Recent developments in climate-related accounting disclosures The report assesses climate-related disclosures from 28 ASX50 Australian firms during the 2022 reporting period, focusing on their alignment with the Taskforce on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB). The study identifies regulatory concerns regarding “greenwashing” (exaggeration) and “greenhushing” (withholding information), highlighted by the Australian Competition and Consumer Commission’s finding that 57% of entities possibly engaged in greenwashing.

Conceptualisations of climate-related accounting and accounting technologies

Climate-related accounting, particularly carbon accounting, faces significant challenges due to complexities in establishing universally applicable accounting standards. Existing literature primarily highlights that emissions disclosures often lack technical detail and focus disproportionately on positive aspects. Similarly, the transition to mandatory reporting has intensified the political dimension of disclosures, reflecting power dynamics between organisations and stakeholders.

Visibility

The study uses Brighenti’s visibility theory, encompassing recognition, quality, and control. Visibility involves social acknowledgment (recognition), how subjects are presented in different reports (quality), and regulatory and societal scrutiny (control). Visibility is crucial for transparency, comparability, and informed decision-making by stakeholders and regulators.

Method qualitative analysis of 120 reports from 28 ASX50 companies, complemented by over 240 news articles and activist investor website content, was conducted. Companies represented diverse sectors, ensuring balanced analysis.

Findings

Visibility as recognition

Physical climate risks (e.g., extreme weather) showed low visibility, typically superficially addressed. For example, Commonwealth Bank noted $31 billion exposure to physical risks affecting home loans. Transition risks (policy, market shifts) had moderate visibility, prominently reported in media and activist discussions. In contrast, transition opportunities (renewable energy investments, efficiency improvements) were highly visible, frequently emphasised by sectors like energy and materials. There was evidence of selective reporting, emphasising opportunities and superficially addressing substantial risks.

Visibility as quality

Climate disclosures varied significantly across reporting venues. Standalone sustainability reports offered detailed disclosures, whereas financial reports generally summarised or omitted climate impacts due to quantification difficulties and uncertainty. Reports commonly highlighted positive narratives around transition opportunities but provided limited financial impacts related to physical and transition risks. This pattern reflected caution in translating uncertain climate-related financial implications into financial reports.

Visibility as control

Regulatory oversight and societal expectations substantially influenced disclosures. Banks, materials, energy, and utilities sectors demonstrated significant climate-related regulatory disclosures, board oversight, and external audit involvement. Societal scrutiny, particularly through media and activist attention, created a paradox where increased scrutiny led to superficial disclosures, avoiding direct confrontation with contentious issues like fossil fuel expansion. Companies strategically navigated this scrutiny by highlighting favourable actions while downplaying controversial practices.

Discussion

The standardisation of climate disclosures through ISSB standards presents notable challenges due to climate science uncertainty, difficulties in financial quantification, and political dynamics among stakeholders. The findings underscore persistent issues such as superficial risk disclosure, exaggerated opportunities, and selective transparency, complicating stakeholder comparability and reliability. Enhancing regulatory frameworks and standardised methodologies is essential to address these inconsistencies and improve disclosure reliability.

Conclusion

The research highlights inconsistencies and superficial disclosures in climate reporting by major Australian companies, suggesting a significant gap between corporate disclosure practices and external societal and regulatory expectations. The study advises regulators and standard-setters to strengthen disclosure standards and comparability frameworks, recommending further research on drivers of non-financial disclosure prominence and exploring visibility dynamics influenced by power relations and regulatory pressures.