Companies in Australia should be given an extra year to prepare to comply with a new proposed law requiring mandatory climate-related reporting, according to a statement released by the Business Council of Australia (BCA), which also pushes for an extended period and expanded scope of immunity from liability related to the new disclosure requirements.

The BCA advocates for a “training wheels” approach to the application of the new climate-related disclosure rules, allowing for time for companies to develop the necessary skills and capabilities needed to ensure the proper implementation of the reporting requirements.

BCA Chief Executive Bran Black said:

“We believe that an appropriately calibrated ‘training wheels’ approach will be key to ensuring a successful implementation of the new requirements, that serves both the users and preparers of disclosures.”

The proposal for additional time forms part of the BCA’s submission to the Australia Treasury’s draft legislation, released earlier this year, which would introduce mandatory climate-related reporting requirements for large and medium sized companies, including disclosures on climate-related risks and opportunities, and on greenhouse gas emissions across the value chain.

The new proposed legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets, which would begin reporting for fiscal years starting from July 1, 2024. Medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) would be required to begin reporting for years beginning from July 2026, while smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets) would begin the following year.

While the BCA submission expresses its support for “the continuous improvement in the quality of climate related financial disclosures,” it also calls for “sufficient time for investment in systems and auditing capabilities to develop,” in addition to “appropriate liability safe harbours and transition periods.”

The BCA submission also highlighted a need for certainty about the reporting standards that will apply, noting that the finalized standards are still under development by the Australian Accounting Standards Board (AASB).

In the submission, the BCA said:

“The commencement date should allow a minimum of 12 months from the date the legislation is proclaimed or AASB standards are published (whichever is later) before compliance is required – which is necessary to ensure there is sufficient time to develop internal capabilities and capacity to meet the new requirements.”

The BCA statement also advocates for close alignment between the AASB’s upcoming standards and the IFRS’ International Sustainability Standards Board’s (ISSB) recently released standards, in order to enable comparisons across jurisdictions and minimize compliance costs for reporting companies. While the AASB’s proposals are based on the ISSB standards, they include a series of modifications in areas such as Scope 3, or indirect value chain emissions reporting, and on reporting requirements for companies that do not have material climate-related financial risks or opportunities.

Another key proposal in the submission is for the extension and expansion of relief from liability in the new legislation. The government’s draft legislation uses a “modified liability approach,” which temporarily suspends liability for “the most uncertain parts” of the new reporting requirements, including Scope 3 emissions and scenario analysis until mid-2027. The BCA submissions calls for the immunity to be extended to 2030, which would align with the requirement for full audit requirements, and for the approach to include all forward looking statements, as well as to “include a high bar for civil actions.”

Black said:

“This is an incredibly important reform and the BCA wants to see it in place, however the goal should be taking the time to get it right, not rushing and risking failure.”