Professional bodies raise ‘significant concerns’ with draft sustainability reporting standards
CA ANZ and CPA said the government’s draft exposure is reminiscent of the problematic adoption of international financial reporting standards in 2005.
In a joint submission to the AASB, CA ANZ and CPA voiced their concerns that exposure draft Australian Sustainability Reporting Standards (ASRS) have deviated too far from International Financial Reporting Standards (IFRS).
In their submission, they urged the AASB to remember its obligation to set standards in a “globally consistent” manner.
By deviating from international best practice, the bodies stated concerns the Australian approach might affect Australia’s place in global markets by increasing the disclosure obligations of foreign companies.
The bodies compared the recent draft exposure to the problematic adoption of IFRS in 2005.
“[Our members] recall the period between 2005 and 2007 where Australian entities faced increasing difficulty in raising overseas capital and higher reporting burden for international companies as financial reporting in Australia was not aligned,” they said.
Further, they said the draft standards might “undermine the credibility of Australian sustainability reporting” and “reverse” international efforts to thwart fragmentation.
The AASB framework compels the body to “facilitate the movement of professionals across sectors and borders” while ensuring the costs of compliance do not outweigh the benefits.
Bentleys partner David Papa said the timelines included in the draft exposure struck him as “a little ambitious”.
Large corporates will be affected by new disclosure requirements by the end of 2025, said Papa, and given the standards have yet to be finalised, this leaves those larger companies in a difficult position.
For many Group Three reporting entities, the cost-to-benefit ratio will be adversely affected, said CPA and CA ANZ.
“We recommend a simplified disclosure regime be considered for smaller, unlisted entities to be developed by the AASB, with the AUASB being responsible for the audit and assurance thereof,” they said.
The submission also took issue with the language of the exposure draft, pointing to the ambiguity of terms such as “not an exhaustive search” in relation to the requirements of not-for-profits in finding information to identify climate risks and “to the extent practicable” in relation to applying National Greenhouse and Energy Reporting (NGER) Scheme methodologies.
CPA and CA ANZ also recommended that the government and the AASB should play a “significant role” in building the capacity of entities to meet the new disclosure requirements, adding a “gap exists” between capacity expectations and real market capacity.
“Both the ASRS and IFRS Sustainability Disclosure Standards reference ‘appropriate skills and competencies’ and ‘skills, capabilities, and resources’ for the preparation of disclosures and other quantitative and qualitative information,” said the submission.
“However, there has been no indication on how or if any of this capacity building will be supported by government.”
Papa agreed that the government should help businesses, particularly SMEs, once the standards are extended to include them. Treasury has indicated that smaller businesses will be required to report from 2030, he said, adding that those businesses should be proactively preparing for that date “because it’s going to come fast”.
The government’s Sustainable Finance Strategy committed to improving transparency through standardised disclosure requirements around “climate and other sustainability-related financial opportunities and risks”.
In their submission, CA ANZ and CPA recommended that the AASB extend its reporting standards to include these broader sustainability disclosure requirements beyond climate.
“We encourage the AASB, as an independent standard setting board, to issue ASRS 1 with the broader sustainability-related financial disclosures perspective,” they said.
“This would support greater international alignment and future-proof sustainability-related reporting in Australia,” they said.
Other recommendations made in the submission include allowing entities to determine which GHG emission measurement methodology is most appropriate, that the AASB should adopt “framework neutral” referenced to industry based metric disclosures, a transition measure with mandatory industry metric requirements from 1 July 2030, and so on.
“We strongly advocate for the prioritisation of international alignment,” they said.
