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

by leave—I move amendments (1) and (2), as circulated in my name, together:

(1) Schedule 4, item 26, page 255 (after line 19), at the end of subsection 296A(1), add:

Note: A requirement to include something in a sustainability report is separate to any other reporting requirement in this or any other Act, and does not affect that other reporting requirement.

(2) Schedule 4, item 145, page 284 (lines 18 to 20), omit subparagraph 1707D(3)(b)(iii).

While I welcome this legislation, as outlined in my second reading speech my community and I are concerned that, as it currently stands, it includes a broad modified liability approach for the commencement of sustainability reporting for the first three years of the scheme. While the government argues that this is designed to ensure reporting entities, auditors and directors are allowed time to develop experience and practice to report in line with the required standards, the Senate Economics Legislation Committee inquiry found many experts had concerns regarding the inclusion of a three-year modified liability. In many instances, their concerns were tied to the fact that in Australia we already have high rates of corporate greenwashing, with at least one in two companies surveyed by the ACCC in 2023 having been found to be promoting concerning claims about their environmental credentials.

The right for 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. At a time when urgent climate action is critical and consumers and communities are demanding faster action to regear our society towards a future-focused economy, it's essential entities are held to account for greenwashing and promoting false solutions to the climate crisis. We are so far behind the rest of the world when it comes to adopting this reporting framework. Many of the companies that will be covered by the proposed modified liability arrangements here in Australia are actually already working to them in other markets. At the same time, many have voluntarily been reporting on climate-related risks in Australia also. Beyond those two facts, the truth is that the government has been signalling that this reform was coming, and the entire economy has had sufficient notice of proposed reporting requirements.

For this legislation to be as effective as it can be, my community argues that it should include a higher standard for those companies that have already begun to report in this way, while allowing room for the development of competency among those businesses which may be stepping into this reporting model for the first time. We agree that some form of indemnity provisions would be appropriate given the scale of this reform, and transitional measures would encourage more fulsome reporting and proper understanding of the requirements by companies and directors. We agree that we need to get the balance right. But we also argue that we should go as far as fast as we can, as we are already so far behind other markets, and we should not excuse wanton abuse to date by building an escape hatch for those businesses who should know better.

The amendments that I am proposing remove immunity relating to transition plans, while retaining the rest of the bill's modified liability plan. Transition plans are company-led initiatives which are based on company business models. The integrity of these plans is important for investors and capital allocation, and any information contained within them should be considered to be of the highest calibre. 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 and scenario analysis. The exposure draft did not prevent third parties from taking action in relation to a company's transition plan, meaning it would have been open to third parties, including investors, to take action against a company for making misleading statements in relation to its climate transition plan. Following a period of public consultation on the exposure draft, the federal government made two amendments which significantly broadened the scope of the immunity provisions to include transition plans and any forward-looking statement made in a sustainability report during the first year of the regime. In doing so, the government strengthened the protection for entities against liability for greenwashing. I fear that has left many of us concerned that there are indeed businesses currently in our market making false claims, and they are being told they are getting extra time to tidy their house.

The inclusion of transition plans in the immunity provisions is a significant departure from both the proposals in the exposure draft and the general application of misleading and deceptive conduct provisions in the Corporations Act, the ASIC Act and the Australian Consumer Law. Given that any business already presenting these transition plans has developed a level of proficiency in their creation, they should not be able to tap into immunity from private litigation. I commend my amendments to the House and thank the minister and his team in advance for considering them seriously.

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

I rise in support of the amendments moved by the member for North Sydney. They are very much in keeping with amendments that I had also circulated around concerns for the provisions to allow a grace period per se, or an exemption from prosecution in relation to a failure to properly report or mistakes. We know greenwashing is a major problem. As the public becomes more and more aware of the importance of the corporate transition to net zero—reducing their emissions to sustainable levels and reducing the footprint of their supply chains—we need to ensure there is corporate accountability in this space and that major corporations and entities caught by this legislation are, in fact, doing what is necessary.

A lot of these disclosure frameworks and requirements are already in place in a voluntary way and are the general expectation internationally. It's important for us to understand that Australia is not a first mover in this space. We are, in fact, behind similar jurisdictions in relation to this requirement of disclosure. So it would be wrong to think that corporate entities are somehow being caught by surprise by this requirement to properly assess and disclose their exposure to risk, especially in relation to their supply chains.

I think it's important for legislation to find the right balance between putting additional requirements on corporate Australia and acknowledging that for some this might have some transition issues. I understand there's already been negotiation with the government to extend the timelines in which some of the provisions will come into play for the different groups of corporate entities to allow them additional time. With that in mind, I don't see the necessity for a provision which gives a further grace period in relation to misreporting. I very much support that provision being taken out of this legislation.

Stephen Jones (Whitlam, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I thank the members for North Sydney and Warringah for their engagement and for their thoughtful contributions to this debate. I don't doubt for a moment the genuineness of the sentiment which motivates them to bring these amendments to the House. Ultimately, these are questions of balance and judgement, and on balance and judgement we won't be supporting the amendments. Many of the factual contributions they've made are correct, and I don't cavil with those, but we've had to get the balance right.

I do simply make the point that throughout the transition period the corporate regulator will still have the power—in fact, the function—of ensuring that any breaches of those disclosure obligations are enforced and may be prosecuted through the court system. It's not as if that through the transition period there is no enforcement available. There is enforcement through ASIC in its function as the corporate regulator responsible for the enforcement of these and other provisions under the Corporations Law.

With those comments, I confirm that government members won't be supporting the amendments.

Question negatived.

Bill agreed to.