New insights show compliance wig new reporting duties is 'achievable'
Employers across Australia are rolling out climate-specific training for their directors in the wake of new sustainability reporting requirements that highlight the need for "climate literacy" in leadership.
This is according to early insights from Mallesons, which analysed the first wave of sustainability reports published on the ASX by 23 Group 1 reporting entities on or before 3 March.
The analysis revealed that 65% of Australian organisations have provided their directors with dedicated climate-specific education or training, typically through targeted briefings, workshops, or external short courses.
This follows the new requirement for Australian employers to disclose their climate-related risks and opportunities, or the Environmental metric, that will impact their business.
Under the new requirements, independent corporate regulator Australian Securities and Investments Commission has also made it clear that directors themselves must make an independent assessment using their own skills and judgment in meeting their directors' duties.
"This reinforces the continued relevance of the learnings from the Centro decision in the context of sustainability reporting, including the need for directors to have a level of 'climate literacy' that enables them to understand and apply proper diligence in reviewing and approving the sustainability report," Malleson's insights read.
Remuneration tied to climate outcomes
Meanwhile, the insights also found that organisations are reinforcing accountability in leadership by linking their remuneration to climate or sustainability outcomes.
According to the findings, 61% of Australian firms have expressly linked executive remuneration to climate or sustainability outcomes. Among them:
- 35% did not disclose how this linkage was split between short-term and long-term variable remuneration.
- 22% linked climate or sustainability outcomes only to short-term variable remuneration.
- 4% tied both short-term and long-term variable remuneration to climate or sustainability outcomes.
"Sustainability reporting is no longer sitting at the edge of governance," said Emma Newnham, special counsel at Mallesons.
"Directors and their teams are now expected to actively understand how material climate risks and opportunities affect strategy, cash flow, and access to capital - and be satisfied that their company's disclosures genuinely hold together."
'Achievable' reporting duties
The findings come amid initial challenges reported by HR leaders when it comes to their organisations' preparedness for their new reporting obligations.
But Newnham noted that the first wave of mandatory reports indicate that compliance with the new requirements is "achievable."
"We have seen a strong consensus in the format and nature of mandatory sustainability reports in the first reports published under the new regime, including an unsurprising focus on risks over opportunities. Where companies differ is when judgment comes into play," the special counsel said.
The majority of Australian firms (83%) now have a dedicated climate, ESG, or sustainability metric in their board skills matrices.
More than half of boards or board committees also receive ESG-related updates on a quarterly basis, most commonly through board committee reports. Another 17% are receiving updates biannually.
"The first wave of mandatory sustainability reports shows compliance under the new reporting regime is achievable. However, the harder task, and the real differentiator, is producing disclosures that will remain defensible as stakeholder expectations, assurance and regulatory scrutiny increase," Newnham said in the report.
