Companies call for certainty around climate disclosures

Industry participants are calling for more certainty when it comes to climate disclosures, with one expert noting it would be better to wait for Scope three emissions reporting before "dumbing down" assurance requirements.

Treasury recently opened a consultation to enhance efficiency of climate disclosures by reducing the cost of compliance for companies.

To achieve this, Treasury is considering the current assurance settings for reporting. Under one of the options, all companies would only require limited assurance on an ongoing basis, removing the requirement to transition to reasonable assurance.

Under another option, the government would retain the long-term objective of progressing to reasonable assurance while extending the transition period from 2030 to 2035.

Avarni co-chief executive Misha Cajic said he doesn't think it's a good idea to completely eliminate reasonable assurance as the industry might end up with a lot less confidence on the numbers. Avarni helps organisations meet their sustainability compliance commitments.

"To be honest, we're in a lot of conversations now with group ones and their auditors, and the auditors are already applying reasonable assurance tests on inventories, even though it's limited assurance," Cajic said.

Cajic recommends a tiered system for assurance depending on the quality of the data, where companies reasonably assure information that has already happened and have available data on it.

"Whereas limited assurance, I think, makes more sense for a lot of the forward-looking information, like downstream scope three," Cajic said.

"That's where you're estimating how the product's going to be disposed in 10 years from now, for example, that is where it makes sense to potentially ease the requirements on reasonable assurance. It's so much more difficult."

Grant Thornton Australia sustainability reporting advisory partner Samantha Sing Key said as entities are only in their first reporting period, it's too early to determine the most efficient way forward for the longer term.

"This was a year of firsts: first time for companies preparing reports using AASB S2 as well as the first time assuring those reports under ASSA 5000. Overall, the most important part of the policy will be to give businesses certainty around what is required and when for both auditors and preparers," Key said.

Cajic added a lot of the auditors are still learning on the job on how to properly report climate disclosures.

"We've even noticed that different auditors in different cities within the same firm -because it's mostly the big four that's auditing the group ones at the moment - and even different auditors in the same firm are treating the assurance differently," he said.

He noted it is too early to tell whether reasonable assurance will be too expensive or not.

"Right now, what it feels like is happening is basically people are reacting to just how much uncertainty there is in Scope three and saying, 'Oh, you know, we should dumb it down because we won't be able to reasonably assure it'. I think it's worth probably seeing it out for a little longer before making a call on Scope three," Cajic said.

Treasury is also floating a government-run repository of domestic emissions factors so large companies can estimate Scope three without issuing data requests to suppliers.

"It would improve access to publicly available emissions factors, which is a necessary part of Scope three emissions measurement," Key said.

"AASB S2 recognises that the measurement of Scope three greenhouse gas emissions is likely to include the use of estimation. Many emissions factor databases have paywalls, creating challenges for companies to access emissions factors needed for calculating their Scope three emissions."

Cajic noted those kind of databases already exist, and there is already an Australian-specific one that Avarni works with.

"What we're imagining is that the government wants to put forward something that's perhaps a little more accurate than what's currently out there," he said.

"We're unsure how they plan to collect that information. Perhaps they'll work with service providers such as ourselves who do collect it from companies."