A recent keynote speech from Australian Securities and Investment Commission (ASIC) chair Joe Longo emphasised that entities need to start preparing for mandatory climate reporting now, and they should not wait until legislation and Australian Sustainability Reporting Standards are final.

Over the next few years, more than 6000 Australian companies will have to prepare climate-related disclosures as part of their annual report, representing the biggest change to financial reporting and disclosures in a generation.

Nearly 75 per cent of ASX200 entities have committed to or are already voluntarily reporting climate information against the Task Force on Climate-related Financial Disclosure (TCFD) framework. ASIC encourages listed companies to report voluntarily using TCFD.

As the legislation is upon us, entities must start preparing according to BDO.

In Longo’s speech, the ASIC chair said it was not an option to put this off until the legislation is final, and then scramble to comply.

Entities need to determine how they will marshal data, support and capabilities, and they need to start keeping appropriate records now, Longo said.

There will be a transition period as companies work to build their capabilities for complying with the new legislation, so enforcement is not front of mind for ASIC at the outset. Instead, ASIC supports a phased-in approach to the disclosure and assurance requirements.

ASIC is aware of concerns about making forward-looking statements in climate disclosures, but Treasury has responded by introducing modified liability settings which will restrict private actions against certain ‘protected statements’ for the first three years.

ASIC will take a pragmatic approach to supervising and enforcing the climate reporting regime. They will provide support and guidance to help entities meet their new obligations through a new regulatory guide and resources on a dedicated page on their website.

Climate disclosures made by entities in annual financial reports are part of ASIC’s annual financial reporting surveillance program. ASIC will use this program to monitor progress and market practice before and during the implementation of the mandatory reporting regime. They will also undertake proactive surveillance of the first reporters (Group 1 entities) to identify any learnings that can be shared for the benefit of the entire market.

Longo said the best time to start preparing was now, and that voluntary reporting under the TCFD framework was a good stepping stone to future reporting as the international sustainability reporting standards (upon which Australian standards will be based) are founded on the same four pillars as the TCFD framework.

However, until Australian Sustainability Reporting Standards are published, entities can start engaging with IFRS Sustainability Disclosure Standards as a guide towards having the necessary data and capabilities to report locally when climate reporting becomes mandatory in future.

BDO national leader, sustainability, Aletta Boshoff urged Australian entities to heed ASIC’s advice.

“Don’t wait until legislation is final—start engaging in the process to ensure you have enough time to develop the data and capabilities needed to prepare your first climate report,” Boshoff said.

“Our sustainability reporting experts can help you understand what this might mean for your organisation.”