NZ Mandatory Reporting: FMA Review
With mandatory climate disclosures on the horizon in Australia, many sustainability leaders are asking, "How do we ensure our reporting aligns with best practices?". Looking across the Tasman to New Zealand offers a valuable starting point. Having implemented mandatory climate reporting requirements a year ago, New Zealand’s Financial Markets Authority (FMA) has now released its first review of Climate Reporting Entities (CREs), highlighting how organisations are adapting to these new standards.
The FMA report provides a comprehensive look at where businesses are succeeding and where there’s room for improvement. It revealed strong governance practices but noted challenges in areas like scenario analysis, Scope 3 emissions, and clear communication of methodologies. It also highlighted the importance of collaboration and benchmarking, particularly through New Zealand’s public register of climate reports, which offers transparency and fosters industry learning.
While New Zealand businesses have made commendable progress, the transition to mandatory climate reporting is not without its hurdles. For Australian companies preparing for similar requirements, these findings provide a roadmap for building robust and effective climate-related disclosures.
Here’s a summary of the key insights from the FMA review and how Australian businesses can use them to strengthen their own approach to climate reporting.
The Importance of Governance in Climate Reporting
The FMA found that governance practices were one of the strongest areas in climate reporting. Most CREs clearly outlined their board's oversight and management’s accountability for climate risks and opportunities. This aligns with the need to embed climate considerations into broader corporate governance structures, ensuring boards are equipped to oversee climate-related risks effectively.
The key takeaway for Australian businesses? Climate reporting is about more than just ticking the mandatory boxed, it’s about embedding sustainability into your business’ DNA. Start by clearly defining governance roles and ensuring your board has the knowledge and oversight needed to address climate-related issues.
Challenges with Scenario Analysis
One of the biggest challenges CREs faced was conducting robust scenario analysis. While most organisations acknowledged its importance, many struggled to align scenarios with their unique business strategies or provide sufficient detail.
The key takeaway for Australian businesses? Scenario analysis can seem daunting, but it’s a critical tool for understanding how different climate futures might impact your business. Start simple, using industry benchmarks and frameworks like the TCFD (Task Force on Climate-related Financial Disclosures), and refine your approach over time.
Data Gaps and Scope 3 Emissions
The review highlighted significant challenges in quantifying Scope 3 emissions. Many organisations relied on estimates or noted difficulties in gathering data from suppliers and value chain partners. This aligns with global trends, where Scope 3 emissions often account for the largest - and most challenging - portion of a company’s carbon footprint.
The key takeaway for Australian businesses? Start engaging your suppliers early. Taking advantage of tools like Sumday make it easier to request and collect accurate data from across your value chain, replacing averages with real-world numbers. Addressing these data gaps proactively will strengthen your reporting and build trust with stakeholders.
Benchmarking and Industry Collaboration
New Zealand businesses benefited from the government’s register of climate reports, allowing organisations to benchmark their disclosures against similar entities. This transparency fosters collaboration and helps organisations identify industry-specific best practices.
The key takeaway for Australian businesses? Leverage existing reports and resources to benchmark your own disclosures. As mandatory climate reporting comes into effect, keeping an eye on what your peers are doing will help you align with emerging standards and improve your reporting year-on-year.
Clear and Transparent Reporting is Key
The FMA emphasised the importance of clarity and transparency in climate-related disclosures. This includes providing enough detail to show how risks and opportunities were assessed and connecting those insights to business strategy. Some CREs struggled to strike the right balance between brevity and detail, with overly generic statements flagged as a common issue.
The key takeaway for Australian businesses? Avoid generic, vague statements in your disclosures. Use clear, specific language to explain your methodologies, assumptions, and key findings. Sumday can help streamline the process, ensuring your reports are both detailed and accessible.
How Sumday Can Help
As businesses gear up for mandatory climate reporting, tools like Sumday can provide the foundation for accurate and reliable disclosures. From helping you calculate Scope 3 emissions to aligning your reports with frameworks like TCFD, we make the process efficient and effective.
By learning from New Zealand’s experience and using the right tools, Australian businesses can hit the ground running and ensure their climate reporting not only meets compliance requirements but also drives meaningful action towards change.
Looking to get started with your carbon accounting? Check out the Sumday Academy for practical tips and resources, or reach out for a call to see how we can help your business prepare for the road ahead.
To explore the full findings from the FMA review, visit the report on the FMA website. You can also access the Climate Reporting Entities registry here to benchmark your disclosures against similar organisations.
