Sustainability regulations suggest digital ESG reporting

Some of Australia’s largest organizations, including Deloitte Australia and PwC Australia, would support mandatory digital ESG reporting as upcoming sustainability regulations act as a catalyst for much-needed innovation. At Workiva’s Accelerate, a cloud-based enterprise reporting platform provider, in Sydney, attended by representatives from Challenger, Yancoal, UNSW and others, some of Australia’s largest organizations spoke about the challenges they face in meeting frequently changing Australian regulatory requirements in the field of ESG.

The general consensus at the event centered around the benefits of nationwide digital reporting, which would provide companies with a standardized reporting framework and ASIC with standard reports and information, free from common errors, that could be assessed more easily and quickly. It also discusses how ESG reporting can complement financial reporting and leverage synergies between scientific and financial data. By integrating both, companies have the opportunity to reduce workload, share departmental skills, and better represent values.

In a 2024 Workiva study of 140 ESG practitioners in Australia, 90% said they found it challenging to adapt their reporting processes to new regulations. 87% of companies place more importance on ESG reporting than in previous years, and 78% are concerned about their company’s ability to collect and share information with other organizations in their value/supply chain.

“In light of ASIC’s latest guidance, it is more likely that Australia will adopt standards and processes very similar to those in Europe. Those Australian companies that already meet European CSRD requirements will have an advantage,” said Andromeda Wood, vice president of regulatory strategy at Workiva. “Australia’s proposed climate-related financial disclosure regulations now focus legal and ASIC attention on certain reports. The draft Australian Sustainability Reporting Standards aim to support these efforts and are based on new standards developed by the International Sustainability Standards Board (ISSB).”

Mandatory digital reporting

Speaking at the Workiva event, Christopher Brown, Partner, Accounting and Reporting at Deloitte Australia, said: “With the global shift towards sustainability-focused financial disclosures, it is critical that finance teams leverage their corporate reporting experience; supporting sustainability teams to understand requirements, establish appropriate governance and controls, and enable digital ESG reporting.

“It is 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 they are already seeing the benefits – we are seeing the same benefits.”

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

In preparation for the new ESG system, 90% of ESG practitioners surveyed said their organizations plan to undertake digital transformation projects to improve collaboration, and 86% of respondents agree that AI will make ESG/sustainability reporting more effective in the next five years.

Unintentional greenwashing

As ASIC sharpens its teeth on greenwashing – which was recently identified by the regulator as a particular area of ​​concern – Carolyn Cosgrove of PwC Australia reminded the audience that the Australian Institute of Company Directors, among others, has consistently warned that liability for failure to comply with ESG obligations , i.e. the practice of intentional or unintentional greenwashing, now falls firmly on the heads of company directors.

Organizations that do not implement digital ESG reporting may leave their directors at risk, and these directors could become role models if ASIC discovers that they are intentionally or unintentionally exaggerating their activities or sustainability impacts.

Digital reporting can reduce unintentional “eco-crimes” by providing a standard and error-free framework within which multiple measurement methodologies can be compared and the correct measurement selected for the appropriate and correct protocol.

Speaking about the challenges Australian business leaders see in their role, Carolyn Cosgrove, partner in Sustainability Reporting and Assurance at PwC Australia, said: “Organizations are facing increasingly stringent sustainability reporting requirements that are increasingly attention of stakeholders and which involve expanded responsibilities for company directors. Leveraging existing skills from finance functions, establishing accountability across the organization and enabling technology solutions will be integral to delivering reliable, accurate and timely reporting.”

Each company has its own path to realizing the future of the finance function, depending on its specific starting point and goals. However, it is clear that more needs to be done to establish enabling relationships, ways of working and competencies using technology to continue to address regulatory challenges.

Photo source: iStock.com/Boy Wirat