Top 10 ESG Markers - August 2024

The month of August covers the Australian climate risk Bill passing the Senate, study showing surf ecosystems as carbon reserves, how the new Right-to-Repair legislation gains momentum across the U.S. and Europe,? Climate Council calls for urgent action on Australia’s methane emissions, drying great salt lake emerges as significant carbon dioxide emitter, accelerating methane emissions pose urgent climate threat, Australian companies brace for EU sustainability standards impact, Consultation being open for developing Australia's Sustainable Ocean Plan, projecting a slowdown in global warming, despite 2023 breaking records: implications and cautions and seaweed supplement shows promise in reducing cattle methane emissions

Again, if I happen to miss some key markers in a particular month. Just drop me some comments, and I will pick them up next month!?

*‘ESG Markers’ – like biomarkers that tell us how healthy our body may be, ESG Markers showing us the big movements in the field of ESG in Oceania and globally.?

So, here are my Top 10 for August 2024, again in no particular order.

Climate Reporting: A New Era for Australian Businesses

Australian businesses are gearing up for a significant shift in corporate reporting. On 22 August 2024, the mandatory climate reporting bill was passed by the Senate, with the Bill expected to be passed in the government-controlled House of Representatives in the September sitting period. The landmark legislation will require certain organisations to make detailed disclosures about their climate-related risks and opportunities, commencing with the largest emitters and corporations from 1 January 2025. Smaller entities will gradually phase into the reporting regime over the following years. The disclosures must align with the Australian Sustainability Reporting Standards (ASRS) and will be included in annual sustainability reports. Charities registered with the Australian Charities and Not-for-Profit Commission (ACNC) are excluded from the regime, but other Not-for-Profits (NFPs) who meet the relevant size thresholds are required to report.

Directors will be responsible for ensuring compliance with the legislation and will need to make a declaration confirming the accuracy of the sustainability report. To incentivise comprehensive disclosures, the government has introduced a modified liability period, providing limited legal protection for certain forward-looking statements.

The legislation also mandates that organisations conduct climate scenario analysis, including assessments based on both 1.5°C and higher warming scenarios. This will help businesses understand and mitigate the potential impacts of climate change.

Assurance over all climate disclosures will be mandatory from 1 July 2030, with the Auditing and Assurance Standards Board (AUASB) to set interim mandatory assurance requirements. The AUASB anticipates issuing a proposed assurance timetable for consultation shortly.

In the meantime, the Australian Accounting Standards Board (AASB) has completed its deliberations on the forthcoming Australian Sustainability Reporting Standards (ASRSs). The final form of the standards, AASB S1 "General Requirements for Sustainability-related Financial Information" and AASB S2 "Climate-related Disclosures," will be aligned with the International Financial Reporting Standards (IFRS) S1 and S2.

Key Points:

• AASB S2: Mandatory standard for climate-related disclosures, aligning closely with IFRS S2. However, AASB S2 will not require the disclosure of industry-based metrics determined after considering SASB Standards.
• AASB S1: Voluntary standard for general sustainability-related financial information, aligning with IFRS S1.
• Effective Dates: AASB S2 will be effective for annual reporting periods beginning on or after January 1, 2025. AASB S1 is also effective from January 1, 2025, but may be adopted early.
• Enabling Legislation: The AASB can only make AASB S2 mandatory once the enabling legislation is in place. A meeting date to make the standards mandatory will be set once the legislation receives Royal Assent as described above through its final passage in the lower house.

The AASB website provides working draft versions of AASB S1 and AASB S2 for reference. While amendments were agreed upon during the meeting, the documents offer a good understanding of the likely final form of the standards.

Surf ecosystems as carbon reservoirs: an underutilised climate change ally

A recent study by scientists from Conservation International, Oregon State University, and Save The Waves Coalition has highlighted the significant role surf ecosystems play in mitigating climate change. The research mapped over 4,800 popular surf spots across 113 countries and found that these areas collectively store approximately 88 million tons of carbon, equivalent to the emissions from 77 million petrol-powered cars. These ecosystems, which include mangroves, coastal forests, marshes, and seagrasses, are not only vital for carbon sequestration but also support high biodiversity.

