Sustainability regulation suggests digital ESG reporting

Some of Australia’s largest organisations, including Deloitte Australia and PwC Australia, would support mandatory digital ESG reporting as incoming sustainability regulations act as a catalyst for much-needed innovation. Speaking at corporate reporting cloud platform provider Workiva’s Accelerate event in Sydney, attended by the likes of Challenger, Yancoal, UNSW and others, some of Australia’s largest organisations talked about the challenges they face when meeting Australia’s frequently evolving ESG regulatory requirements.

The general consensus at the event centred around the merits of nationwide digital reporting, which would provide companies with a standardised reporting framework and ASIC with standardised reports and information, free of common errors, that is more easily and quickly assessed. Also discussed was how ESG reporting might complement finance reporting and capitalise on the synergies between science-based data and financial data. By integrating both, companies have the opportunity to alleviate workload, share department skillsets and better represent value.

As part of Workiva’s 2024 research that polled 140 ESG practitioners in Australia, 90% said they find it challenging to adapt reporting processes to comply with new regulations. 87% of companies are prioritising ESG reporting more than in previous years and 78% are concerned with their company’s ability to collect and share information with other organisations in their value/supply chain.

“In the wake of the most recent new guidance from ASIC, it’s looking more likely that Australia will adopt standards and processes very similar to those in Europe. Those Australian companies already meeting Europe’s CSRD requirements will have an advantage,” said Andromeda Wood, VP of Regulatory Strategy, Workiva. “The proposed climate-related financial disclosure legislation in Australia now brings the focus of the law and ASIC to some of that reporting. The draft Australian Sustainability Reporting Standards are aiming to support this effort and have been based on the new standards drafted by the International Sustainability Standards Board (ISSB).”

Mandatory digital reporting

Speaking at the Workiva event, Christopher Brown, Partner, Accounting & Reporting, at Deloitte Australia, said: “Amidst the global shift towards sustainability-focused financial disclosures, it is imperative that finance teams bring to bear their corporate reporting experience; to support sustainability teams in understanding the requirements, establishing appropriate governance and control, and digitally enabling ESG reporting.

“It’s time for Australia to accelerate its transition to digital reporting. This will help us keep pace with our trading partners, such as the US, UK, Europe and Japan. They have mandated digital corporate reporting and have already seen the benefits — we can see those same benefits too.”

Through its research with ESG practitioners in Australia, Workiva found that 87% of companies are planning to allocate more budget to technology for ESG initiatives in the next three years and 85% believe that access to technology and data will play an important role in making decisions to advance their company’s ESG/sustainability strategy for the future.

In preparation for the new ESG regime, 90% of the ESG practitioners surveyed said their organisations are planning to undertake digital transformation projects to improve collaboration and 86% of respondents agree that gen AI will make ESG/sustainability reporting more efficient in the next five years.

Unintentional greenwashing

With ASIC sharpening its teeth when it comes to greenwashing — which was recently called out as a specific area of focus by the regulator — PwC Australia’s Carolyn Cosgrove reminded the audience that, among others, Australian Institute of Company Directors has continually warned that the liability for non-compliance of ESG obligations, or the practice of intentional or unintentional greenwashing, now falls firmly on the heads of company directors.

Organisations that are not implementing digital ESG reporting may leave their directors walking a tightrope of risk, and those directors could be made an example of, if ASIC discovers that they are intentionally, or unintentionally, overstating their sustainability actions or impacts.

Digital reporting may reduce unintentional greenwashing by providing a standardised and error-free framework where multiple measurement methodologies can be compared, and the correct measurement can be selected for the relevant and correct protocol.

Talking about the challenges that Australian business leaders see in their role, Carolyn Cosgrove, Partner, Sustainability Reporting & Assurance, PwC Australia, said: “Organisations are facing increasingly challenging sustainability reporting requirements, which are getting sharper focus from stakeholders and come with expanded liability for company directors. Leveraging existing skillsets from finance functions, establishing accountability across the organisation and enabling technology solutions will be integral in delivering credible, accurate and timely reporting.”

Each company has its own trajectory to realising the future of the finance function, depending on its specific starting point and goals. But it is clear that more must be done to establish enabling relationships, ways of working and competencies using technologies to meet regulatory challenges head on.

Image credit: iStock.com/Boy Wirat