Operating in the context of evolving climate disclosure practices and frameworks

Abstract

The standards for companies reporting on the environmental impacts of their operations have changed drastically over the last decade and are about to become even more complex. Initially, limited regulation or guidance available to companies in relation to climate disclosures led to widely diverging practices. This has resulted in many companies facing allegations of ‘greenwashing’ and in some cases litigation and shareholder activism. However, the Australian Government has recently announced it will implement mandatory climate reporting commencing from 1 July 2024 for many Australian companies. Additional climate disclosures – encouraged by pressure from stakeholders and required by the new reporting regulations – will make environmental risk management more complex. The additional disclosures will also provide further opportunities for interference with the approval process for new projects, if there are inconsistencies between a company’s climate disclosures generally and what they have said in their project approval documents. In this paper, we provide an overview of effective strategies and mitigation steps that can be taken to reduce this risk of disruption and disincentivise activist interference more generally, drawing from recent climate change proceedings and experience advising energy and resources clients in relation to climate change and Environmental Social and Governance (ESG) issues more broadly. In particular, we will cover the aspects of the new mandatory climate reporting regime that will be most difficult to comply with; common greenwashing pitfalls; stakeholder/activist engagement planning; and how Boards should approach these issues.