Richard Branson-backed Climate Leaders Coalition says corporates lagging on climate action

Concern over a lack of momentum on climate action among Australian business continues to grow, with a new study issuing a warning ahead of the COP28 Summit.

Less than one third of top Australian companies have adopted science-based climate targets, with a major green body warning companies face a crackdown with tougher disclosure rules set to start in July 2024.

Ahead of the COP28 climate summit starting in Dubai on November 30, the Climate Leaders Coalition said only 29 per cent of some of Australia’s biggest companies had taken up Scope 3 emissions targets, which are those produced outside a company’s direct industrial processes.

The CLC has urged member companies to accelerate cuts to Scope 3 emissions or face significant commercial consequences, with strict new reporting standards mandating Scope 3 commitments and reporting from July 2024.

“This is organisational evolution at a scale bigger than anything we have witnessed,” said Gareth O’Reilly, president of Schneider Electric and a member company of the CLC.

“CEOs’ involvement, understanding and visibility is critical to success. Commitments must lead to immediate action – the clock is ticking.”

Member companies of the CLC include some of Australia’s biggest polluters such as AGL Energy along with BHP, Incitec Pivot, Rio Tinto, Santos, Worley, Microsoft and Viva Energy.

The environmental initiative, backed by Richard Branson’s The B Team, was created in 2020 to discuss tackling climate change in line with the Paris agreement, which aims to keep temperature rises well below 2 degrees above pre-industrial levels with an aim of limiting rises to 1.5 degrees.

But three years on, pressure is mounting on Australian businesses to start delivering results.

A new climate disclosure framework was formed out of the 2021 Glasgow summit when the IFRS Foundation – the body responsible for international accounting standards – announced the establishment of the International Sustainability Standards Board.

The ISSB aims to develop baseline climate and sustainability disclosure standards to meet investor expectations, and will come into force in July 2024.

“Companies will be expected to set and act on Scope 3 targets if they haven’t already,” former Telstra boss David Thodey, a co-chair of the CLC, said. “Over the past 12 months, we have observed that capital markets and customer demand are leading the way ahead of regulation.”

Accounting for Sustainability, a UK-based group established by King Charles aimed at boosting business’ response to climate change, said there was now a sense of urgency for corporates.

“There’s a recognition that we need to do something. But we’re way behind the timetable that we really need to adopt to where we make sure we’re avoiding the disastrous effects of climate change as much as we possibly can influence,” Robin Stalker, chairman of the accounting body known as A4S, told The Australian.

The A4S group has been working with Australian businesses on embedding sustainability into finance systems, but stressed it was also focused on the bigger strategic picture in addition to a looming accounting clampdown.

“It’s not just about reporting, because it’s fundamentally about is the business really doing these things to improve its business model and to have a more sustainable approach to its business. The reporting of it keeps everyone honest,” Mr Stalker said.

“But there’s still a tremendous amount we have to do and there’s obviously limited time. And that’s why I think one of the biggest issues we have is that there’s a lot of companies that will say yes to action but there’s not enough urgency and real momentum.”

Underscoring the challenge ahead, a survey of 32 CLC members who completed a Scope 3 checklist in early 2023 found just 29 per cent were confident in the quality and accuracy of their reported Scope 3 data, while 42 per cent had started sharing Scope 3 emissions data across their value chain in some form.

Scope 3 emissions can make up as much 95 per cent of a company’s direct and indirect carbon impact and progress in tackling pollution levels shapes as one of the biggest challenges this decade for corporate Australia.

The CLC a year ago warned Australian chief executives to step up actions to reduce their Scope 3 emissions, including having more proactive discussions with suppliers.

The Australian Securities and Investments Commission is also focused on hitting more companies and funds involved in greenwashing, a reference to those making net zero claims without reducing emissions from their use and production of fossil fuels.