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Companies are increasingly aware that reporting will be mandatory soon, says HLB Mann Judd specialist.
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Greenwashing focus ‘changing the game on ESG’
16 September 2022
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10 minute read
ASIC’s focus on greenwashing is one factor driving a mood change on company boards around ESG reporting although many are scratching their heads about how to start, says a specialist at HLB Mann Judd.
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Katelyn Adams, a corporate advisory partner with the firm, said the absence of a single set of guidelines for environmental, social and governance reporting should not deter companies from preparing the ground.
In the absence of ESG expertise most would have to engage specialist consultants and boards would need to scrutinise them carefully, she warned, as the space could attract some bad faith operators.
Ms Adams, who sits on a number of listed company boards across a range of sectors including mining and health tech, said there was a widespread expectation that ESG reporting would be mandatory for 2024–25, so by the end of the financial year 2023 some of the pieces would need to be in place.
Auditors were increasingly raising this prospect with boards, she said.
“There’s definitely heightened awareness of ESG — how that looks like internally and how that is projected externally to shareholders and potential investors,” Ms Adams said.
“It’s really pricked up the ears up of all listed entities, regardless of size. They are actually actively considering their ESG outlook in the very near future, so starting to think about what reporting requirements may concern the companies, and what that might look like for them, and how they’re going to go about it.”
She said Australia would probably be led by the approaches to ESG being adopted in the UK and US, but ahead of mandatory reporting guidelines companies were left without a road map.
“That’s why it’s been so difficult for boards, especially the junior or the mid-cap entities, to really understand where to even start,” she said. “And that’s when we’re seeing now that ESG committees are being formed to really tackle this.”
Selecting some targets that spoke to the company’s core activities was better than putting ESG into the too-hard basket.
“Picking something is better than picking nothing,” she said. “Whether they pick some of the Task Force on Climate Related Financial Disclosures, or whether they pick the UN Sustainability Guidelines, picking some key ones that can be aligned to the company’s values already, that can be accretive to shareholder value, and can actually drive a greater social, global impact will be a really good start.”
From there, companies needed to be consistent in disclosure, even if new goals had to be added later.
She said one of the first moves for many companies would be to engage external ESG consultants, because both directors and auditors lacked the necessary expertise.
But they should proceed with caution as it might be hard to pick the good faith operators from the bad, and it was unclear what regulations applied to ESG consultants.
“It’s really good for boards to do their due diligence on the consultants that they’re picking. Really scrutinise those tenders, or scopes for ESG work, that come across the table,” she said.
“Get a few different quotes, especially if it’s starting with a baseline study, to get a feel of the different consultants, so you’re not taken for a ride.”
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