Zali Steggall (Warringah, Independent) Share this | Hansard source

The Guardian recently surveyed a number of climate scientists on the Intergovernmental Panel on Climate Change. What they said was nothing short of earth-shattering. Almost 80 per cent of scientists who responded to the Guardian's survey indicated that they foresee at least 2½ degrees Celsius of global heating ahead, while almost half anticipate at least three degrees Celsius. Only six per cent thought the internationally agreed 1.5 degree limit would be met.

It's clear that all the efforts in Australia and globally that many are trying to undertake to transition to a net zero economy and keep to the Paris Agreement's targets are falling short. Let me repeat why climate scientists are so alarmed at this point that we are currently not on track to meet these internationally agreed targets. They point to the lack of political will to meaningfully do what needs to be done. The year 2023 was the warmest on record, with the earth 1.36 degrees Celsius warmer than the 1850-1900 preindustrial average level. Whether meeting the targets or not, climate change is changing how our economy functions in so many aspects. For businesses, climate related risks have financial implications. Extreme weather destroys supply chains and damages productivity, and transition risks, such as policies to phase out fossil fuels, will undermine core business. Investors need to understand how exposed a company is and identify and manage these risks. For Australia to have a resilient economy, we need the companies within that economy to be resilient businesses. The changing climate threatens the viability of some of those industries and entities, but it also presents opportunities to cut greenhouse gas emissions and to take charge of the opportunities that the net zero economy will allow us. We simply cannot put our heads in the sand any longer.

Deloitte's 2022 report, The turning point, highlighted that investment in green technologies which help us pivot to a net zero economy will unleash a transformation globally that could increase the size of the world economy by $43 trillion in net present value terms from 2021 to 2070. This bill helps align Australian entities with international corporate reporting standards, allowing credible, transparent and comparable climate related information to enable responsible investment decisions. For Australian companies to be even remotely competitive on the world stage, and to continue trading, it's vitally important for them not to face carbon border tariff adjustments.

They must be able to make this kind of disclosure. Accurate information is the key thing; it's essential for good decision-making in a market economy. The private sector is the major emitter of greenhouse gases. Until now, data around the risks and opportunities that climate change poses have been piecemeal and sporadic. A good disclosure resume is a fundamental step towards closing this data gap and improving the availability and accessibility of data that better indicates how companies and investors must mitigate risk and respond to opportunities. This will help ensure greater action on climate is taken and that capital is allocated more credibly to activities such as reducing extreme weather hazards, minimising pollution and investing in resilience. It's imperative that climate reporting by corporate entities in respect of the past and future be as precise as possible and comparable both here and abroad.

The bill before us today is one more tool in the toolbox to help shift the dial on that effort. Schedule 4 of the bill before us establishes a climate related disclosure regime for Australian companies and entities. The bill aligns Australian corporate climate related disclosure with the International Financial Reporting Standards set by the International Accounting Standards Board, encompassing climate related evidence, strategy, risk management, targets and metrics. It is important; it empowers the Australian Accounting Standards Board to develop sustainability standards, which it aims to have ready once this bill is enacted. It brings us into line with other jurisdictions, including the European Union, the United Kingdom, Canada, Singapore, New Zealand and Hong Kong, which already mandate climate related disclosures by corporate entities. It allows for a phased reporting approach, with entities classified by the size of their revenue, gross assets and employees, or whether they already report under the National Greenhouse and Energy Reporting Act 2007. They're classified as follows: group 1 is the largest entities, estimated as numbering around 723 entities. They will commence reporting from 1 January 2025. Group 2 is estimated to include about 1,117 entities and they will report from 1 July 2026—they have been provided with additional time. And group 3 is estimated to number 4,555 and will report from 1 July 2027. They have a significant amount of time to put a system in place with the ability to do this reporting. I should say that group 3 entities which do not have material climate related risks will not be required to prepare complete standardised climate disclosures. I appreciate that many in this space have made submissions and contributions relating to the possible impact on small businesses as they fit within the supply chains for larger organisations. I must say I am not surprised that, again, the members from the coalition are catastrophising the effect of this bill, making out that it's somehow going to be the end of small businesses and the agricultural sector. The reality is that we cannot compete, we cannot trade internationally, unless we get on board with the kind of disclosure that is required in the current economy internationally and from a trading point of view.

