Supporting organisational social licence with effective sustainability reporting

A social licence is generated when an organisation operates in ways that meet a community’s expectations.

When it comes to the environment, over recent decades communities have been demanding more and more transparency from organisations about their impacts and dependencies on nature. This started with concerns about pollution and waste and has progressively expanded to encompass connections to climate change and biodiversity.

Sustainability reporting meets this demand for transparency. Sustainability reporting also discloses risks and opportunities and can underpin an organisation’s strategic direction. Positive environmental performance can build and maintain an organisation’s social licence, whereas poor environmental performance can have the opposite effect.

Sustainability reporting can take various forms. Many organisations use the Environmental, Social and Governance (ESG) framework to report on their responsibilities, risks and priorities. Other organisations may focus purely on environmental performance or specifically on risk following the recommendations of the Taskforce on Nature-Related Financial Disclosures (TNFD).

The choice of approach will depend on:

• mandatory reporting requirements
• requirements from stakeholders or funding bodies
• existing organisational policy
• demand from stakeholders and communities
• data and information policies and processes.

Making sustainability reporting mandatory

At the UN Biodiversity Conference (CBD COP15) in Montreal in December 2022, governments adopted a new global agreement on nature with the intention of halting and reversing nature loss by 2030.

At COP15, more than 400 business and finance institutions from 52 countries with combined revenues of more than $2 trillion helped convince governments at COP15 to adopt Target 15 of the Global Biodiversity Framework.

Target 15 calls for requirements for all large businesses and financial institutions to assess and disclose their risks, impacts and dependencies on biodiversity by 2030.
Progressing sustainability reporting around the world

Several countries around the world now have mandatory sustainability and/or ESG reporting, including:

• Australia
• Brazil
• Canada
• European Union
• Japan (PDF)
• Malaysia (PDF)
• New Zealand
• Switzerland
• United Kingdom

Understanding the new laws in Australia

In Australia, from 1 January 2025, many large businesses and financial institutions will need to prepare annual sustainability reports containing mandatory climate-related financial disclosures, following the passage of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth) in 2024.

Large entities will now need to lodge a sustainability report alongside their financial report, directors’ report and auditor’s report.

There is a staggered starting point for mandatory sustainability reporting over three financial years:

• 2025 – entities with consolidated revenue of $500 million or more, consolidated gross assets of $1 billion or more, or more than 500 employees.
• 2026 – entities with consolidated revenue of $200 million or more, consolidated gross assets of $500 million or more, or more than 250 employees.
• 2027 – entities with consolidated revenue of $50 million or more, consolidated gross assets of $25 million or more, or more than 100 employees.

The sustainability report must contain:

• the entity’s material climate-related financial risks and opportunities
• the entity’s metrics and targets for the financial year relating to climate, including in greenhouse gas emissions
• any information about the entity’s governance, strategy or risk management in relation to these risks, opportunities, metrics and targets.

Find out more with ASIC’s guide to sustainability reporting.

Making sure that sustainability reporting is credible

In 2022, the Australian Competition and Consumer Commission (ACCC) found that 57% of businesses made concerning claims about their environmental credentials.

Greenwashing leads to a lack of trust among communities and stakeholders, undermining an organisation’s social licence and having a detrimental effect on brand.

Natural capital accounting offers an antidote to greenwashing. By analysing the data underpinning everything that nature brings to our economy, natural capital accountants can report on the real impacts and dependencies that organisations have in relation to the environment. Using the principles of the System of Environmental Economic Accounting (SEEA) – the international standard for natural capital accounting – we can ensure that data, reports and analysis is robust, transparent and meaningful.

IDEEA Group uses a natural capital approach to measure and report on your organisation’s environmental performance as part of fulfilling the requirements of ESG and sustainability reporting.

Using standardised natural capital frameworks and accounting-based approaches, we help organisations to understand the impact their activities have on nature. They can then use this data-backed evidence to communicate the outcomes they are generating and the benefits of their investment in nature.

The data can be used in a range of ways to support whatever reporting mechanism your organisation uses, whether for sustainability reporting, ESG, TNFD or another requirement.

Download our brochure about environmental performance reporting for more information on how we can support you to:

• quantify your connection to the environment
• meet your mandatory reporting requirements
• build and maintain your social license.