Operating in the context of evolving climate disclosure practices and frameworks
Mark Smyth A * and Edward Einfeld A *A
Mark Smyth is a partner at Herbert Smith Freehills specialising in ESG, public law and strategic litigation. Mark advises clients on ESG issues including human rights, sustainability, First Nations engagement and governance issues, as well as regulatory enforcement processes and consequent litigation. He is involved in defending a number of significant, high-profile ESG claims against multinational clients and responding to novel claims, as well as advising clients on risk mitigation, ESG and regulatory compliance. Mark is the inaugural Chair of the NSW Law Society’s Climate Change Committee. He is recognised by Doyle’s Guide as a leading Australian Administrative and Public Lawyer and is the co-author of a leading Australian public law textbook Control of Government Action. Mark works closely with our global ESG team, advising global institutional clients, and brings a cross-jurisdictional perspective to his advice, having regard to the latest developments in the US, UK and Europe. |
Edward Einfeld is in Herbert Smith Freehills’ Disputes practice, specialising in ESG, board and executive accountability, and corporate crime. Edward advises clients in the private capital, financial services, energy and resources sectors on complex regulatory disputes and investigations, commercial and shareholder disputes, and contentious contractual advice and negotiations. Edward was recognised by clients (in Legal500 Australia 2021 – White Collar Crime) as ‘extremely responsive’ and listening ‘to the actual situation of the company and adjusting the process and output to the needs. Very pleasant to deal with’. He was also listed by Doyle’s Guide as a Rising Star in Commercial Litigation, NSW (2022). |
Abstract
The standards for companies reporting on the environmental impacts of their operations have changed drastically over the last decade and are about to become even more complex. Initially, limited regulation or guidance available to companies in relation to climate disclosures led to widely diverging practices. This has resulted in many companies facing allegations of ‘greenwashing’ and in some cases litigation and shareholder activism. However, the Australian Government has recently announced it will implement mandatory climate reporting commencing from 1 July 2024 for many Australian companies. Additional climate disclosures – encouraged by pressure from stakeholders and required by the new reporting regulations – will make environmental risk management more complex. The additional disclosures will also provide further opportunities for interference with the approval process for new projects, if there are inconsistencies between a company’s climate disclosures generally and what they have said in their project approval documents. In this paper, we provide an overview of effective strategies and mitigation steps that can be taken to reduce this risk of disruption and disincentivise activist interference more generally, drawing from recent climate change proceedings and experience advising energy and resources clients in relation to climate change and Environmental Social and Governance (ESG) issues more broadly. In particular, we will cover the aspects of the new mandatory climate reporting regime that will be most difficult to comply with; common greenwashing pitfalls; stakeholder/activist engagement planning; and how Boards should approach these issues.
Keywords: climate litigation, corporate governance, corporate regulation, disclosure, ESG, greenwashing, shareholder activism.
Mark Smyth is a partner at Herbert Smith Freehills specialising in ESG, public law and strategic litigation. Mark advises clients on ESG issues including human rights, sustainability, First Nations engagement and governance issues, as well as regulatory enforcement processes and consequent litigation. He is involved in defending a number of significant, high-profile ESG claims against multinational clients and responding to novel claims, as well as advising clients on risk mitigation, ESG and regulatory compliance. Mark is the inaugural Chair of the NSW Law Society’s Climate Change Committee. He is recognised by Doyle’s Guide as a leading Australian Administrative and Public Lawyer and is the co-author of a leading Australian public law textbook Control of Government Action. Mark works closely with our global ESG team, advising global institutional clients, and brings a cross-jurisdictional perspective to his advice, having regard to the latest developments in the US, UK and Europe. |
Edward Einfeld is in Herbert Smith Freehills’ Disputes practice, specialising in ESG, board and executive accountability, and corporate crime. Edward advises clients in the private capital, financial services, energy and resources sectors on complex regulatory disputes and investigations, commercial and shareholder disputes, and contentious contractual advice and negotiations. Edward was recognised by clients (in Legal500 Australia 2021 – White Collar Crime) as ‘extremely responsive’ and listening ‘to the actual situation of the company and adjusting the process and output to the needs. Very pleasant to deal with’. He was also listed by Doyle’s Guide as a Rising Star in Commercial Litigation, NSW (2022). |
References
Australian Competition and Consumer Commission (2023) Making environmental claims: A guide for business. Guidance note, December 2023. Available at https://www.accc.gov.au/system/files/greenwashing-guidelines.pdf
Australian Institute of Company Directors (2023) A director’s guide to mandatory climate reporting. Slide deck, 3 October 2023. Available at https://www.aicd.com.au/content/dam/aicd/pdf/tools-resources/director-resources/directors-guide-to-mandatory-climate-reporting-web.pdf
ISSB (2023) IFRS S2 Climate-related Disclosures. [Standard] (International Sustainability Standards Board) Available at https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s2-climate-related-disclosures/
Treasury, Australian Government (2023) Climate-related financial disclosure. Consultation paper. June 2023. Available at https://treasury.gov.au/sites/default/files/2023-06/c2023-402245.pdf