The study shows that while surf breaks are crucial for carbon storage and biodiversity, only 3% of these areas with high ecological value are protected from environmental threats like coastal development and overfishing. This lack of protection poses a risk to both the ecosystems and the surfing communities dependent on them.

New Right-to-Repair legislation gains momentum across the U.S. and Europe

Recent developments in right-to-repair legislation are reshaping the landscape for consumers and manufacturers alike. Notably, the state of California has enacted the Right to Repair Act, effective from July 1, 2024. This law mandates that manufacturers provide access to parts, tools, and repair information, empowering consumers and independent repair shops to fix their own devices without relying solely on the original manufacturers.

Similarly, Oregon has introduced a groundbreaking law that bans parts pairing, starting in 2025. This legislation will prevent manufacturers from restricting repairs by tying specific components to individual devices, a practice that has been widely criticised for driving up repair costs and encouraging waste.

In Europe, the European Union has adopted a set of right-to-repair rules aimed at reducing electronic waste and promoting sustainability. Although these rules are not yet fully finalised, they represent a significant step toward ensuring that consumers can repair their own devices rather than replacing them.? France has been at the forefront of this movement, having implemented a repairability index in 2021. This regulation requires manufacturers to display a repairability score on electronic devices, guiding consumers on how easily their products can be repaired.

These recent moves follow the earlier success in New York, where the Digital Fair Repair Act came into effect in July 2023, and Colorado's Consumer Right to Repair Digital Electronic Equipment, considered the most comprehensive right-to-repair bill in the U.S., passed in 2024.

The surge in right-to-repair legislation reflects growing consumer demand for affordable, accessible repairs and highlights a shift toward greater sustainability and reduced electronic waste. As more states and countries follow suit, the right-to-repair movement continues to gain momentum, challenging manufacturers to rethink their approach to product design and repairability.

Climate Council calls for urgent action on Australia’s methane emissions

A recent report from the Climate Council highlights the urgent need for Australia to implement effective strategies to reduce methane emissions. Despite committing to the Global Methane Pledge at COP26, Australia remains without an official methane reduction target or comprehensive action plan. The pledge aims to cut global methane emissions by 30% by 2030, yet Australia, the 12th largest methane emitter globally, has made limited progress.

Methane is the second most significant climate pollutant after carbon dioxide, with its atmospheric levels rising by 260% since pre-industrial times. It is responsible for 25-30% of the global warming experienced since the Industrial Revolution. Methane is particularly potent, trapping 85 times more heat than carbon dioxide over 20 years.

The Climate Council’s report identifies key sources of Australia’s methane emissions, including agriculture (52%), fossil fuel mining (25%), and waste (11%). The report advocates for practical solutions such as feed supplements for livestock, improved waste management practices, and mandatory direct measurement of methane emissions from mining operations.

Without decisive action, global methane emissions are projected to rise by 15% this decade, potentially derailing efforts to meet net-zero targets. The Climate Council urges the federal government to establish a national methane reduction target and a detailed action plan to align with the Global Methane Pledge and contribute meaningfully to global climate goals.

Drying great salt lake emerges as significant carbon dioxide emitter

A new study has revealed that Utah's Great Salt Lake, which has lost 73% of its water and 60% of its surface area, released approximately 4.1 million tonnes of carbon dioxide and other greenhouse gases in 2020. The findings, published in One Earth, indicate that the lake's desiccating shores are becoming an increasingly significant source of climate-warming emissions.

The lake's decline, driven by water diversions, global heating, and a prolonged mega-drought, has led to exposed lakebeds releasing toxic dust laden with arsenic, mercury, and lead. This poses serious public health risks, including respiratory issues and increased rates of heart and lung disease.

The study warns that if this trend continues, the Great Salt Lake and other shrinking saline lakes worldwide could become major contributors to global greenhouse gas emissions, exacerbating climate change. The researchers emphasise the importance of preserving the lake to mitigate these emissions and protect local ecosystems and communities.

