Why sustainability?
Australian companies will increasingly be required to report on their environmental, social and governance (ESG) impacts. The objective is to encourage Australian companies to become more sustainable for their benefit and the benefit of society.
These changes will be implemented in stages through various forms such as guidelines, legislation and public reporting processes. The focus will initially be on large companies, and then cascade down to all levels of business including SMEs. The process has already started.
In addition. stakeholders will increasingly be seeking ESG reporting information to help them make business and consumer decisions. These include investors, employees, customers and regulators. Reporting on various aspects of ESG will increasingly be required by export markets such as the European Union.
Assessing a company’s ESG aspects can also help identify hidden costs, such as wasted energy. Once identified, a company is better positioned to address the underlying causes and reap the benefits which may include those outlined below. Ultimately, a company becomes more sustainable and increases its value.
- Reduced operating costs, eg elimination of inefficient resource use, eg energy.
- Increased productivity, eg more loyal and motivated workforce.
- Improved reputation with various stakeholders such as customers and investors.
- Reduced liability from better risk management.
The requirements
The focus in Australia will initially be on reporting environmental impacts such as greenhouse gas emissions. This is driven by Australia’s commitment to helping the world to reduce the impacts of climate change by achieving a 43% reduction in our emissions by 2030 and net-zero emissions by 2050.
The key legislative requirements in Australia are summarised below:
National Greenhouse and Energy Reporting Scheme (NGER), which comprises the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) and its Regulations which require companies to report on their greenhouse gas emissions and emission reduction strategies.
The Safeguard Mechanism sets legislated limits, known as baselines, on the greenhouse gas emissions of Australia’s largest industrial facilities, which are required to reduce their emissions in line with Australia’s climate targets.
Financial reporting standards are also being introduced requiring all companies (based on criteria) to report on the financial impacts of their operation on the environment. As a consequence, such information will be made public through annual reporting processes.
The sustainability challenge
Making it happen
Implementing sustainability measurement and reporting is a critical step for companies looking to align with environmental, social, and governance (ESG) principles. Like any worthwhile business initiatives, it needs structure and resourcing. Below is an outline of the steps and activities to make it happen:
1. Leadership Commitment:
- Gain commitment from the company’s leadership team to prioritise sustainability. Align sustainability goals with the company's mission, vision, and core values.
- Establish a governance process to manage the sustainability initiative, eg a subcommittee of the Executive Team or the Board.
- Allocated resources that suit your company such as budget funds and hire or contract specialist staff.
2. Materiality Assessment:
- Identify and prioritize key sustainability issues relevant to the business and its stakeholders.
- Assess the impact of these issues on the company's operations and reputation.
3. Stakeholder Engagement:
- Identify the relevant stakeholders (customers, employees, investors, local communities and regulators).
- Engage with stakeholders to understand their expectations and concerns related to sustainability.
4. Set Goals and Targets:
- Establish clear and measurable sustainability goals aligned with the identified material issues.
- Develop specific targets to track progress toward achieving these goals.
5. Data Collection and Management:
- Identify key performance indicators (KPIs) for each sustainability goal.
- Implement systems for collecting, managing, and analysing relevant sustainability data.
6. Reporting Framework Selection:
- Choose a sustainability reporting framework. Ensure the chosen framework aligns with the company's industry and goals.
- Automate the process as much as practical to reduce costs as well as human error and bias.
7. Develop Reporting Protocols:
- Define the scope and boundaries of sustainability reporting.
- Establish protocols for data collection, validation, and reporting.
9. External Assurance (Optional):
- Consider obtaining external assurance for sustainability reports to provide independent verification can enhance credibility and transparency.
10. Report Publication:
- Publish an annual sustainability report with transparent and concise information.
- Make the report accessible to stakeholders through various channels such as websites and publications.
- Communicate sustainability efforts to investors and address their concerns.
11. Legal and Regulatory Compliance:
- Stay informed about relevant sustainability regulations and reporting requirements.
- Ensure compliance with local, national, and international standards.
12. Continuous Improvement
- Regularly review and update sustainability goals, targets, and reporting protocols.
- Collaborate with industry associations to share best practices and address common challenges
- Allocated resources that suit your company such as budget funds and hire or contract specialist staff.
By following these steps, a company can establish a robust sustainability measurement and reporting framework that aligns with its business strategy and achieves the company’s commitment to long-term environmental and social responsibility.
For further advice on implementing sustainability contact me on 0402 843 314 or john@johntedesco.com.au I can link with various experts in the field that can meet your company’s needs regarding sustainability and advise you on accessing grants and other forms of government support. The initial decision is to make a strategic assessment and decision about your sustainability actions, so let me help you do that first.
John Tedesco. Business Innovation Services
Mob 0402 843314
