Subsidiaries must comply with Aussie regime

Inbound Australian subsidiaries of international groups must comply with the Australian Sustainability Reporting Standards (ASRS), even if they already make disclosures under foreign regimes, EY finds.

Alexandra Banks, partner at EY, climate change and sustainability services, has been receiving an influx of questions related to the application of proposed climate-related disclosures in Australia as part of her work with the EY Sustainability Disclosure Hub.

Foreign regulatory regimes that serve the same purpose include the European Union's Corporate Sustainability Reporting Directive (CSRD), and the United States Securities and Exchange Commission (US SEC).

Questions have centred on whether inbound Australian subsidiaries of international groups should report locally, where the parent or group is already making climate-related disclosures under one of those regulatory regimes.

EY's May 2024 update on requirements for climate-related financial disclosures in Australia clarifies that such groups do fall within the scope of the Australian regime.

This is because "the standards and frameworks and timelines for reporting that apply at the parent/international level... differ from the requirements of the ASRS," the EY report says.

"It cannot even be assumed that information prepared by an international parent that is reporting under ISSB Standards can be used by its Australian subsidiary for reporting under the ASRS because of local differences that, as an example, require the use of NGER Scheme legislation to measure greenhouse gas emissions (GHG) emissions."

Reporting obligations under the Corporations Act apply to individual entities, meaning that inbound Australian subsidiaries of an international group cannot meet obligations by lodging a parent entity's consolidated sustainability report.