Accelerating methane emissions pose urgent climate threat

Global methane emissions are rising at the fastest rate in decades, necessitating immediate action to prevent a dangerous escalation in the climate crisis, according to a recent study published in Frontiers in Science. The research, led by an international team of scientists, highlights methane’s significant impact, contributing to half of the global heating experienced so far.

Methane, with 80 times the warming potential of carbon dioxide over 20 years, has been increasing rapidly since 2006. The study notes that global methane emissions have risen by approximately 30 million tonnes annually in the 2020s compared to the previous decade, setting records in both 2021 and 2022. Contributing factors include expanded fossil fuel extraction, particularly through fracking, increased livestock agriculture, and accelerated organic decomposition in wetlands due to global heating.

The Global Methane Pledge, initiated by the US and EU in 2021, aims to reduce methane emissions by 30% by 2030. However, only 13% of emissions are currently covered by existing policies, and just 2% of global climate finance targets methane reduction.

The study notes that if cut immediately, 90% of accumulated methane could dissipate within 30 years, offering a rapid means to mitigate global warming and protect current generations from worsening climate impacts.

Australian companies brace for EU sustainability standards impact

Australian corporations are facing growing pressure to scrutinise their global supply chains for human rights abuses and environmental harm due to the European Union's newly implemented Corporate Sustainability Due Diligence Directive. The directive, which came into force last month, mandates that large companies identify and address infringements related to working conditions, wages, discrimination, and environmental damage within their global operations and supplier networks. Companies failing to comply risk significant financial penalties.

This directive's extraterritorial reach means it could apply to Australian companies involved in the European market, either by selling goods or providing raw materials within a European company’s supply chain. The directive has underscored the need for Australia to align its corporate environmental, social, and governance (ESG) standards with those of key trading partners like the EU.

The European Australian Business Council (EABC) has warned that Australia's mining, extractive, and agricultural sectors could be particularly vulnerable under the new directive, especially those operating in regions with known labour and environmental issues. The directive's phased implementation, set to begin in 2027, could leave Australian companies grappling with a significant compliance burden due to the difficulty of ensuring clean practices across complex global supply chains.

Australia’s current sustainability regulations lag behind those of the EU, as highlighted by the Monash Centre for Financial Studies, which notes that Australian companies, while improving in their efforts to eliminate modern slavery from their supply chains, still struggle to connect their exposure to risks with their responsibility to address them. The delay in the Australian government’s response to a major review of the Modern Slavery Act, which recommended mandatory due diligence and civil penalties for noncompliance, has only added to the uncertainty.

Developing Australia's Sustainable Ocean Plan: Consultation open

Australia is in the process of creating a Sustainable Ocean Plan aimed at improving the management of the nation’s oceans through collaboration with governments, industries, research organisations, conservation groups, and communities. This plan is crucial for addressing the complex challenges facing Australia's oceans and the $118.5 billion "blue economy" dependent on them.

As part of the High Level Panel for a Sustainable Ocean Economy, the Australian Prime Minister has committed to the development of this plan, with a focus on sustainably managing 100% of Australia’s ocean. The primary goals include ensuring a healthy and resilient marine environment, promoting sustainable and prosperous ocean industries, and fostering inclusive decision-making processes to share ocean resources equitably across current and future generations.

The plan's drafting involved extensive engagement with First Nations people, marine industries, governments, and other stakeholders to understand the challenges and opportunities within Australia's marine environment. This input informed the development of a shared national vision for 2040, identifying priority areas and opportunities for national action.

Feedback on the draft Sustainable Ocean Plan is currently being solicited, with the deadline for submissions set for 5pm on 13 September 2024. More details can be found at Draft Sustainable Ocean Plan - Climate ( dcceew.gov.au )

Projecting a slowdown in global warming, despite 2023 breaking records: implications and cautions

A new federal report has painted a stark picture of the escalating effects of climate change in 2023. The year witnessed a series of unprecedented extreme weather events, from record-breaking marine heatwaves to severe droughts and wildfires.

