Mandatory reporting of greenhouse gas (“GHG”) emissions is here. Arising from Australia’s adoption of international protocols and regulations, many Australian companies will have to start reporting their GHG emissions. Some have already started.

GHG reporting timing

The requirements are being introduced in stages. Most Australian companies will fall into the third stage (“Group 3”) and will only have to start reporting GHG emissions for financial years commencing on or after 1 July 2027. FY28 will be the critical year.

Note: Companies must meet at least 2 of the 3 criteria. Group 1 also includes entities registered under the National Greenhouse and Energy Reporting Act 2007.

By way of clarification, these new requirements apply only to companies which lodge financial reports with Australian Securities & Investments Commission (“ASIC”) and which meet the above size thresholds. Everyone else is exempt.

Reporting obligations

The reporting obligations are onerous and require numerical as well as narrative disclosures. The numerical disclosures require companies to estimate total GHG emissions arising from their entire supply chain. This means estimating the emissions produced directly by the company (called “Scope 1”) (e.g. by company-owned vehicles), the emissions produced by the company’s electricity usage (“Scope 2”) and all of the other indirect emissions produced by, for example, transport to and from the company, employee commuting and business travel (“Scope 3”). Scope 3 is the broadest and will be the most challenging to estimate. There are 15 specific categories of emission which a company must consider.

There are also extensive narrative disclosures on governance, strategy, risk management, metrics and targets related to GHG emissions. All of this pre-supposes that a company has a strategy and a risk management framework in relation to GHG emissions as well as the policies, procedures and systems for estimating emissions.

One saving grace is that Group 3 companies are exempt from reporting Scope 3 emissions for FY28 and need only start reporting them in FY29. However, they must still report estimates of Scope 1 and Scope 2 emissions in FY28 in addition to all of the narrative disclosures.

Supporting documentation

All emissions estimates must have a supportable basis. This could mean capturing non-financial data from electricity bills, log-books, employees, suppliers, customers and external databases. In order to be ready from 1 July 2027, Group 3 companies must start planning now. The preparation should include:

• Staff training and up-skilling;
• Identification of appropriate carbon accounting software and databases; and
• Development of a strategy, risk management framework and the related policies and procedures to implement reporting.

In some cases, it may even be necessary to recruit dedicated staff or GHG consultants.

Some Group 3 companies may become subject to pressure to supply GHG data before FY28 from suppliers and stakeholders who themselves are Group 1 or Group 2 companies and are already required to report.

By the way, GHG reporting will also need to be audited. The audit requirement is being introduced by stages until all GHG reporting will be audited by FY33.
GHG reporting will be difficult and it will not be cheap. Don’t shoot the messenger.

Contact Pilot

GHG reporting will be complex so companies should seek professional advice early. To discuss your reporting requirements or for assistance in preparing for these changes, contact Daniel Gill or Chris King on (07) 3023 1300.