Sustainability Reporting in Australia – a tipping point

sustainability reporting in australia
  • Insight
  • 6 Minute Read
  • March 12, 2024

Over the past few years, we've seen a gradual increase in demand from investors for companies to demonstrate their exposure to sustainability related risks and opportunities in a more meaningful way.

 

While investors are raising the bar higher, so too, is the Australian Government, having set itself a sustainable finance strategy aimed at providing capital markets with better quality information around climate risks, opportunities and impacts. 

 

Herein lies the tipping point: while the past was largely driven by voluntary adherence to multiple sustainability reporting guidelines, future reporting obligations will be determined by consistent standards mandated by regulators (although these standards will vary across jurisdictions worldwide).

 

In this years’ report, we draw on insights from our 2023 PwC Global Investor Survey to explore investor perspectives on raising the bar for sustainability integration. We also share the key findings of our 2023 study of ASX 200 companies and how they are responding to evolving sustainability reporting requirements, as well as the key challenges, opportunities and practical solutions.

Sustainability Reporting in Australia - a tipping point

To learn more, download the full report:

Investor perspectives on sustainability integration

While regulation of sustainability reporting accelerates around the world, investors are weighing in.

According to PwC’s 2023 Global Investor Survey, investors are pressing to understand how companies incorporate sustainability considerations into their strategic decision-making, risk management, and financial statements. They want to know how a company’s sustainability plans align with its business model and, ultimately, its prospects for creating long-term value.

Arguably, investors are driving the bar higher on sustainability reporting standards. They want clearer, more consistent and more comparable information on the material issues facing companies. 

 

50% say they have sought inclusion of ESG targets in executive pay or submitted shareholder resolutions on ESG. 57% say that if companies meet upcoming regulations and standards, it will meet their information needs for decision-making to a large or very large extent. 94% believe corporate reporting contains at least some level of unsupported sustainability claims (i.e., greenwashing). 85% say they engage with companies regularly or when issues of interest or concern on ESG issues arise. 85% say that reasonable assurance (the level of assurance obtained in an audit of financial statements) would give them confidence in sustainability reporting—to a moderate, large or very large extent. say they have divested their stakes in companies that haven’t demonstrated sufficient action on ESG. 42% What investors want 50% say they have sought inclusion of ESG targets in executive pay or submitted shareholder resolutions on ESG. 57% say that if companies meet upcoming regulations and standards, it will meet their information needs for decision-making to a large or very large extent. 94% believe corporate reporting contains at least some level of unsupported sustainability claims (i.e., greenwashing). 85% say they engage with companies regularly or when issues of interest or concern on ESG issues arise. 85% say that reasonable assurance (the level of assurance obtained in an audit of financial statements) would give them confidence in sustainability reporting—to a moderate, large or very large extent. say they have divested their stakes in companies that haven’t demonstrated sufficient action on ESG. 42% What investors want

ASX 200 sustainability reporting trends

It’s clear: more investors are recognising the rising significance of climate change risk and its potential implications for the financial performance of companies in which they invest.

So how are Australian companies responding to what investors want?

Our analysis reveals that ASX 200 companies are taking positive strides to address investor concerns about climate change impacts on corporate strategy and future company prospects. Additionally, the results indicate that there’s been a significant jump in the proportion of ASX 200 companies preparing standalone climate change reports, which typically offer insights beyond what is feasible to include in an annual report on elements recommended by the TCFD framework.

 

What assurance is being sought across the ASX 200? Limited assurance 32% 27% 17% 21% Scope 1 emissions Scope 2 location- based emissions Scope 2 market- based emissions Scope 3 emissions 8% 6% 4% 3% Reasonable assurance 40% 33% 21% 24% Total % separate sustainability reports 2023 2022 72 pages on average Alignment with voluntary reporting standards demonstrated through use of index tables 25% Sustainability Accounting Standards Board (SASB) standards 30% Taskforce on Climate-related Financial Disclosure (TCFD) 45% Global Reporting Initiative (GRI) 45% of companies obtain independent assurance over some aspect of their climate disclosures Assurance over climate-related disclosures 2022 % separate climate change reports 2023 (over half of which were within the ASX50) 46 pages on average 5% prepare both sustainability AND climate change reports 30% 85% of companies mention ‘climate change at least once in the notes to their financial statements and 15% of companies mention it more than five times of annual reports included disclosures relating to climate change Climate-related disclosures in the annual report 49% 46% 17% 10% What ASX 200 companies are doing: What assurance is being sought across the ASX 200? Limited assurance 32% 27% 17% 21% Scope 1 emissions Scope 2 location- based emissions Scope 2 market- based emissions Scope 3 emissions 8% 6% 4% 3% Reasonable assurance 40% 33% 21% 24% T otal % separate sustainability reports 2023 2022 72 pages on average Alignment with voluntary reporting standards demonstrated through use of index tables 25% Sustainability Accounting Standards Board (SASB) standards 30% T askforce on Climate-related Financial Disclosure (TCFD) 45% Global Reporting Initiative (GRI) 45% of companies obtain independent assurance over some aspect of their climate disclosures Assurance over climate-related disclosures 2022 % separate climate change reports 2023 (over half of which were within the ASX50) 46 pages on average 5% prepare both sustainability AND climate change reports 30% 85% of companies mention ‘climate change at least once in the notes to their financial statements and 15% of companies mention it more than five times of annual reports included disclosures relating to climate change Climate-related disclosures in the annual report 49% 46% 17% 10% What ASX 200 companies are doing:

Challenges and opportunities

ASX 200 company directors are arguably facing the most significant change to reporting obligations since the implementation of the International Financial Reporting Standards (IFRS).

While this new wave of change is marked by the complexity of identifying, measuring, recognising, and disclosing a company’s climate-related risks and opportunities, the end goal is the same: restoring and maintaining investor confidence.

The draft Australian Sustainability Reporting Standards represent a more prescriptive approach compared to previous reporting frameworks, which in some ways is reassuring for businesses in the consistency it will encourage. However, given the scale of the proposed task, they introduce a fresh set of complex challenges, including:

  • Timing and adoption

  • Estimates and forward-looking information

  • Climate scenario analysis

  • Connectivity with financial statements

  • Reporting model, systems and capability

  • Assurance

As Australia joins the world in galloping towards mandatory sustainability reporting, organisations must quickly adapt to meet the twin challenges of investor and regulatory expectations. To discover practical strategies for preparing your organisation for mandatory sustainability reporting in Australia, check out the full report.

Sustainability Reporting in Australia - a tipping point

To learn more, download the full report:

Contact us

Caroline Mara

Caroline Mara

Sustainability Reporting and Assurance Leader, PwC Australia

Tel: +61 (2) 4925 1125

John Tomac

John Tomac

Partner, ESG, PwC Australia

Tel: +61 282 661 330

Katelyn Bonato

Katelyn Bonato

Partner, Energy Transition, PwC Australia

Tel: +61 402 941 913

Liza Maimone

Liza Maimone

Chief Operating Officer and Chair of ASEANZ Consulting, PwC Australia

Tel: +61 3 8603 2008

Contact us

Sue Horlin

Sue Horlin

Partner, Assurance, PwC Australia

Tel: +61 409 933 212

Liz O'Brien

Liz O'Brien

Audit Business Leader, PwC Australia

Tel: +61 2 8266 3819

Corinne Best

Corinne Best

Trust and Risk Business Leader, PwC Australia

Tel: +61 421 614 344

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