One of the most concerning findings was the significant reduction in heat-reflecting clouds, contributing to record-high global temperatures. The report also highlighted the widespread occurrence of marine heatwaves, affecting nearly 94% of ocean surfaces. These extreme events had devastating consequences for marine ecosystems, leading to mass die-offs of fish, seabirds, and marine mammals.

Scientists are increasingly concerned that these extreme events may signal a fundamental shift in the global climate system. The unprecedented intensity and duration of the marine heatwaves, in particular, suggest that the planet's climate is reaching a tipping point.

Australia is experiencing an unusual heatwave for the middle of winter, with temperatures soaring well above average across much of the country. This heatwave, driven by a persistent high-pressure system, has led to broken temperature records and raised concerns about the ongoing impacts of climate change.

The Bureau of Meteorology has reported that temperatures in many regions have been 10-15 degrees Celsius above average, with some locations reaching over 40 degrees Celsius. This extreme heat event is particularly concerning as it occurs in August, typically the coldest month of the year in Australia.

Released in August 2024, the Great Barrier Reef Outlook Report 2024 has issued a stark warning about the deteriorating health of the Great Barrier Reef, primarily due to climate change. The report, released by the Great Barrier Reef Marine Park Authority, confirms that the reef is facing a multitude of threats, including rising ocean temperatures, severe tropical cyclones, crown-of-thorns starfish outbreaks, poor water quality, and unsustainable fishing.

The report highlights the devastating impact of mass coral bleaching events, which have become increasingly frequent and severe in recent years. These events, caused by rising ocean temperatures, result in the death of vast swaths of coral. The report warns that unless urgent action is taken to address climate change, the Great Barrier Reef may not survive.

On a more positive note, a recent study suggests that a deceleration in global warming could be on the horizon due to reductions in greenhouse gas emissions, driven by government policies. This research projects that the current rate of global warming, approximately 0.21°C per decade, could decrease to around 0.15°C per decade by 2050. This anticipated reduction underscores the significance of national emissions policies, which are beginning to show effectiveness in moderating temperature increases.

However, the study warns against complacency, as the slower rate of warming does not equate to a reduction in overall warming or its impacts. The findings suggest that without further stringent emissions cuts and adherence to climate commitments, the slowdown could be insufficient to prevent severe climate-related damage. Additionally, non-linear climate responses, such as accelerated aerosol reductions, could complicate future projections, potentially leading to unforeseen consequences.

This research reinforces the urgency of continued and enhanced climate action, highlighting that while current policies are making a difference, they fall short of what is needed to meet global targets and mitigate the worst impacts of climate change.

Seaweed supplement shows promise in reducing cattle methane emissions

A recent study conducted in an Australian feedlot has demonstrated the potential of seaweed supplements to significantly reduce methane emissions from cattle. By incorporating a red seaweed derivative into the feed of 80 cattle, researchers achieved a 51.7% reduction in methane emissions over 200 days.

The study, published in the journal Translational Animal Science, highlights the positive impact of this seaweed-based additive on reducing greenhouse gas emissions from the livestock industry. Methane, a potent greenhouse gas, contributes significantly to global warming, and cattle are a major source of these emissions.

While the results of this study are promising, it's important to note that the trial was conducted in a feedlot setting, which represents a smaller portion of Australia's cattle industry. Implementing such strategies in grazing systems, where the majority of cattle are raised, will pose greater challenges.

The researchers estimate that a combination of interventions, including feed additives, selective breeding, and improved farming practices, could reduce methane emissions from Australia's beef cattle herd by 15-20% by 2030. However, this target falls short of the government's commitment to a 30% reduction in methane emissions by the same period.

Addressing the issue of methane emissions from livestock is crucial in the fight against climate change. While seaweed supplements offer a promising solution, it's essential to explore a range of strategies and technologies to achieve substantial reductions in this sector.

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The views expressed in this article are the views of the author, not Ernst & Young (EY). This article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.