Upbeat intro
Rebecca Archer
Welcome back to Beyond the Numbers with Grant Thornton – a podcast unpacking marketplace shifts in today’s dynamic business landscape.
I’m Rebecca Archer, and today I’m joined by Sustainability Reporting Advisory Partners John Askham and John Askham. As Group 1 organisations release their reports and Group 2 already have started reporting as of 1 July 2026, there’s a valuable opportunity to learn from the challenges and lessons emerging so far.
With Australia’s first wave of statutory sustainability reports now out, organisations still preparing should be paying attention to the outcomes and asking questions beyond the technical elements.
Welcome John & David!
John Askham
Thanks Rebecca. Pleasure to be here.
John Askham
Thanks, Rebecca.
Rebecca Archer
Alright, so let's go back to basics. First off, why are businesses needing to report?
John Askham
In summary, the new requirements are coming from the Corporations Act, which was modified a couple of years ago to mean that effectively every business that has to lodge financial reports with ASIC will also at some point have to lodge a Statutory Sustainability Report, and in summary, that report will contain a mix of qualitative and quantitative information related to climate change and the potential financial impact on the business.
So, that includes how climate-related risks and opportunities are governed within the organisation, information about what the organisation is doing about those risks and opportunities, what is its strategy, how does it manage risk? So, a lot of narrative information that organisations might not be used to disclosing to users of financial statements.
That report is really supposed to be a complement to the existing financial report. It's intended to provide additional information to investors and lenders about the climate-related risks and opportunities. The requirements relate to climate only, so no other sustainability topics that might previously have been voluntarily reported on, like nature or biodiversity type issues, and only those aspects of climate that might have a financial impact on the business.
Rebecca Archer
And are there any particular areas of concern when it comes to this reporting that you're finding?
John Askham
I think the most obvious or common area of concern is probably the data required that underpins the report.
So, a lot of organisations are quite concerned about the data required, particularly for measuring greenhouse gas emissions, which is one of the requirements. It is just one aspect of the reporting and it's true that it probably is the area that involves gathering the most data, but the emission disclosures are actually a very small part of the eventual reporting and there are some other particularly technical areas that aren't well understood yet around, for example, quantifying the impact of some of these risks and opportunities, or undertaking a scenario analysis or doing a Scope 3 emissions measurement.
Capability in those areas is going to take a bit longer to increase, I think. ASIC though has released some guidance clarifying the requirements in those areas, in particular focusing on what it calls a “proportionate and pragmatic approach.” So, they recognise essentially that skills are developing and it will take some time for them to reach a certain level of sophistication.
David Pitts
I think one of the challenges and one of the sort of the misconceptions is just the fact that it's called a Sustainability Report. Now companies have been preparing sustainability reports for decades where they talk about their impacts on communities, on the environment. This isn't that.
What this is really a climate risk report. So, it's all around risk management. It's about understanding the climate-related risks on an organisation, and so we've had a number of our clients talking to us saying actually we've been doing Sustainability Report for years and now we're being told that we have to prepare this Sustainability Report, so what do we do with the old version?
And so, I think, I think there's probably just been a little bit of confusion in the terminology because really this is all about – it is a climate set of climate risk disclosures rather than a traditional sustainability report.
Rebecca Archer
It's an important distinction, and I wonder too, David, who actually owns sustainability reporting internally?
David Pitts
Good question. It always used to be sustainability and where sustainability sat would be different for different organisations.
So, historically when sustainability was seen as more of a marketing exercise, you would see sustainability sometimes sitting with corporate comms. Now I think the role really should be spread between finance and sustainability teams. The sustainability professionals are the ones that have the experience – the historic experience – of really sort of telling the story and crafting the narrative around things like climate risk and greenhouse gas emissions, and you know, these disclosures, there are numbers in them, but really they are kind of narrative focused and finance teams are more used to dealing with, with the numbers, but as well they are climate-related financial disclosures.
So, you can't do them without the link to finance, and so, I think the answer – not wanting to sit on the fence – but I think the answer is that responsibility sits between both finance and sustainability.
Rebecca Archer
What if a team isn't big enough to have dedicated sustainability experts?
