Scott Bouvier (Partner - KWM) and Michaela Aspell (Senior Climate Adviser – Owl Advisory by KWM) attended the ImpactX Agriculture and Land Decarb Forum on 25 November 2024. Scott and Michaela share insights from the event which brought together representatives from across the sector, from retailers to FMCG companies to farmers to discuss initiatives to decarbonise the sector.
Climate change is already impacting on farmers and growers in Australia - for example due to increasing bushfires, changing seasonal patterns and extreme rainfall and flooding. As global warming intensifies, farm profits are expected to decrease by between 11% – 50% by 2050 – with increased profit reduction under higher warming scenarios.
The agriculture sector is responsible for 17% of all greenhouse gas emissions in Australia. Decarbonisation of all sectors including agriculture is crucial for Australia to play its part in meeting global emissions reductions, which in turn will reduce impacts on farmers, food security and rural communities. In addition, there are wider benefits of moving away from emissions intensive agriculture such as reductions in pollution and water eutrophication associated with fertiliser use (Australia is ranked 9th top user of fertiliser worldwide). Farmers and land holders at the Decarb Forum shared their initiatives and plans for increasing farm sustainability.
The recent finalisation of legislation mandating sustainability reporting, and the release of the AASB standards, signals a new era of sustainability reporting in Australia.
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 mandates climate-related financial reporting for certain entities. Since the passing of the legislation, the Australian Accounting Standards Board (AASB) has finalised standards for undertaking sustainability-related disclosures (S1) and climate-related financial disclosures (S2) that are based on international standards but specific to the Australian reporting regime.
Reporting entities will need to include climate-related disclosures as part of a separate Sustainability Report, published alongside annual financial reporting. The disclosures will meet the requirements set out in AASB S2, and include material climate-related risks and opportunities and the impacts of these on the entity over the short-, medium- and long-term, how resilient an entity is to at least two climate scenarios (including a higher warming and lower warming scenario), disclosure of Scope 1, 2 and 3 emissions and a transition plan with actions to meet any greenhouse gas (GHG) emissions related targets. Note that the Scope 3 emissions and transition planning are not required until the second year of the reporting regime.
This new climate reporting regime is adding additional challenges to an already challenging climate (no pun intended). ‘Confusopoly’ was the word of the ImpactX forum – signalling increased confusion from all parties with the rise in regulatory requirements and in making sense of differing perspectives, data, and approaches across the agriculture industry.
We heard from many at the ImpactX forum that data can be a key enabler and prohibitor of action. On one hand, having robust data helps entities understand where to focus efforts for emission reductions. Robust data is also required to make climate-related disclosures particularly in relation to Scope 3 greenhouse gas emissions and setting meaningful targets. On the other hand, data limitations – both internally and externally – could mean that action towards data collection and target setting is forfeited in the pursuit of data perfection.
Related to data collection is the increased load on farmers and producers who now need to ensure they can pass information on GHG emissions higher up the supply chain. For those using the carbon credit scheme as an additional source of revenue, there is a decision point (as well as a double-counting risk). On farm emissions reductions can contribute to marketability and entice those further up the supply chain to purchase produce but those reductions cannot be counted if instead used by farmers and/or their carbon project service providers for carbon credits. For those suppliers directly or indirectly exporting internationally, particularly to the European Union (EU), demonstrating environmental practices that contribute towards EU Green Deal targets will be crucial for ongoing market access. Farmers and land holders at the Decarb Forum shared on their willingness to adopt approaches for increasing farm sustainability, as long as it can be made simple and measured efficiently.
Due to the complexity in the sector and the limited time availability of farmers and producers already strained by the nature of their industry and associated regulatory requirements, having standard approaches to data collection and data sharing is crucial as we move into this new era of sustainability reporting. References were made to international examples in the EU, as well as from New Zealand (where the Overseer platform for data collection and corporate demonstrability is used by over 15,000 farms).
For systems to work at scale, the ImpactX forum emphasised that sector collaboration and partnerships are critical at all ends of the spectrum – from farmgate to processing to supermarkets. Collaboration and partnerships also assist with creating the strategic agricultural changes that are needed to support the industry in the future. With increased adoption of the Taskforce for Nature-related Disclosure recommendations (TNFD) and Australian initiatives to promote ‘nature positive’, approaching agriculture reform collaboratively and holistically may also prevent existing conversations being repeated if nature-related reporting also becomes mandatory.
Overall, the ImpactX forum contributed to the cross-sector discussions that are needed for sector decarbonisation and climate resilience. The forum also highlighted the challenges still to come with mandatory sustainability reporting commencing in Australia from 1 January 2025, and increased expectations of sector decarbonisation from government and private sector alike.
KWM’s Food & Agribusiness team is working with clients on a range of carbon reduction technology and practices, advising on intellectual property protection, data rights and rules, research and collaborations, new product development and reporting and advertising. Our governance experts and climate advisers at Owl Advisory by KWM can support you in your climate reporting journey including understanding legislative obligations, undertaking climate change risk assessments and risk management, upskilling board and management teams and reviewing or preparing a gap analysis of existing climate and sustainability-related reports against the mandatory requirements.
