Will Australia's mandatory climate reporting make “greenwashing” illegal? – Watt?

Article by Eric Worrell

Legal penalties for “greenwashing” could force Australian companies to declare they are completely uninterested in climate action.

Mandatory climate reporting to begin this year, marking generational change for Australian business

National and regional reporter Clint Jasper reports

in short:

Australia's new mandatory climate reporting legislation will begin this week.

The bill requires companies to disclose their emissions and how global warming may affect their balance sheets.

What’s next:

Only the largest entities will need to start reporting this year, but the legislation will cover more entities in coming years.

Australia has introduced new mandatory climate reporting rules requiring business owners to estimate their company's emissions and outline plans to deal with future risks.

The Australian Institute of Company Directors (AICD) said the legislation, due to be passed in 2024, was the most significant change to reporting requirements and directors' responsibilities in a generation.

It will require companies to disclose their greenhouse gas emissions in sustainability reports submitted with their financial data and explain how a range of future climate scenarios could affect their business.

Initially, the legislation will only apply to Australia's largest companies, but by 2027 thousands of businesses and not-for-profit organizations will be included – Mark Rigotti, AICD managing director and chief executive said it would be a significant change in the way companies enforce mandatory regulations.

“This is actually a fundamental change in reporting that probably hasn't happened since 2003 when we moved from domestic financial reporting standards to international financial reporting standards,” Mr. Rigotti said.

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Find out more: https://www.abc.net.au/news/2025-01-02/mandatory-climate-reporting-rules-begin/104718398

I'm no legal expert, so please consult your own attorney, but it seems the only legally safe way to avoid being sued for making misleading financial statements is to tell the truth.

The Greens will be watching closely and cracking down on companies that make misleading statements about climate policy in their corporate reports. I fully expect to see some prosecutions against companies that make misleading statements, companies that think they can continue business as usual, misleading the public and their investors about their climate commitments.

The best way to err on the side of caution is to admit that you don’t have any plans to address climate change or reduce emissions.

Corporations have a fiduciary responsibility to serve the interests of shareholders. Committing to winding down operations if climate change eats away at profits is a legally acceptable response to all these alleged climate threats. The Company is under no obligation to continue operating under adverse trading conditions. If a board of directors believes that shareholder capital is at risk, they have every reason to orderly close the company and sell the company's assets to return as much capital as possible to shareholders.

So a company that says “if climate change adversely affects our business, we will cease trading and sell all our assets” has every right to do so, as long as they can demonstrate that this statement is in the best interests of shareholders. Pursuing short-term profits, using the lack of climate action as a tactic to undercut competitors and gain market share, and then shutting down the company when this course of action is no longer tenable, is a perfectly acceptable way to respond to the so-called climate crisis.

The reality, of course, is that there is no climate crisis. However, by taking a formal position to accept the existence of a crisis, then explaining that you do not intend to do anything about it and setting out the reasons for this position, company directors should be able to minimize personal risk while serving the best interests of the company Benefit.

If any director succumbs to pressure and invests heavily in climate action, such action also carries risks. America's commercial banks have been accused of conflicts of interest because of their green commitments. If a court finds that they breached their fiduciary duties to shareholders, directors who succumb to the green blob may find themselves personally liable for investors' capital losses because they diverted excessive shareholder cash away from profitable activities.