This is a high stakes road map, and there are still some elements that need to change in this bill. Overall it's a good bill, and we need to implement this reform as soon as possible. The price of inaction the scientists are telling us, as the Guardian reported a few weeks ago, is:

… a "semi-dystopian" future, with famines, conflicts and mass migration, driven by heatwaves, wildfires, floods and storms of an intensity and frequency far beyond those that have already struck.

So let's be very clear: business as usual is not a possibility.

Nevertheless, there are parts of this bill that I believe need to be changed to maximise its effect. For me, it is a concern that the modified liability provision in this bill will encourage, I suspect, greenwashing, placing at risk the very intent of the legislation. The purpose of this bill is for accurate, comparable climate related reporting. The concern about the modified liability is that it would cause the misallocation of investment capital and compromise Australia's ability to reach its emissions reduction goal under the Paris Agreement. Section 1707D of this bill is a modified liability provision that prevents third parties from initiating civil action for false and misleading statements for three years to 2028, effectively meaning they cannot be held accountable for commitments made. This will apply also to the reporting of scope 3 emissions, scenario analysis and transition plans, and forward-looking statements for 12 months. The bill allows only ASIC to launch civil action against an entity for false or misleading sustainability statements in the first three years from the start of reporting. That realistically opens a window in which entities could make false and misleading statements without facing the threat of legal repercussions from investors or affected individuals, thus undermining the credibility of the climate related disclosures by corporate entities. Relying solely on ASIC to enforce civil action in these periods after the start date of reporting means that only the most egregious examples of false or misleading statements made in these reports are likely to be pursued, if any at all. I don't think that is good enough.

Many of Australia's major emitters have been reporting annually on climate related issues for around a decade. Since 2021, in response to investor demand, many ASX companies have been publishing climate transition plans, and smaller companies in groups 2 and 3 have had time to develop their capabilities due to the phased approach of the reporting requirements. In this context, we're taking a backwards step by having that provision that allows them to modify liability on climate reporting going forward.

Moreover, the Corporations Act already provides sufficient protections for directors. For example, under section 189 of the Corporations Act it states that a director's reliance on information or advice prepared by an employee or expert is taken to be reasonable so long as the reliance was made in good faith and the information was subject to the director's independent assessment of the information or advice having regard to the director's knowledge of the corporation and the complexity of the structure and operations of the corporation. Therefore, there is no need for the modified provisions that put a halt on accountability. Of course, compliance with legislation is essential to the rule of law. Accordingly, a better course is to amend schedule 4 of the bill by removing that section 1707D entirely. I will attend to that in the consideration-in-detail stage. The existing provisions in the Corporations Act already allow a defence for directors who pursue their duties with care and diligence. Removing section 1707D will ensure that climate related disclosures are to be treated in the same manner as financial reporting.

We need to pass this bill and implement the changes it will bring about. Enhancing the credibility of our reporting system will bolster business and investor confidence. This is crucial for attracting increased capital investments, which in turn will accelerate our emissions reduction. This is essential for a swifter transition to a net zero economy.

Keeping clause 1707D in schedule 4 creates the risk that corporations will engage in spin rather than real, accurate reporting and rather than committing to take the real action to measure, monitor and reduce their climate impact. The pace of climate change means we don't have the luxury of time to deflect, defer or obfuscate any longer. We must have accurate and transparent climate-related reporting. If we want Australian businesses and the Australian economy to be competitive in the world as it engages towards a race to net zero, it is vital that we have that climate disclosure, that we have the risk accounting, and that we make sure we do it in a diligent and accountable way.

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