As the regulatory landscape continues to evolve, it's crucial for small businesses in Australia to stay updated on new compliance requirements.
One significant area is sustainability reporting due to the Australian government's introduction of mandatory sustainability reporting requirements. While these regulations may not directly apply to small businesses, understanding their implications is essential for maintaining strong commercial relationships and ensuring future compliance.
What are the sustainability reporting requirements?
The Australian Government has mandated that large businesses and financial institutions disclose information annually about their financial risks, opportunities, plans, and strategies associated with climate change. This regulation, effective from 1 January 2025, aims to enhance transparency and accountability in how businesses address climate-related financial risks.
ASIC's reminder to small businesses
ASIC is reminding small businesses that, although they are not directly subject to these new obligations, they should still be aware of the potential indirect impacts. Small businesses operating as sole traders, partnerships, or trusts are not directly affected, but those operating under a company structure may face reporting requirements starting in 2028. Specifically, small businesses will need to comply if they meet at least two of the following criteria by 30 June 2028:
- Revenue of $50m or more
- Assets of $25m or more
- 100 employees or more
Indirect impact on small businesses
Even if small businesses do not have direct reporting obligations, they may still be affected indirectly. Large businesses and financial institutions, which are required to report on their sustainability practices, may request information from their small business partners to fulfill their own reporting requirements. Here are some examples of how this might happen:
- Energy usage data: A large business might need detailed data on energy usage from its suppliers to complete its sustainability report. For instance, if a small business supplies components to a large manufacturer, the manufacturer may request information on the energy consumption involved in producing those components.
- Waste management practices: A financial institution might require information on waste management practices from its small business clients to ensure that their overall environmental impact is accurately reported. For example, a small business providing cleaning services to a bank may be asked to report on their waste disposal methods and recycling efforts.
- Supply chain transparency: Large retailers may seek information on the sustainability practices of their suppliers to meet their own reporting obligations. This could include data on the sourcing of raw materials, labour practices, and environmental impact. A small business producing textiles for a major clothing brand might need to provide details on the sustainability of their supply chain.
- Carbon footprint: A large corporation might request carbon footprint data from its logistics partners to include in their sustainability report. For example, a small business offering transportation services may be asked to provide information on their vehicle emissions and fuel consumption.
Preparing for future compliance
Small businesses should take proactive steps to prepare for potential future compliance. This includes:
- Keeping accurate records of energy usage and other relevant data.
- Engaging with customers and suppliers to understand their reporting needs.
- Consulting with accountants, tax agents, or professional advisors for guidance on sustainability reporting requirements.
Resources for small businesses
To help small businesses navigate sustainability and ESG practices, several resources are available:
- Business.gov.au: Provides comprehensive guidance on how to use environmental, social, and governance (ESG) practices in your business. This resource offers practical tips and strategies for integrating ESG into your business operations. You can find more information here
- ASIC's Sustainability Reporting Webpage: Offers detailed information on the sustainability reporting requirements and how they apply to businesses of different sizes. This resource is essential for understanding the regulatory landscape and preparing for compliance. More details can be found here
- Develop Your Sustainability Action Plan: This resource from Business.gov.au helps small businesses create a sustainability action plan, providing guidance on managing changes and implementing new practices. More information can be found here
Staying informed about sustainability reporting requirements is essential for small businesses to navigate the evolving regulatory environment. By understanding these requirements and preparing accordingly, small businesses can ensure they remain compliant and maintain strong relationships with larger business partners.
We’re here to help
Grant Thornton can help businesses of all sizes understand and measure their potential sources of greenhouse gas emissions depending on their specific needs, whether it be for reporting purposes or more broadly to have the data to make appropriate decisions for their business. Following the initial development of a greenhouse gas inventory, Grant Thornton can also assist with the first steps on the journey towards setting and realising their short, medium, and long-term emission reduction goals.
Unpacking Australian Sustainability Reporting: What’s really required?
