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Greenwashing: ASIC reports on greenwashing interventions 2023 - 2024
The Australian Securities and Investments Commission (ASIC) has just released its report into greenwashing interventions for the period 2023 – 2024 (Report).
Australia | Publication | August 2024
On 22 August 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) (Bill) was passed by the Senate with minor amendments. One of the purposes of the Bill is to implement Australia’s climate-related financial disclosure (CRFD) regime. The Bill will now return to the House for final consideration and is expected to pass imminently with the CRFD regime due to commence on 1 January 2025.
Entities should now start considering how the new CRFD reporting obligations under the Corporations Act 2001 (Cth) will apply to them. This will require a multidisciplinary approach with co-ordination across each organisation’s finance, audit, sustainability and legal teams. In this article, we outline how NRF can best support your business to comply with the CRFD regime.
Before considering the latest Senate amendments to the Bill, we first outline again the CRFD regime’s main components.
From 1 January 2025,1 the CRFD regime will require certain organisations to disclose a ‘sustainability report’ as part of their annual financial statements. This will need to include information on:
The CRFD regime will be phased in over several years, as organisations of different sizes are brought under its scope, based on their revenue, the value of their assets, and/or their number of employees (see the table below).
Expected first annual reporting periods starting on or after | Large entities and their controlled entities, meeting at least two of three criteria: |
National Greenhouse and Energy Reporting (NGER) Reporters | Asset Owners | ||
Consolidated revenue | EOFY consolidated gross assets | EOFY employees | |||
1 January 2025 |
$500 million or more | $1 billion or more | 500 or more | Above NGER publication threshold | N/A |
1 July 2026 Group 2 |
$200 million or more | $500 million or more | 250 or more | All other NGER reporters | $5 billion assets under management or more |
1 July 2027 Group 3 |
$50 million or more | $25 million or more | 100 or more | N/A | N/A |
The phase-in also includes a modified liability regime, under which there will be limited immunity in relation to the disclosure of certain “protected statements”, which include statements in a sustainability report (or in an auditor’s review of a sustainability report) made for the purpose of complying with a sustainability standard or assurance standard about:
This limited immunity will apply for the first three years following the initial implementation of the CRFD regime. During which time, reporting entities can only be subject to action from ASIC and criminal proceedings in relation to disclosures made as part of their “protected statements”.
For a complete summary of the Bill’s provisions, please see our detailed review here from when it was first introduced, and an updated review from April 2024 here (following various amendments).
The amendments made by the Senate to the CRFD provisions in the Bill are limited to the disclosure of scenario analyses.
The amendments provide that when an entity is required under the relevant sustainability standards to disclose a scenario analysis (or information about, or derived from, that analysis), it must at least use scenarios in which the increase in the average global temperature:
Scenario analyses constitute a “protected statement” under the CRFD regime, meaning that reporting entities have a limited immunity from claims brought in relation to these disclosures during the first three years the regime is in force.3
With the coming into effect of the CRFD now seeming certain and imminent, organisations will need to carefully plan for how they will discharge any new reporting obligations (and avoid novel risks that the regime creates). Below, we explore how NRF can support your business to navigate the CRFD regime.
The implementation and substantive requirements of the CRFD regime are undeniably complex, requiring businesses to rapidly build their internal capacity to understand and report on climate-related matters (including technical demands, such as emissions reporting).
Owing to the complexity of the new reporting requirements, we consider that there is a substantial risk of businesses being inadvertently non-compliant with the CRFD regime (at least in the early stages) whilst, at the same time, ASIC’s appetite for enforcement may be high.
We can therefore assist your legal team to:
In addition to potential regulatory enforcement, the CRFD regime will likely require businesses to make more public climate- and/or sustainability-related statements about their internal processes, supply chain, products, management, and future plans, than they have done historically. This brings about a substantially increased risk of becoming subject to climate litigation – whether from shareholders, activist organisations, or regulators (including ACCC and ASIC).
Recent analysis shows that Australia is now the jurisdiction with the second highest number of climate litigation cases.4 Moreover, one of the emerging global trends within climate litigation is a new category of “transition risk” cases in which company directors and officers are sued for their mismanagement of climate risks. It is critical that Australian businesses do not under-estimate the risk of becoming subject to expensive and reputation-damaging litigation.
Legal support is therefore necessary to:
The implementation of Australia’s CRFD regime is likely to raise additional challenges for businesses with multinational operations. Such entities are likely to already be conducting similar climate-related reporting (or be preparing to do so) in jurisdictions such as the US, European Union (EU), UK, New Zealand, Hong Kong and Singapore.
However, whilst this may benefit some businesses by enabling them to share knowledge and capacity internally, it is vital that they avoid the trap of assuming that reporting requirements are the same (or even similar) across different jurisdictions. From our recent analysis of the world’s pre-eminent climate-related disclosure regimes, linked here, it is evident that their requirements, scope and liabilities vary broadly.
Whilst we appreciate that businesses which will not immediately fall under the regime may be hesitant to spend significant time and resources considering its reporting obligations, the trend of increased sustainability reporting will not be slowing down. As such, an investment now will likely reduce costs in the future.
We anticipate that further obligations may soon arise in Australia in relation to nature- and/or biodiversity-related reporting. This was hinted at in the Explanatory Memorandum to the Bill, which provided that the government’s approach is “climate first, but not only”.5 Furthermore, in the EU, typically a standard bearer on evolving sustainability-related requirements, we have already seen tangible steps towards nature-related disclosures via the draft European Sustainability Reporting Standards.6
We expect that those Australian businesses which choose to invest now in building their internal knowledge and capacity building for effective sustainability reporting will be best placed to handle rapidly evolving sustainability-linked developments, and remain competitive, in the coming years.
As passage of the Bill looks imminent, it is vital that businesses seek specialist support to ensure they remain compliant, appropriately manage their risks, and understand the unique challenges of climate reporting across each of the jurisdictions in which they operate.
As a global law firm, NRF is uniquely positioned to advise large entities on the legal implications of their sustainability-related reporting obligations. For further information, or to enquire about any of the services listed above, please contact a member of NRF’s Climate Change practice.
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