David Pitts
And I think that is probably the case for lots of organisations out there, especially as we get towards the Group 2 cohort, which are traditionally smaller.
So, I think there are a lot of organisations that are grappling with these disclosures for the first time that don't have sustainability expertise. Similarly, lots of quite large global businesses that we're working with where they do have sustainability expertise, but often it sits within head office, so it sits offshore for Australia, and so the Australian team that are having to prepare Australia-specific climate disclosures don't have that sort of historic experience.
So, I think that the role of finance teams is really expanding at the moment and the role of the CFO in particular is really broadening to include climate, and as we're saying, you know, it is, it is risk and it is, they are financial disclosures, and so I think the expectation is that the role of finances is really expanding, and we also, we get asked a lot whose responsibility it is within an organisation.
And because of the nature of the disclosures that John touched on, you need to involve risk. If you have risk expertise within business, you'll need to involve legal because there are governance disclosures that touch on the legal side. So, one of the first things that we recommend to all of our clients to do is to really kind of work out where the roles and responsibilities sit within the organisation for preparing the information and preparing the disclosures.
John Askham
I might just add to that point on the sort of coming together of finance and sustainability teams, there's been a real interesting clash in some cases of people coming from different backgrounds with different views on sustainability.
So typically, a sustainability team understands the climate science and the physical things that happen in the climate, whereas accountants and auditors like to standardise things and put things into that sort of a standardised reporting format. It's very hard to do that and keep that technical, engineering level of accuracy sometimes.
So, a lot of our engagements are sometimes translating between those two different teams and different views of the world, which is, which has been interesting.
Rebecca Archer
Group 1 reports have been out for a while, and we know that you have both digested first thoughts. In summary, what does good look like for you when it comes to this?
John Askham
From the ones we've seen – so it's actually quite a limited cohort so far being the December year end Group 1s that are publicly available – I think it's fair to say mixed is the initial reaction when we looked at those that have been lodged so far, a mixed bag really. Some are very long and very wordy and some are more succinct and that doesn't necessarily correlate to the size of business we're talking about.
So, some very large businesses have put out quite short reports and some smaller businesses that put out quite long but often repetitive content sometimes. So, it's been really hard to compare, which is normal I think because it's a new requirement. A lot of people are getting to grips with this for the first time.
So, I suspect the comparability will increase over time, but for the first few years there's really going to be some diversity in how these reports look.
David Pitts
John, I think that you nailed it with the word comparability and I find it really helpful to zoom out and to consider why this requirement exists in the first instance and the reason that Australia has introduced this requirement and why it's being introduced all over the world is to provide a comparable framework for financial decision making for investors and financial stakeholders.
And so that really is the key. Now I think what we saw in the first wave of Group 1 reporters from December was that there was still a huge amount of variability, but to steal some words from Kate O' Rourke, who is the ASIC Commissioner, she did a speech recently where she talked about before these standards were introduced we were comparing apples and oranges and so we didn't have that comparability and investors didn't have decision useful information to make investment decisions with.
We now have apples and apples but they're all sort of different shapes and sizes. You know, she compared it to, to being in an orchard with lots of different variations of apples. I think of it as sort of the odd bunch packets of misshapen fruit you get in the supermarket. So, the comparability is happening and we will certainly see a convergence and an improvement over the course of time.
Rebecca Archer
What's your Recommendation for Group 2 and 3 reporters?
David Pitts
The first recommendation is to get started early – not to leave things to the last minute because some of the work that's required to be done does take quite a long time. So, I think it's really worthwhile getting started early.
Certainly, that piece around working out the roles and responsibilities within an organisation then I think some of the first steps that we often see clients taking are working out what the governance framework is going to be over their climate risks and opportunities. That is one of the disclosure areas within the framework. It's also one of the areas that gets assured in the first year. So, I think being really clear up front about what that governance structure looks like I think is really important.
It's a climate risk standard and so another one of the first bits of work that organizations need to do is to understand their climate related risks and opportunities. That informs a number of work streams down the track that they'll need to complete, and so actually having that clear view about what are your physical and transition climate risks is a really important first step.
