Kylea Tink (North Sydney, Independent) Share this | Hansard source

The right of third parties and consumers to hold companies, businesses, governments and individuals to account for making false or misleading statements is crucial not only to our society's general health but specifically to the proper functioning of any market. From our day-to-day purchases through to the big investments some will make in businesses, products or projects, each of these decisions requires a level of access to accurate information to ensure that it's well informed.

At a macro level our global economy has relied on a range of standardised business reporting processes that provide transparency to a multitude of stakeholders who may be interested in a particular business. For many years most of the reporting processes in Australia have been modelled on those generally accepted international standards, which today are commonly known as the International Financial Reporting Standards—or the IFRS. These are accounting standards governing how certain types of transactions and events should be reported in financial statements. They were developed and maintained by a body known as the International Accounting Standards Board, and they seek to ensure the standards are applied on a globally consistent basis to provide investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers. The IFRS, which replaced the International Accounting Standards in 2000, are now used in over 100 countries, including the European Union and over two-thirds of the G20.

As someone who has both run national domestic businesses and sat on a global executive team for a multinational company, I know how important it is that these reporting processes are not only standardised but also scrutinised and updated on a regular basis. Across the early 2000s I was both on the board of and a domestic CEO for the Australian operations of a company whose parent entity was based in the USA. In that capacity I witnessed firsthand the shock that was the global recession of 2000 through to the 2007 financial crisis. I rapidly learned the importance of ensuring consistency in reporting business performance across markets. Fast forward to 2017, and, again as the CEO, I worked with the board of a national charity I was then running to produce the first integrated annual report in the not-for-profit sector in Australia. Stepping into that reporting frame was not easy, and it took us around three years to fully understand the process and produce a report that I felt met our obligations under this ambition appropriately. So today I bring not only the voice and expertise of my community of North Sydney to the debate on the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 but also my lived experience in terms of what it means to embrace a new reporting standard in an existing corporate entity.

Ultimately the provision of accurate information to investors and key stakeholders is critical in driving public accountability, and generally my community of North Sydney welcome the alignment of our markets with global climate related financial reporting frameworks, as they believe increased transparency will be to the betterment of us all. The climate disclosure framework debated today will improve the ability of governments, regulators, investors and the public both here in Australia and globally to make informed decisions, manage climate related risks and encourage the transition to a renewable energy economy. Importantly, high-quality climate related financial disclosures will attract international capital.

In this context, the first part of the bill, which introduces a crisis management and resolution regime for Australia's financial market infrastructure, is noncontentious in my electorate. By enhancing the licensing, supervising and enforcement powers of the Australian Securities and Investments Commission and the Reserve Bank of Australia, and changing the roles and responsibilities of the minister, the RBA and ASIC, my community is satisfied the government has taken on board appropriate recommendations from the Council of Financial Regulators.

The second part of the legislation introduces mandatory climate related financial disclosures. This is where my community has a differing opinion on what is appropriate for our times, and it is this divergence of opinion that I will now present. From the outset it's important to note that, as with many climate related initiatives, Australia is behind the pack when it comes to implementing this reform. Jurisdictions including the European Union, the United States, the United Kingdom, Canada, New Zealand, Singapore and Hong Kong have implemented or are implementing mandatory climate related financial disclosures. While this bill is a landmark piece of legislation in Australia, then, many of the largest businesses that will be required to abide by it domestically going forward are in fact already reporting on this basis in other markets. Given this, my community believes the modified liability provisions currently included in the legislation are too broad, specifically when it comes to the immunity related to transition plans. To address this concern I will be proposing amendments to remove immunity from third-party litigation relating to statements about transition plans. While we must be patient and protect and support those entities that may be adopting this style of reporting for the first time, it's also appropriate that we expect those businesses with deeper resources and broader experience to be faster adopters.

A strong climate related reporting regime which ensures that disclosures are accurate, transparent and consistent across all companies is absolutely required in our country, particularly as the impacts of what is now unavoidable climate change are being felt more often and more broadly, with severe weather events hitting more frequently. Schedule 4 of this bill establishes the framework for a mandatory climate disclosure reporting regime in Australia. This regime will require entities of a certain size which lodge reports under the Corporations Act, chapter 2M, or which have emissions reporting obligations under the National Greenhouse Gas and Energy Reporting Scheme, to make climate disclosures in accordance with the sustainability standards set out by the Australian Accounting Standards Board. At this stage, it's proposed that these new obligations will be phased in over four years.

