Sustainability and the role of organisations

Australian Sustainability Reporting Standards are now live. In this article, we explore where your business can start to address these new requirements.

The Australian Sustainability Reporting Standards AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information and AASB S2 Climate-related Disclosures are no longer enigmas but are now live following their publication by the AASB on 2 October 2024.

AASB S2 Climate-related Disclosures is made mandatory and the AASB’s phased approach to the rollout of these standards will see first reporters applying this for annual periods beginning on or after 1 January 2025.

Organisations’ role as corporate citizens is changing and the United Nations in its development of sustainable development goals have acknowledged that it is not only up to governments to work towards the 17 goals but as a collective, organisations have a part to play.

How is your organisation contributing to sustainability? It may be worthwhile asking these questions of you and your organisation as you begin your journey in sustainability.

Is ESG a priority for your leadership?

In the survey by McKinsey, “93 per cent of respondents say at least one ESG dimension—an environmental, social, or governance topic—is on their organisation’s agenda. While survey responses suggest that organisations broadly seem to recognise the importance of ESG overall, approaches and areas of focus vary by sector, industry, and region, consistent with differences in materiality.”

Is ESG important to your stakeholders?

According to McKinsey, most surveyed investors not only consider environmental, social and governance initiatives to be important–they are also willing to pay a premium,

Have you ever reported on your ESG efforts to partners, investors, customers or reporting agencies?

ESG reporting trends suggests that while strategies remain the same, the transparency of these efforts are now being magnified and reported.

Have you identified your company’s climate-related risks?

Climate related risks form part of the E (environment) of the ESG, and is arguably the most pressing dimension as prioritised by the Australian Government to support its aim to achieve net zero emissions. This target aims to cut carbon emissions to a point where there is negligible to zero impact to the atmosphere.

Does your company measure Scope 1 and 2 Greenhouse Gas (GHG) emissions?

Once you have identified your carbon footprint, what steps have you taken to measure GHG emissions that are under your control? Scope 1 emissions are emissions that an organisation produces, such as through manufacturing processes, whereas Scope 2 emissions are emissions that an organisation consumes, such as purchased electricity.

Does your company measure Scope 3 GHG emissions?

Scope 3 emissions are emissions that organisations indirectly consumes through its business activities and relationships. An example of this would be through the purchase, use and disposal of products from suppliers.

Do you track or measure any specific ESG metrics?

Other types of ESG metrics involve the Social dimension which cover the ways in which an organisation considers human rights in its operating activities whereas the Governance dimension focuses on the organisation’s leadership and corporate policies.

Where can organisations start

1. Upskill the Board and leadership and establishment of strategy. 
   The ESG Strategy starts from the tone at the top and Boards and senior management need to upskill themselves to determine what this will look like for their organisation. Not all organisations are created the same way although they may look similar from the outside. Organisations need to decide from themselves their ESG value proposition or risk being left behind by its competitors.
2. Stakeholder engagement. 
   Now that you have determined your strategy, there is a need to understand who your stakeholders and engage with them. Remember, the ESG impact is wider than the organisation itself and affects those whom the organisation may not be directly interact with. An example of this could be groups of people who may be displaced as a result of a deforestation activity.
3. Understand your ESG criteria and material topics.
   With your markets in mind, prioritise the ESG topics in the manner of importance to your organisation. Use methods such as horizon scanning and benchmarking against your peers to test your determination of material topics.
4. Set goals and targets.
   Once you identified your material topics and baseline, set measurable and achievable goals and targets against your ESG criteria. Embedding key performance indicators into your organisation’s practices allows you to track the progress and achievement of your goals and targets.
5. ESG reporting standards and readiness assessment.
   As you have made considerable progress, now is a good opportunity to review the processes and systems that you have in place and assess them against the regulatory requirements of the ESG reporting standards. This step gives you comfort that you are ready to fulfill your obligations as ESG reports go through assurance, much like what we see in traditional financial reports.

In time, the question is no longer whether organisations will be impacted by these reporting requirements but how they will be impacted.

Contact us

Wherever you are in your journey, PKF is here to help.