Calls for farmers to be carved-out of financial disclosures

Under the government's proposed cornerstone legislation, Australia's largest listed and private companies, banks and superannuation funds will soon be forced to disclose climate-related "risks and opportunities" as a component of their annual reporting.

All but a handful of Australia's 85,000 farmers would not be directly impacted by Climate-Related Financial Disclosure rules - initially only targeting organisations with gross assets of $1 billion or more or consolidated revenue of at least $500 million - when the first of a three-phase rollout begins on July 1.

However, stakeholders fear the vast majority of farmers will be dragged into providing sensitive commercial-in-confidence financial data to supply partners to help them meet the scheme's attached scope 3 reporting requirements.

Nationals leader David Littleproud said the regulatory burden that would be forced on producers under the scheme was too onerous and called for farmers to be removed from it altogether.

"In the absence of any agreed scientific method for farmers to measure emissions, and in the middle of a cost of living crisis," Mr Littleproud said.

"It would make sense to carve agriculture out of this legislation to protect farmers and consumers of extra costs."

Scope 3 emissions are indirect emissions, other than electricity, which are scope 2, occurring outside of the boundary of an organisation as a result of actions by the organisation.

Farmers therefore supplying major supermarkets or using multinational shipping companies, for example, would need to provide their own climate disclosures to be incorporated into the scope 3 reports of those companies.

Meanwhile, in a submission to the government's exposure draft consultation, National Farmers Federation chief executive Tony Mahar also said the organisation was concerned that there was no "scope 3 reporting exemption for agricultural entities."

He also pointed to the "significant regulatory burden" where initial regulatory compliance costs for affected entities would exceed $1 million and annual compliance costs would exceed $500,000 per entity before decreasing over time.

The submission also called for a formal scope 3 reporting date to be pushed back to 2035, despite the government wanting it operational within a year, saying "this is a novel, and extremely complex issue that will require supply chain elements to develop in-place new infrastructure to satisfy demands for Scope 3 reporting."

Mr Mahar also said a consequence of the proposed, and potentially shifting, regulatory capture criteria is that producers could feel "compelled" to disclose sensitive commercial information "at their own individual cost to satisfy their march larger business counterparts to avoid unnecessary strain on critical business relations."

A statement from Treasurer Jim Chalmers said the reforms were aiming to help Australia maximise the "economic opportunities of cleaner, cheaper and more reliable energy and manage climate change risks."

"Our changes will establish Australia's climate risk disclosure framework, giving investors and companies the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation," it said.

The Exposure Draft legislation seeks to amend parts of the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities.

Australian Security & Investments Commission chair Joe Longo has previously described environmental, social and governance issues as driving the "biggest change to corporate reporting in a generation."