ASIC promises to work with small businesses facing climate disclosure green tape

Australia’s corporate regulator the Australian Securities and Investments Commission (ASIC) promises to work with small businesses facing new green tape in the forthcoming climate-related reporting regime, as accounting giants urge the government not to heap a compliance burden on SMEs.

The federal government plans to legislate new rules compelling Australia’s largest companies to share their impact on the climate, alongside their traditional financial reports to shareholders.

It is part of a broader, cross-sector attempt to measure, mitigate, and drive investment from the most devastating causes of climate change.

Draft legislation proposes Australia’s biggest companies will divulge their climate impact from July 1 this year, before the scheme expands to cover smaller entities through to 2027.

Under the plan, the smallest companies covered by the scheme will have consolidated revenue above $50 million gross assets in excess of $25 million, and more than 100 employees.

As such, Australia’s small and medium businesses won’t be required to directly report their greenhouse gas emissions or other impacts on the climate.

However, a requirement for designated companies to divulge their Scope 3 emissions — that is, emissions caused up and down their supply chain — means many SMEs will need to share relevant data with reporting entities.

On Tuesday, ASIC deputy chair Sarah Court said it will work alongside SMEs tasked with forwarding their climate data to suppliers, clients, and customers covered by the regime.

“Once the new laws come into effect, ASIC will work with small business representatives to develop practical guidance for small businesses in relation to the requirements of the new laws and how the new laws may impact them,” Court said.

The confirmation suggests the corporate watchdog will work alongside small businesses through the process, which promises to add another dimension to standard business reporting processes.

Court added that the government expects Scope 3 emissions reporting will initially rely on estimates at the time of disclosure, potentially saving small businesses from arduous accounting in the short term.

Australian business lobby groups recognise the threat of climate change and broadly support new climate-related disclosure rules, but argue the Stage 3 reporting scheme must not have a disproportionate cost-to-benefit ratio.

Similarly, two of the nation’s most prominent accounting bodies argue the standards under development by the Australian Accounting Standards Board (AASB) could impose extra costs on small businesses without government intervention.

In a recent joint submission to the AASB, CPA Australia and CA ANZ said small and medium entities not directly covered by the regime “will be expected to provide information through their value chain to inform the disclosures of reporting entities and therefore we anticipate financial implications for them.

“These costs could be minimised if Government plays a role in coordinating such information requests to minimise unnecessary duplication.”

As regulators attempt to set the ground rules, some major corporations have already put small businesses on notice: supermarket giant Coles said it expects to set sustainability targets at 75% of its suppliers between now and 2027.