By James Allston and Laura Reed

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For those of us working in climate and new energy, there is a constant frustration that we aren’t decarbonising the world’s homes and businesses fast enough. The sense of public urgency on climate change feels cyclical and linked to weather disasters close to home. Do we really need another 1-in-a-100-year-now-every-decade storm to again flatten the energy grid just to remind everyone that - yeah, our climate is changing, and our economies are not immune from that change?

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Fortunately, thanks to the Albanese government’s excellent legislative win last month, we hopefully don’t need weather disasters to remind boardrooms and investors to dwell on the climate risks. The government just passed what is arguably the most impactful climate legislation in a decade, with, remarkably, absolutely no fanfare.

‘The biggest change to financial reporting in a generation’, ASIC Chair, Joe Longo

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In this blog, we explain what you need to know, how businesses must prepare, and how the commercial solar and battery industry can benefit from climate disclosure legislation.

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A new era for Australian reporting

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In September 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 was passed. This legislation will initially obligate the largest of Australia’s emitters and corporations from 1 January 2025. 

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The main requirement is for businesses to disclose information derived from scenario analysis that considers climate risks and opportunities under at least both of the following scenarios:

• A low global warming scenario (1.5C)
• A high global warming scenario (2.5C+) 

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In addition, businesses need to consider the impacts of identified risks and opportunities on their strategic and forecasted financial performance.

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What must be reported

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The legislation requires businesses to report the material impacts of identified risks and opportunities associated with climate change on their strategy and forecasted financial performance. This includes disclosure of:

• Scope 1, Scope 2 and, after the first year, Scope 3 carbon emissions. 
• A company’s transition plan that is defined as - “an aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-carbon economy, including actions such as reducing its greenhouse gas emissions.”

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These disclosures must be part of a sustainability report in the annual report to shareholders, alongside the directors’ report, financial report and auditor’s report. 

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Critically, directors must declare compliance with the legislation regarding any climate disclosures. There are also increasing assurance requirements like those required for financial reports under the Corporations Act that ratchet up after the first year. This means that auditors must sign off on the reports.

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💡 In carbon reporting, Scope 1, 2, and 3 emissions refer to different categories of greenhouse gas emissions an organisation must account for:

• Scope 1 emissions: Direct emissions from sources owned or controlled by the organisation, such as fuel combustion from company vehicles or on-site manufacturing.
• Scope 2 emissions: Indirect emissions from the generation of purchased energy (like electricity, heating, or cooling) consumed by the organisation.
• ‍Scope 3 emissions: All other indirect emissions that occur throughout the organisation’s value chain, including emissions from suppliers, product use, waste disposal, and employee travel.

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Who must report and by when

The table below describes who has to report and by when.

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BUT, BEFORE YOU SKIM ON thinking, “That just impacts big businesses”, what’s not explicitly stated here are all the businesses within the supply chains of the companies who must report. For example, if you’re a fruit canning factory and you’re not considering the climate risk to your business of all the small farmers in your supply chain, you will not have done your climate due diligence. The canning factory will also need to report the carbon emissions of their suppliers in their Scope 3 emissions. There will be countless examples like this.

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What should you do to prepare?

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For most Orkestra customers, this will be a cracking new opportunity for new business rather than a new reporting requirement. However, if you’re reading the “who must report” table, and it’s just dawned on you that they capture your business, then:

• Have a conversation with your board and executive management about your level of preparedness. Consider whether you need a briefing session or specialist training to bring this group up to speed.
• Undertake a readiness assessment so you can clearly see the work ahead. The insights from the readiness assessment can inform a climate disclosure roadmap.
• Ensure you have the right partners to support you. This may include specialist climate consultancy, as well as engaging with your financial audit and legal counsel partners.

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What does this mean for the commercial solar and battery industry?

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There are a few different angles here. 

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Businesses who are impacted by this legislation will have to:

1. Report opportunities to reduce their carbon emissions. Needless to say, installing solar at a business is one of the best ways to do this in most states of Australia. This is an opportunity for solar installers to demonstrate the carbon emission improvements of their solutions. 
2. Consider your business operation in a low-carbon world. This means thinking about opportunities to electrify organisations that depend on fossil fuels. This includes thinking about the electrification of transport. This is an opportunity for energy service companies to present electrification solutions that reduce carbon emissions. 
3. Consider climate risk to your business operation. This includes, no less, thinking about the future reliability of your energy supply. This is an opportunity for battery vendors to show how their solutions can improve the reliability of electricity supplies.

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Something for everyone!

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Conclusion

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No longer will businesses and investors need a tornado through a transmission line and the resulting electricity market chaos to remind them about climate risk. They will get annual reminders from now on.

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To quote Joe Longo, ASIC Chair, again, "This is a crucial point: [those who must report] have to do this now. It’s simply not an option to put this off...and then scramble to comply. You have to figure out how you’re going to marshal data, support and capabilities and start keeping the necessary records now – today.”

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This legislation will likely create the impetus and the urgency for businesses to decarbonise and electrify their businesses to both reduce their climate risks and, crucially, their impact on climate change.

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About the Authors

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James Allston is the co-founder and co-CEO of Orkestra, Australia and NZ’s leading software for planning commercial new energy projects, making feasibility analysis and sales of solar, batteries and EV chargers fast, easy and accurate. James has been a leader in the clean energy sector for over a decade, providing expertise in commercial battery feasibility modelling, solar PPA, embedded networks & microgrids, innovative retail models, virtual power plants, battery-as-a-service, solar financing and more. Before Orkestra, he held strategic positions at Siemens and OVO Energy in Europe, led Jemena's Emerging Opportunities task force, and co-founded Australia's Energy Efficiency Council.

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Laura Reed is the Principal of Governance & Transparency at Edge Impact. Edge’s mission is to work towards a world where unsustainable is unthinkable. Established in 2008, Edge is a full-service global sustainability consultancy focused on Asia-Pacific and the Americas. Edge Impact’s teams are based in Australia, New Zealand, the United States and Chile and combine science, strategy and storytelling in partnership with motivated leaders, organisations and industries to reimagine sustainability for positive impact.