Some fashion retailers and manufacturers will be required to undertake mandatory climate reporting for the first time this financial year, with retail specialist lawyer Emma Peters saying many of these are underprepared.
Amendments to the Corporations Act have been introduced to make climate-related financial disclosures mandatory, phased in from this year. Such disclosures must be made in an annual report, from climate governance, strategies, metrics and targets to setting out emissions.
Initially, only larger entities will need to comply, with a phased-in approach that will include businesses over $50 million by 2027.
Peters, who also specialises in environment, social and governance regulation and is a director at Cowell Clarke Commercial Lawyers, said businesses not only need to report their own climate change risks but also those of their suppliers. She said entities must also be mindful that even if they are not caught as reporting entities, their customers may well require climate-related information in order to meet their own reporting requirements.
Some retailers have been on this journey for some time already, particularly through the Modern Slavery Register, which forces businesses earning over $100 million to share their supplier list alongside modern slavery risks, with some also reporting environmental goals and initiatives as well. Others report their environmental commitments through annual reports.
“For fashion and retail businesses, this can be particularly complex because supply chains are complicated and global,” Peters said. “While many fashion related businesses have already commenced with gaining more visibility over their supply chains for human rights risks due to legislation such as the Modern Slavery Act 2018 (Cth), calculating supplier emissions is another matter altogether.”
Peters said that in a speech earlier this year, ASIC chair Joe Longo had observed that over the next few years, more than 6000 entities in Australia would need to report under the new regime, and especially for smaller businesses, this was creating some understandable apprehension.
“As someone who has worked with a range of fashion and retail businesses it is clear the industry faces particular challenges,” Peters said. “Recently, Bloomberg undertook a fashion industry-specific study in which it described global fashion emission tracking as being in ‘disarray’ and ‘unlikely to be resolved soon’. This could mean that difficulties with reporting don’t become apparent until it is too late.
“Those businesses that have waited until it is legally required to start gathering the data may find it simply too late and others will find themselves under pressure from customers to provide data they have not gathered.
“In my experience, some Australian fashion businesses are well underway, but many more haven’t even started.
“The risk faced by business is multifaceted, not only from a regulatory perspective but if disclosures are misleading or deceptive (greenwashing) it has the potential for climate-related litigation, and could also damage access to capital, insurance and create reputational harm.”
Peters said technology is available to help meet the compliance requirements, particularly for those with global supply chains. This includes RFID.
“The most important thing for fashion and retail businesses to recognise is that these provisions are driven by an international framework and they won’t be going away.
“While many fashion businesses currently fall below the threshold required to report, the clock is ticking and the sooner businesses incorporate the collection of this data into their business practices, the easier it will be once it is fully mandatory.”