Mandatory climate reporting protects Australia's biggest polluters

Despite public commitments to protect consumers from greenwashing, the Australian Government is putting more effort into protecting the private sector from the Australian public.

While it seems like the government is keen to be part of the solution — financial and consumer regulators such as the Australian Securities and Investments Commission (ASIC) and Australian Competition & Consumer Commission (ACCC )have announced 'crackdowns' on greenwashing, mandatory climate disclosures have been implemented, sustainable finance frameworks in development — in fact, the Australian Government is the very reason we have so much greenwashing in Australia.

For years Australian governments on both sides have kowtowed to industry. Not only have polluting industries completely subverted policy to the point where we find ourselves in a climate and biodiversity crisis with a government too scared to regulate either their activities or their claims, but the government continues to approve and subsidise their activities.

This creates quite a quandry for a government that has told voters it is cracking down on greenwash and is committed to climate and integrity.

The Australian Government — a government that is notionally committed to reducing emissions and is bidding to host a UN Climate Conference, while also heavily subsidising fossil fuels and approving gas and coal mines, and making it almost impossible for other sectors across the economy to decarbonise — has deployed a heavy arsenal of state-sponsored greenwash to reconcile this inherent contradiction.

However, consumers and investors are not only increasingly skeptical of carbon offsetting and net zero claims, they have lost tolerance for the performative inaction of the private sector. In response to this, the Australian Government has now introduced regulation that will protect companies from accusations of greenwashing by the Australian public (including shareholders and consumers) altogether.

While there has been a lot of enthusiasm about the Australian Government's implementation of mandatory climate disclosure legislation whereby Australia's biggest companies must report their climate risk, far less attention has been paid to the elements of this legislation that increases the power of corporations and shrinks the rights of Australians.

Following consultation and an inquiry, Australia’s new climate-related financial disclosure regime was passed in parliament in September 2024.

This legislation requires Australia’s biggest companies (including Australia's fossil fuel companies) to disclose their climate risk and prepare a sustainability statement every year.

While most have enthusiastically welcomed the legislation, the Australia Institute and others have consistently flagged serious issues with it since it was first proposed.

1)? Reporting alone does not necessarily translate into action.

The idea is that companies are exposed to scrutiny and so they subsequently want to reduce their climate risk by changing their business practices and reducing their emissions.

But it’s not a given.

Without complementary measures that require a reduction in absolute emissions by the private sector, there is no guarantee that climate disclosures will result in action.?

In KPMG's submission to the consultation, they said over 76 per cent of ASX 100 companies already voluntarily report climate risks in accordance with the Taskforce on Climate-related Financial Disclosures. These are disclosure standards that take into account scope 3 emissions and scenario analyses. If the emissions of these companies have not been declining despite already reporting, it shows that?reporting alone is not enough.

2)?Provisions have been included in the bill that?protect businesses from civil?greenwashing?litigation.?

Despite the Treasury's policy impact paper stating, 'Climate change is a systemic risk to the financial sector that warrants heightened scrutiny’, heightened scrutiny is exactly what is being removed with a three-year moratorium on?greenwashing?actions being imposed.

The rationale for including this immunity is that this is a new regime and businesses need time to adjust. ASIC has suggested that this moratorium was implemented at the request of the private sector.

However, as stated above, Australia’s biggest companies are already voluntarily reporting climate risks in accordance with the Taskforce on Climate-related Financial Disclosures on which this legislation is based. These are the biggest and most well-resourced companies in Australia. They are already making climate claims and this kind of reporting has been foreshadowed for years – specifically the Labor Government has been saying it will introduce this reporting since the 2022 election. ESG reporting has been around for decades with the global reporting initiative being founded in 1997. These businesses have had more than enough time to prepare.

Equity Generation Lawyers (EGL) has done an extraordinary amount of work unpicking and highlighting the most problematic aspects of this legislation.

Company directors are also protected.?Transitional period for directors’ declarations: for the first three years of the regime, directors who are required to provide a declaration alongside a sustainability report will only need to provide an ‘opinion’ on whether the entity took reasonable steps to ensure the substantive provisions of the sustainability report are in accordance with the Bill.?This appears to be a result of lobbying by affected parties, including?the Australian Institute of Company Directors.

Only ASIC will be able to take action for misleading and deceptive conduct in relation to climate-related disclosures for the first three years of the reporting regime.?There are already doubts about ASIC’s appetite to take action against companies that may make significant donations to the government.

EGL identified an amendment made late in the day that enabled companies to repeat protected statements where otherwise required by Commonwealth laws, such as documents prepared by companies to inform and protect investors, like product disclosure statements and financial statements, and to satisfy continuous disclosure obligations:?[Explanatory text of the bill Schedule 4, item 145, section 1707D] No action, suit or proceeding (collectively ‘legal action’) is able to be brought against a person or entity in relation to protected statements or statements required under a Commonwealth law that are substantively protected statements (for example, a reproduction of a protected statement in a Product Disclosure Statement).

The?greenwashing?moratorium raises a number of significant issues, not just related to climate. It is actively blocking democratic and legal processes.

Currently it is only?consumers,?Traditional Owners?and?civil society groups?who are holding government and industry to account on a number of fronts, not just?on greenwashing.

This bill effectively undermines the rights of the community. It sets an extraordinary precedent. I am not aware of any other type of financial reporting in Australia that has been subject to similar immunity provisions.

While consumers and investors can still take action against misleading claims made in advertising etc, it’s likely that companies will just stop advertising their sustainability claims and instead refer to their ‘protected’ statements or reproduce their protected statements in other documents and investors and consumers will have no recourse.

We are halfway through what the UN has called the "critical decade". The UN climate secretary recently said we pretty much have two years ‘to save the world’. We know what needs to be done to dramatically cut emissions. The IEA and the IPCCC have said we cannot open anymore gas and coal mines and we have to rapidly cut absolute emissions.

Yet the government is implementing a disclosure scheme with no emissions reduction requirements, and gently shepherding our biggest companies through the process, giving them three years to practice before they have to get it right. This will include gas companies such as Santos and Woodside who are telling investors they will be increasing their fossil fuel production while being able to report that they have met all their climate requirements placed on them by government.

There is every chance emissions will continue to increase over this period.

That is, there is a significant risk that the Australian Government's mandatory climate disclosure laws will not only be ineffective, they will facilitate increased fossil fuel production and fossil fuel emissions.