And then for those that haven't historically been gathering greenhouse gas emissions data, considering what you're reporting about, boundary is upfront, which means that you then have a really clear idea about what data you need to gather through the course of a year, and I think if you put those pieces in place at the start of your reporting cycle, then I think you will be in a really good position for the rest of the year.
John Askham
Just one other practical point for Group 2 and Group 3, there might be a tendency to think that by the time they have to report enough group ones will be out there to essentially copy or take some inspiration from some reports that are out there.
While that might be true in certain areas, so it might give you some ideas of how to present the information, for example, really the purpose of the report is to be as specific to your organisation as possible. So, it's very, it's very difficult to standardise or boilerplate these disclosures. They are subject to audit, or they will eventually be subject to audit, and the auditability of that information will be really important.
So, copying another report or thinking that an AI tool might be able to generate the whole report for you based on some that have already been published is probably not quite accurate. It might give you a good starting point, but it's really important to make sure that whatever you do produce is based on fact and your individual circumstances.
Rebecca Archer
According to the Standards, are there things that businesses don't have to disclose?
John Askham
Yes, there are. So, in the first year of reporting, there are a couple of reliefs available for first time reporters. So, the two big ones are relief from the requirements from having to disclose Scope 3 emissions data, which can be quite a, quite a daunting exercise, particularly for small and medium sized businesses. So, scope three emissions involve estimating emissions that occur outside of your control, so from your supply chain and through the use of your products and services by customers, which is quite challenging.
So, I think in recognition of that, the relief exists from having to do that in the first year of reporting. The other one that's available is not having to disclose comparative information in the first year. So not having to disclose the prior year information, which to be honest, virtually all first-time reporters are taking both of those reliefs that we're working with. So that I think relieves quite a significant burden in the first year of reporting.
The other thing I would encourage everybody to consider is the overarching concept of material information. So, materiality kind of underpins the whole report and really material information is information that is useful to whoever is using that report and that might change their decisions about whether to invest in you, to lend money to you.
It's different to the, to the idea of traditional financial materiality, but it's not what you might think of as double materiality, which is another concept that, that is often conflated with this idea of material information. We're still focused on an investor and a financial audience.
So, it's information that might be material to them, but it's slightly different to the, to a strict dollar threshold that exists in financial materiality.
Rebecca Archer
All right, so what would your advice be for businesses when it comes to building something scalable?
John Askham
It's interesting. One of the things that we get asked a lot by clients grappling with the requirements in their first year is what system should I use? What carbon accounting platform should we use? And while there's nothing wrong with doing that in the first year, it's also not necessary.
So, I think the most important thing in the first instance is to make sure that you really understand the disclosures you're preparing and the work that sits underneath them and that the disclosures are auditable. So, they're supported by a robust trail of evidence. They will clearly mature over time, and I think following that maturity curve, I would expect widespread adoption of carbon accounting platforms.
But in the first year, there's absolutely nothing wrong with doing things in spreadsheets. I think especially the main area where that's really relevant is over greenhouse gas emissions, and there are lots of platforms out there at the moment that will help that process, but we similarly, we see, really, we see lots of large organisations who are still gathering their emissions data for now in spreadsheets. And there's no problem with that. It helps organizations to understand how the information comes together and it helps auditors as well when they need to perform their assurance.
Rebecca Archer
I'm assuming that to now auditor involvement has been limited but will increase in years 2-4 of reporting. What needs to be considered here?
David Pitts
Yeah, there's deliberately been a gradual phasing in of the assurance requirements in Australia.
So, the first-year scope is just a limited assurance scope over a selected number of disclosures in the report, and so limited assurance that the nature of the work you do as an auditor is focused on analytical reviews and understanding processes.
When that increases to reasonable assurance, the testing becomes much more extensive and requires review of systems, processes, controls, and so there's much greater scrutiny under reasonable assurance that's not applied until 2029 and beyond. So, there's a few years for organisations and auditors because everyone's learning how to do this all at once, so there's a few years where we're operating under limited assurance to enable reporters and auditors to understand and to move along that kind of growth curve, if you like. Having said that, there is an increase in the scope of assurance.