As mentioned earlier in this speech, as someone who has run businesses I understand the need for a well-balanced regime that's capable of being implemented as soon as practicable while also allowing businesses the necessary time to adapt to a complex new reporting environment. It's highly appropriate that the requirement to prepare a sustainability report be phased in based on the size of an entity. As it stands, group 1, larger entities, must prepare a sustainability report in the first transitional period, which is from 2025 to 2026. Group 2 entities must prepare a report during the second transitional period, from 2026 to 2027, and group 3 entities must prepare a report on or after 1 July 2027.

Having run businesses of varying sizes, I support this targeted approach, knowing that larger listed companies will be more able and better resourced to meet the incoming regime, while less mature market participants may require more time to adjust to the new reporting requirements. I am concerned, however, that the bill, as it currently stands, includes a broad modified liability approach for the commencement of sustainability reporting for the first three years of the scheme. The legislation claims to be designed to ensure that reporting entities, auditors and directors are allowed time to develop experience and practice to report in line with the required standards. However, the Senate Economics Legislation Committee inquiry into this bill found that many submitters and experts raised concerns regarding the inclusion of this three-year modified liability period for all reporting entities. The concern was tied to the fact that we're already seeing high rates of corporate greenwashing in Australia, with at least one in two companies surveyed by the ACCC in 2023 found to be promoting concerning claims about their environmental credentials.

At a time when urgent climate action is critical, and consumers and communities are demanding that we take faster action to regear our society towards a future focused economy, it's essential that entities are held to account for greenwashing and promoting false solutions to the climate crisis. In many instances, the larger companies covered by the proposed modified liability arrangements have already begun voluntarily reporting on climate related risk as their boards and shareholders have, rightly, demanded that level of transparency and accountability of the business's executives. For this legislation to be as effective as it can be, my community would argue that it should include a higher standard for those companies that have already begun to report in this way, whilst allowing room for the development of competency amongst those businesses which may be stepping into this reporting style for the first time. Some form of indemnity provisions are appropriate, given the scale of this reform, and transitional measures will encourage fuller reporting and a proper understanding of the requirements by companies and directors. It is true that we need to get the balance right, but it's also true that we should strive to go as far and as fast as we can, as we are already far behind other markets.

The amendments that I will propose would remove immunity relating to transition plans while retaining the rest of the bill's modified liability regime. Why I think this makes sense is that transition plans are company led initiatives based on company business models. The integrity of those plans is essential, as they drive investor behaviour. Given that a company must already have some level of competency in the area of environmental and sustainability reporting to produce them, those businesses should be held to a higher expectation. In the exposure draft of this legislation, the only statements covered by the three-year immunity from private litigant action were those made in the sustainability report about scope 3 greenhouse gas emissions in the scenario analysis. The inclusion of limited immunity relating to statements about transition plans was only proposed for the first time in the final iteration of this draft bill. The inclusion of transition plans in the immunity provisions is both a significant departure from the proposals in the exposure draft and from the general application of misleading and deceptive conduct provisions in the Corporations Act, the ASIC Act and in the Australian Consumer Law. It's unacceptable for this change be made at this point and the legislation progressed without significant debate.

The interaction between a staggered start date for different-sized entities in the immunity provisions is also worth noting, as the current structure of immunity benefits the largest companies, who will enjoy three years of modified liability, while the smallest companies, who are the least equipped and have relatively less capacity, will only have the benefit of one year. That just seems unfair.

Yet again, the big guys with the loudest voices and the deepest pockets seem to have been able to negotiate more breathing space for themselves, when in truth I believe they should be leading the charge and setting an example that lets the smaller guys follow more easily. We should not apologise for asking businesses to continue to champion the pathway that they are already on. We don't need them to coast; we need them to step up yet another gear. In the same way that we would not expect an A-level student to be told to study less as they move towards the next exam, we need to ensure businesses keep striving for advancement.

Debate interrupted.

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