'Alphabet soup': Study shows patchy sustainability reporting in 2022
Deakin University researchers have published a comprehensive analysis of sustainability reporting practices among Australia's top-listed companies in 2022, revealing a substantial gap between rhetoric and action, particularly among smaller firms.
The analysis revealed that while most companies mentioned sustainability frameworks in their reporting, those that provided detailed evidence of adherence to these frameworks and independent external assurance of this reporting were in a minority.
Director of the Deakin Integrated Reporting Centre Professor Peter Carey said the lack of robust adherence to corporate sustainability frameworks among Australia's top listed companies could contribute to concerns about 'greenwashing'.
"The absence of a legal mandate for sustainability reporting, coupled with a myriad of voluntary international reporting frameworks, has led to a confusing landscape, often referred to as the 'alphabet soup' of reporting," Professor Carey said.
To address these challenges, Australian authorities are currently considering the mandate of a local equivalent of the International Sustainability Standards Board's standards for the disclosure of climate-related risks and opportunities (IFRS S2).
In anticipation of these potential changes, the Integrated Reporting Centre conducted an analysis of the current sustainability reporting practices of the nation's largest 300 publicly listed companies (ASX 300), excluding foreign-based entities and listed investment vehicles, to shed light on the current extent and quality of sustainability reporting.
Key research findings
- 27 of the ASX 300 made no reference to a sustainability reporting framework in their statutory reporting in 2022.
- While many cited sustainability reporting frameworks, only a minority provided comprehensive evidence of adherence to these frameworks.
- Only 30 per cent subjected their sustainability disclosures to independent external assurance.
- The majority that did provide external assurance for sustainability disclosures did so selectively, with only four firms across the entire ASX 300 subjecting all their stand-alone sustainability reporting to comprehensive assurance.
Professor Carey said a company's disclosure that it has followed recognised sustainability reporting frameworks gave investors, and the wider public, confidence in the authenticity and integrity of that reporting.
"The limited occurrence of sustainability reporting assurance by ASX 300 companies is a significant concern, potentially eroding public and investor confidence in the credibility of their disclosures," he said.
"These findings underscore the urgency of developing a uniform, structured, and possibly mandatory approach to sustainability reporting in Australia.
"We support the issuing of an Australian equivalent of IFRS S2 for climate reporting and its mandate through the Corporations Act, which is currently undergoing a public consultation process. We also recommend extending this mandatory approach to broader sustainability reporting."
Recommended way forward
Drawing on its research findings, the Integrated Reporting Centre made the following recommendations to Australian companies, regulators, policymakers, and professional bodies.
- Implement uniform and structured sustainability reporting practices.
- Encourage comprehensive adherence to recognised sustainability reporting frameworks.
- Promote independent external assurance for sustainability disclosures.
- Foster transparency and authenticity in sustainability reporting practices.
- Actively combat 'greenwashing' to safeguard corporate credibility.
"Our research serves as a vital catalyst for fostering responsible corporate practices and advancing sustainability reporting in Australia," Professor Carey said.
"The recommendations in this report will help Australia capitalise on the positive changes brought by the proposed adoption of the international standards as a baseline to improve sustainability reporting quality and regulation into the future."
'Sustainability Reporting and Assurance by ASX 300 Companies' is available to download from the Deakin Integrated Reporting Centre webpage.