So, the first year is just a limited scope of assurance. The second year covers everything in the sustainability report. So, all the disclosures around resilience, around Scope 3 emissions is included in the second year assurance scope. So, there is a much broader scope of work to be covered in the second year, but the key message is that, and this applies for the assurance it provide applies to the disclosures – the expectation is that in the first year what is being reported will necessarily be quite rudimentary for the vast majority, and that maturity will improve and will increase over time, remembering that assurance providers are learning how to do this work at the same time.
There's been a vast upskilling program of financial auditors in order to perform all the work that is now out there in sustainability assurance, and so there's a really kind of large upskilling going on across industry and across the assurance practice.
Rebecca Archer
So, beyond all of the technical questions, what are Group 2 and 3 reporters not asking yet, but very much should be?
John Askham
I think one of the first things that businesses should perhaps consider is how might the climate risks and opportunities they've identified affect their actual strategic business and decision making.
So, one of the big pillars of disclosure is around the strategic response to the identified risks and opportunities. So, if you think about your business is particularly exposed to a physical climate risk or transition climate risk, what are you actually doing about that?
And the answer might be nothing, or it might be that we're in the early stages of considering a response. It's fine to disclose that. So, the point of the disclosures is really to be factual about how your business is responding, and if you've considered a risk or you're only just beginning to consider a risk, it's far better to disclose that factually than try and over engineer a response that doesn't exist yet, and so, our methodology when we're working with clients is really about not over engineering those disclosures and keeping it factual.
So, if you don't have a sustainability committee or you don't have an appointed person looking after these risks and opportunities yet, Again, it's fine to disclose that it's a factual disclosure about arrangements that currently exist. So, I think that's one area.
Another area, when we think about the actual purpose of the report, is what might this reporting actually look like to an investor or a potential investor? One of the overarching aims of this whole regime is to provide investors and lenders, or potential investors and lenders with information that allows them to compare reports from different businesses.
So, when they're deciding which business to invest in or lend to, which of those has a better climate change response or one that aligns more with what the investor might be looking for. So, two businesses in a similar industry with similar climate related risks that approach them in very different ways might be viewed differently by an investor looking to put funds into one of them. So, I think thinking about what that reporting might look like is really important.
David Pitts
I guess the only things that I would add – we know that lots of first time reporters are seeing this as a compliance exercise and it is a lot of work. It's a heavy lift to go from nothing as a lot are to a fully compliant first year report.
I think the ones that will benefit the most are the ones that in the second and third year will go, you know, we've got this really now rich reporting and this great data. We understand our risks and our opportunities. What are we going to do with it?
Are we going to continue to see this as a compliance exercise or are we actually going to use this information strategically? So that's what I'd hope to see, and I think that's a real opportunity for reporters. The other thing that I think we'll see over time, and this comes back to the speech from ASIC Commissioner Kate O’Rourke.
The expectation will be that as we've sort of said already, the sophistication and maturity will increase over time. So, the quote was that we don't expect the baseline to become the benchmark. We know that the sophistication of reporting will increase over time, and so it’s important to constantly be thinking about how you improve the reporting from year on year.
John Askham
I think we've certainly seen that in the first year reporters that we've helped over the line in this first year, the message really has been that what gets you over the line this year might not stand up to scrutiny next year, and as a business, you'll want to avoid painful manual processes to bring this report together in a scramble at the end of the year or having to engage it external consultants, frankly to do this for you year on year is not palatable to many businesses, so we're really focused on educating our clients so that they don't have to do that and that they can put proper governance in place for the full year where possible.
Rebecca Archer
John and David, thank you so much for coming onto the show. Once again, for those listening who would like to connect and maybe delve deeper into the work that you do or explore ways that you can potentially assist them, what's the best way for them to reach out and get in touch with you?
John Askham
So, I think we're very happy to connect on LinkedIn or for people to have a look at the Grant Thornton website. David and myself are part of a team of specialists, and all of our contact details are there, so we're very happy to set up a call or a meeting if anybody is interested.
Rebecca Archer
If you enjoyed this episode, make sure to follow Grant Thornton Australia on Apple Podcasts or Spotify so you never miss new insights. Do you have a burning question or a challenge keeping you up at night? Drop us an email. We'd love to hear from you. Our experts are here to break down the business tax advisory and consulting landscape so you can focus on building your business.
I'm Rebecca Archer, thanks for listening.
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