolidated revenue of $50 million or more

In addition to this, some small businesses may still be required to report to a large entity on their GHG emissions – under Scope 3 emissions reporting requirements for Groups 1-3 – if they are a supply chain provider.

You can find a more in depth breakdown of who the ASIC sustainability reporting requirements apply to on the ASIC website here.

What is the deadline to comply with the AISC sustainability reporting requirements?

The deadline to comply with the AISC Sustainability Reporting Requirements will vary depending on which group your organisation falls in to.

Larger companies that meet 2 of the requirements outlined in group 1 are required to prepare sustainability reports for financial years commencing on or after 1 January 2025. Those in group 2 are required to prepare sustainability reports for financial years commencing on or after 1 July 2026. Those in Group 3 are required to prepare sustainability reports for financial years commencing on or after 1 July 2027.

For the smaller businesses mentioned above, no action is likely needed until 2028 – unless you are part of the supply chain of a larger business.

How do the ASIC sustainability reporting requirements affect smaller businesses?

If you run your business as a sole trader, partnership, or trust, the sustainability reporting requirements will not apply to you directly.

If your business operates under a company structure, these reporting requirements won’t directly apply to you until 2028—and only if the company meets at least two of the criteria outlined in ‘Group 3’ above.

Although smaller businesses will remain unaffected for a short time, it is important to keep an eye on these regulations because as your organisation expands over time, these requirements could impact your business in the next 3 years. Also, as mentioned previously, if you are part of the supply chain of a larger business you may still need to report your sustainability metrics to the larger entity.

What should your ASIC sustainability report contain?

According to the ASIC Corporations Act 2001 the sustainability report for a financial year should consist of the climate statements for the year, any notes to the climate statements, and the directors’ declaration about the statements and notes.

The report must disclose:

• The entity’s material financial risks or opportunities relating to climate
• The entity’s metrics and targets for the financial year relating to climate that are required to be disclosed by AASB S2, including in relation to scope 1, 2 and 3 greenhouse gas emissions.
• Any information about the entity’s governance, strategy, or risk management in relation to these risks, opportunities, metrics and targets.

Source ASIC

How can organisations organise their sustainability data to produce reports for ASIC?

Producing sustainability reports for ASIC that contain the relevant information can be a challenge for organisations when the data is held in different spreadsheets and systems. That’s why many organisations are implementing specialist ESG software platforms to support them to produce their ASIC sustainability reports and monitor progress against their ESG related initiatives. Here’s how it works.

Firms use the software to centralise their ESG and sustainability data. This enables them to work out their current position, set goals, and establish a strategy to get to where they want to be in the future. Organisations can use the platform to plan out their long-term ESG or sustainability strategy and map out all the projects, actions and metrics needed to achieve their goals and meet reporting requirements. As actions are completed, progress is indicated at each stage of the plan and staff can input timelines and manage budgets, resources and dependencies.

Data can make its way into the platform in several ways. Automated workflows can send reminders to staff to enter the data on the frequency required, be that monthly, quarterly or annually. They simply update action and KPI performance data and commentary in a quick update page – building a complete and up to date picture of ESG and climate related status. Organisations can also pull ESG and climate related data from other systems and data sources into the platform via API integrations – this helps to centralise ESG and sustainability data in one place to simplify reporting.

These systems can be used to generate reports that align with the ASIC sustainability reporting requirements as well as other ESG related standards such as IFRS Sustainability Disclosure Standards (ISSB), Global Reporting Initiative (GRI) Standards, European Sustainability Reporting Standards (ESRS), SASB Standards (Sustainability Accounting Standards Board), ISO 14001:2015 Environmental Management Systems, Corporate Sustainability Reporting Directive (CSRD), TSFD (Task Force on Climate-related Financial Disclosures) and, CDP (formerly Carbon Disclosure Project). To further support ASIC sustainability reporting requirements, financial firms can also use ESG software to manage climate related risks and opportunities. Firms build a climate related risk register in the platform, establish Key Risk Indicators (KRIs) for each risk, and monitor risk levels on a regular basis. Automated workflows send notifications asking staff to complete risk assessments and reviews online – with all data feeding into the platform. Risk levels can also be monitored by pulling risk data into the platform from other systems and spreadsheets via API integrations. When risk levels exceed the agreed appetite and tolerance, staff are alerted and can review controls and implement remediating actions.

Controls entered into the system and linked to causes and/or consequences of the risk as part of a bow-tie analysis can be tested and checked regularly to ensure they are effective in relation to design and operation. The software can fully automate the control check and testing process, and automated workflows flag any potential control failures so they can be addressed.

Teams can also build an ‘opportunities register’ in the platform and log potential opportunities to make improvements in relation to ESG and sustainability. Opportunities may include ways to save power or reduce energy, water consumption or wastage. These opportunities can be captured and analysed to see if they can help to meet the organisation’s sustainability and ESG objectives and metric targets. Tracking opportunities not only helps firms to meet ASIC sustainability reporting requirements but it also helps to uncover process efficiencies and ensure continuous improvement.

Firms can also use an ESG software platform to manage related incidents that could adversely impact sustainability objectives and associated metrics. Staff can log   incidents or emerging issues directly in the software platform or via the mobile app. Automated workflows triage and escalate each incident and facilitate case management and root cause analysis workflows and possible investigations until incidents are resolved. This helps firms to rapidly detect and act upon ESG related incidents before they impact sustainability metrics and targets.

By capturing all ESG data related to climate and sustainability metrics centrally and actively managing climate related risks, opportunities, and incidents in one centralised platform, firms can easily meet their reporting requirements. These platforms offer a wealth of dashboard visualisations and reporting outputs to enable firms to pull sustainability reports that align with ASIC requirements at the touch of a button. It also enables firms to actively demonstrate that they are effectively managing ESG risks and actively seeking opportunities to improve overall sustainability.

To learn more about how software can support your organisation to centralise ESG related data and generate sustainability reports that align with ASIC requirements, request a demo.