ASIC releases guidance on mandatory sustainability reporting

ASIC has released the Draft Regulatory Guide RG 000 Sustainability reporting to assist businesses in preparing for mandatory sustainability reporting, which will begin in Australia on 1 January 2025.

Key elements of the draft guide include:

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·?????? What content is required

·?????? How ASIC will oversee and enforce the new reporting regime

If you’re a director of a company that’s required to release annual financial reports under the Corporations Act, you may be required to report under the new sustainability regime. Please reach out if you’d like further advice about your obligations or how and when you should start preparing.

Key Elements of the Draft Guide

1. Who Must Report: Outlines which organisations are required to prepare reports in compliance with the Australian Sustainability Reporting Standards (ASRS). Explains how the new requirements interact with existing legal obligations.
2. Content of Reports: Covers climate-related financial disclosures, sustainability information, and its presentation. Includes guidance on disclosing Scope 3 emissions, risk management, and transition plans.
3. ASIC’s Administration: Details ASIC’s approach to granting relief, issuing directions to companies, and enforcing compliance.

Directors' Duty of Care and Diligence

Directors are responsible for ensuring compliance with the new reporting requirements. Obligations include:

• Staying informed about material climate-related risks and opportunities.
• Establishing systems to identify, monitor, disclose, and respond to risks.
• Seeking expert advice but independently assessing and using it in good faith.

Transition Period and Modified Liability

ASIC recognises that mandatory sustainability reporting presents a step change for many businesses. Transition measures have been introduced to help businesses adapt, including:

• Protected Statements: Limited liability for disclosures about future climate risks, such as strategies, targets, and Scope 3 emissions.
• Protection from civil lawsuits for a limited period: Only ASIC or criminal proceedings can challenge the Protected Statements. Civil claims (e.g., for misleading conduct) are not permitted. ASIC can issue directions for incorrect, incomplete, or misleading information in sustainability reports.

Future Outlook

• Over time, sustainability standards are expected to become common practice across the corporate sector, extending to the public sector and other agencies with tailored standards.
• Early preparation is encouraged, including assessing current reporting capabilities and addressing gaps to ensure smooth compliance.

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