Australian Government to Start Tracking Corporate Commitments to Reduce Carbon Emissions
Compliance and disclosure issues continue to grow for Australian companies, due to heightened scrutiny by the government as well as investors.
In recent years, the boards and senior management of Australia's largest companies have increasingly responded to investor demands to make commitments to reduce emissions. Currently, 18 companies on the ASX 200 have set net-zero targets, and in the most recent reporting season a number of companies further developed their emission reduction strategies.
The Australian Government is now signalling that it will increase its scrutiny of the actions taken by companies to achieve these commitments. Given the focus on this area by both government and investors, the compliance and disclosure risks continue to grow.
On 4 December 2020, the Federal Minister for Energy and Emissions Reduction, the Hon Angus Taylor MP, suggested that 'transparency is an essential prerequisite to accountability for those targets'.
Accordingly, in early 2021 the Australian Government will write to the chief executives of every ASX 200 company and/or those that are obliged to report under the National Greenhouse and Energy Reporting Act 2007 (Cth) ("NGER Act") to advise of the relevant regulatory frameworks, including:
- The Department of Industry, Science, Energy, and Resources will begin to publish the share of domestic units chosen by businesses to satisfy their Climate Active certifications. A Climate Active certification is awarded by the Australian Government to businesses and organisations that have credibly reached a state of achieving net zero emissions, that is carbon neutrality; and
- The Clean Energy Regulator, the statutory authority responsible for administering the NGER Act, will begin to publish the progress that NGER Act regulated companies are making towards their emissions reduction targets. This tracker will be available for reporting on the 2021 financial year.
This is an emerging issue, however, the Government's announcement highlights the importance of companies documenting plans to achieve emissions reduction targets, and tracking performance against those plans. Record keeping is a critical component of compliance in this area, and both emissions reduction plans and performance tracking should record details of the methods used to estimate carbon emissions, and energy production and consumption.
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