Australia, which feels the warmth more often than most, has recently embraced mandatory climate reporting and joined the array of countries taking a more ambitious approach to tracking ESG performance.

Companies will now need to more adequately demonstrate that they are acting on ESG issues, especially in emissions, across their value chains. Crucially, mandatory reporting will hopefully assist global regulators in aligning their requirements and expectations related to ESG performance and is an important aspect of embedding climate action in all companies.

Sheilas, blokes, and ESG slow-pokes

Mandatory reporting will help keep companies and countries honest about their poor climate-related performance. Increasingly bringing businesses and aspects of their operations that were previously hidden, deliberately or otherwise, into the ESG limelight is an important part of internationally aligning climate goals.

Scope 3 emissions or the emissions that a business is indirectly responsible for through its suppliers and customers, have been historically underreported or misreported. Some companies have focused and promoted performance in insignificant and non-carbon-intensive categories to appear more green than they are.

These issues sit within the UN secretary-general’s comments that the battle to limit the world’s temperature will be determined by the end of the current decade. 92% of global warming in 2023 was human-caused, with the rest attributed to natural phenomena, like El Niño. The burden of action, thus, falls on companies and countries more broadly to act. Mandatory climate disclosures aim to remedy this problem by ubiquitously targeting all companies with the goal of holistic action.

No letting up on ESG

It is easy for companies to publicly pay lip service to popular ESG agendas like the circular economy and renewable energy. It is even easier for them to avoid action in these areas.

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Growing the scope, granularity, and obligatory nature of climate-related performance disclosures is a crucial part of systematically compelling companies to be more transparent and conscientious. It will also help those companies that less adequately pursue reducing their greenhouse gas (GHG) emissions.

Google, Microsoft, Meta, and Apple are all ‘creatively accounting’ for data centre GHG emissions, with some potentially almost 700% larger than officially claimed. This underlines the need for more holistic monitoring and reporting expectations that fundamentally enshrine transparency.

Demands for robust monitoring can increasingly be met by IoT sensors, remote sensing drones, and AI-enhanced real-time trackers, tailored to specific reporting needs.

Software that can automate ESG reporting and emissions tracking is a growing market, with large investments from technology giants. Many of these technologies can be integrated into a company’s operations to meet the expanding requirements globally. Companies wishing to proactively engage with their ESG commitments can now, more than ever, actively do so. What remains is for such action to occur.

Throwing a few laws on the carbon

Australia’s commitment is not without issue.

While the largest companies must comply with new regulations as soon as January 2025, smaller companies have delayed reporting expectations for years to come. The step-change in expectations in reporting standards is essential to changing companies’ behaviour concerning ESG performance, but temporary allowances must not permit persistent inaction.

Companies can and must use a growing collection of ESG-related facilitating technology that makes measuring and reporting ecological performance even more accessible and holistic. Measurement and monitoring are central to comprehending and minimising global GHG emissions.

Domestic regulations have conventionally been the driver for ESG agendas but can be limited in their scope of effect if such regulations are not emulated globally.

Mandatory climate-related performance disclosures will provide companies, supply chains, and customers with increasingly quality information to inform interactions going forward. Sadly, the extent to which it helps compel the necessary global engagement with climate goals remains to be seen.