Corporate reporting and sustainability policy statement

The case for change

Robust, fit-for-purpose corporate reporting is an essential element of the economic, market and corporate transformations we must make to respond to the environmental and social crisis presented by climate change.

Our global economic systems are increasingly unviable unless we adjust for the impacts of climate change. Australia is particularly vulnerable to the physical and transitional risks associated with global warming.

Corporate reporting is undergoing profound reform in response to these risks. There has been a rapid growth in the understanding of the interdependency between economic, environmental and social relationships.

There is growing recognition of the obligation on companies to manage their climate change impacts on sustainability. To facilitate this, we support elevating sustainability reporting to a level of rigour and acceptance comparable to financial reporting.

Why is sustainability reporting a priority?

The adjustments humankind must make to the global economy will require:

• major transformations in global governance
• rethinking of the nature, scope and purpose of business models
• rapid and deep deployment of technological innovation

Market mechanisms will play an essential role in achieving these outcomes. Reliance on relevant, timely, transparent and appropriately costed information will underpin this change.

Sustainability reporting must be a priority. It performs several important functions, as it:

• enables the pricing of risk and allocation of capital
• assists in addressing information asymmetries
• facilitates the discharge of directors’ duties
• promotes good governance practices
• encourages strategic and operational adaptation

Corporate reporting in Australia

Australia’s financial reporting system for companies is governed by the Corporations Act. It includes statutory weight being given to AASB accounting standards, with regulatory oversight provided by ASIC. In contrast, sustainability reporting has evolved on a market-led, voluntary basis.

Both frameworks are now being applied to reorient corporate reporting towards long-term value creation and to elevate environmental and social information to a level of rigour comparable to that of other accounting disciplines.

International responses

International developments influence the future direction of Australian corporate reporting.

Globally, there is a trend towards technical alignment among the five leading global sustainability reporting framework developers and standards-setters – CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) – known collectively as the Group of Five.

The Group of Five, along with the global accounting profession (including CPA Australia), supports the establishment of the Sustainability Standards Board to sit alongside the International Accounting Standards Board.

What actions are we taking?

We actively engage in the global and national corporate reporting reform agenda by:

• providing input on the application of accounting and auditing standards with respect to the financial disclosure of climate-related risk
• providing informed comment on capacity building across the corporate reporting ‘value chain’ and the opportunities offered by technological innovation
• providing thought leadership on the conceptual frameworks for sustainability reporting and its interaction with financial reporting standards
• participating in national and international consultations on corporate reporting reforms by governments, regulators and standards setters
• making submissions on the discharge of directors’ duties in relation to climate-related governance
• examining ways in which we can assist professional accountants to acquire the skills necessary to undertake broader corporate reporting and assurance