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From January 2025, new climate reporting legislation will be introduced. It will require big businesses in Australia to track their carbon emissions and include the results in sustainability reports, which they’ll need to submit alongside their other annual reporting obligations.
While this law directly targets businesses with more than 100 employees, the impact will inevitably trickle down to their suppliers, who may need to provide emissions data to them.
The requirements for small businesses and their accountants are due to be phased in over 2026 and 2027. However, mandatory climate-related financial disclosures, which will bring both challenges and opportunities, may begin much sooner.
As we head towards the new year, here’s what this legislation means for you, and how you can prepare your business or practice ahead of the change.
What this means for small businesses
While small businesses aren’t directly impacted by the legislation at this stage, they may still need to provide emissions data to larger clients who are subject to the reporting requirements.
If you’re a small business, you may need to invest time and resources in measuring and reporting your emissions, even though you aren’t legally required to. That’s because large businesses may favour suppliers who can provide climate-related reporting to help them meet their own obligations.
It’s also a great opportunity to decrease your carbon footprint, because once you measure it, you can reduce it. Savvy consumers are becoming increasingly aware of businesses that exaggerate their sustainability efforts, so if you have robust data about your emissions, you can also protect your business from accusations of greenwashing.
By proactively managing your emissions and demonstrating a commitment to sustainability, you can gain a competitive advantage and strengthen your relationships with customers and partners. Research from Deloitte found that roughly two-thirds of Gen Zs and millennials will pay more for sustainable products and services, while around a quarter have stopped supporting businesses with unsustainable practices.
What this means for accountants
Accountants can play a crucial role in supporting businesses as they comply with the new climate reporting requirements. The introduction of this legislation presents a great opportunity to get ahead of the game and offer new services to your clients early.
If you’re an accountant with small business clients, you’ll need to:
- understand the legislation
- help clients accurately calculate their carbon footprint
- provide assurance (through an audit) on climate-related disclosures
This is a new area for many, but you don’t need to be a sustainability expert to provide carbon accounting services. In the end, it’s just maths. With the right tools, you can help your clients track and measure their emissions.
Luckily, there are lots of resources out there to help you get started. Check out the Sumday Academy for a range of courses and learning tools.
How Xero can help
We’re committed to helping small businesses and accountants transition to mandatory climate reporting. For small businesses, the good news is that the data you already have in Xero can be used to understand your carbon footprint.
You can find carbon footprinting apps in the Xero App Store. These apps connect to Xero and use your Xero data to measure your emissions.
Xero partner Sumday provides accountants with an easy-to-use tool for measuring and reporting emissions to an auditable standard. So check out Sumday, along with Greenly and a range of other apps at different price points. There’s something for everyone.
The climate reporting legislation is a significant step towards greater transparency and accountability in corporate Australia. While it presents challenges for small businesses and accountants, it also offers opportunities to drive positive change.
Whether you need to start reporting now or not, it’s a great time to take a step towards a greener future.
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