Corporate reporting is undergoing significant changes in New Zealand and Australia, reflecting broader trends in compliance, transparency, and sustainability.
Mark Disomma and Neil Sparksman from Voice Brand Agency have delved into various sources and annual reports to understand these evolving disclosure requirements.
This blog explores the key findings from their research, focusing on narrative length, dual-listed business reporting trends, Australian reporting standards, and essential Environmental, Social, and Governance (ESG) trends.
Narrative length. The storytelling dilemma
One of the most striking trends is the apparent decline in narrative and storytelling within corporate reports. Historically, these narratives provided context and a compelling story about the company’s journey and strategy. However, initial research indicates a shift away from this approach. Companies are increasingly focused on compliance-driven content, potentially at the expense of engaging storytelling. This shift may be influenced by the growing complexity and volume of mandatory disclosures, leaving less room for narrative elements.
Reporting trends for dual-listed businesses
Reporting requirements can be particularly challenging for businesses in New Zealand and Australia. These companies must navigate different regulatory environments while maintaining a coherent reporting strategy. A critical observation is the trend towards either integrating or splitting up reports. Integrated reports are becoming longer and more complex, while others opt for multiple publications such as storytelling documents, data books, sustainability reports, and investor decks. This dual approach helps manage the diverse expectations of stakeholders across both countries.
Australian reporting standards. Mandatories and non-mandatories
Australian reporting standards are expanding, driven by increasing expectations for ethical and sustainable business practices. Companies must adhere to various mandatory requirements, such as the National Greenhouse and Energy Reporting Scheme and modern slavery statements for large businesses. Additionally, non-mandatory frameworks like the Global Reporting Initiative (GRI) and the Taskforce on Nature-related Financial Disclosures (TNFD) are gaining traction. These frameworks help companies address broader sustainability issues, ensuring they remain competitive and transparent in a global market.
The rise of ESG reporting
ESG reporting has become a central focus for companies in New Zealand and Australia. Initially concentrated on environmental issues such as greenhouse gas (GHG) emissions and water management, ESG reporting has expanded to include social and governance factors. This broader scope encompasses data protection, diversity, business ethics, and board composition. Companies are now expected to measure and track various metrics, from waste management to customer privacy protection.
ESG trends. What companies need to know
The range of topics covered under ESG reporting is extensive and continually growing. Companies must define what ESG means to them and clearly articulate the scope of their reporting activities. Introducing Climate-Related Disclosures (CRDs) in New Zealand will significantly impact reporting practices. The first round of CRD reports is due in April 2024, setting a precedent for transparency and accountability. In Australia, proposals for mandatory CRDs are under consultation, indicating a similar trajectory.
Governance of ESG-related matters
Governance has emerged as a critical component of ESG reporting. The revised NZX Corporate Governance Code and amendments to the Companies Act emphasize the importance of strong governance practices. Companies with robust governance structures and transparent disclosure practices can differentiate themselves from peers and create a more robust investment proposition. Conversely, the rise in ESG litigation highlights the risks of inadequate governance. The case of Smith v Fonterra in New Zealand and a recent claim against ANZ in Australia underscore the legal and reputational risks associated with poor ESG management.
Multiple frameworks. Navigating complexity
Australasian companies increasingly adopt multiple ESG reporting frameworks, including CRD, GRI, and the Sustainability Accounting Standards Board (SASB). AIRA’s research indicates that 68 percent of companies use two or more frameworks, with CRD being the most widely adopted. This multi-framework approach reflects the diverse expectations of stakeholders and the complex nature of ESG issues. Climate change remains a top priority, with investors prioritizing short and medium-term emissions reduction targets.
Modern slavery reform
Modern slavery reform is another significant trend affecting corporate reporting. The New Zealand government has announced plans to establish a public register for transparency over supply chains, similar to existing requirements in Australia. Companies with more than $20 million in revenue must report on their actions to address exploitation risks. This reform aligns with broader efforts to ensure ethical business practices and protect vulnerable workers.
Sustainable finance. Taxonomies and market trends
The market for sustainable finance products in New Zealand is growing, driven by incentives for decarbonization and sustainability goals. Launching a Sustainable Financing Bond Framework and issuing $1.6 billion in green bonds highlight this trend. Sustainable finance allows companies to align their financial strategies with ESG objectives, attracting environmentally conscious investors.
COP28 and the Global Stocktake
The outcomes of COP28, including an agreement to transition away from fossil fuels, will have far-reaching implications for corporate reporting. Companies must stay informed about global policy shifts and adapt their strategies accordingly. This international context underscores the interconnected nature of ESG issues and the need for comprehensive, forward-looking reporting.
Australian reporting: A closer look
In Australia, reporting requirements continue to evolve in response to stakeholder expectations. More than 400 companies must report under the National Greenhouse and Energy Reporting Scheme, while the APS Net Zero 2030 policy mandates public reporting on emissions. Companies must also navigate gender equality reporting, modern slavery statements, and the Australian Packaging Covenant targets. Compliance with these diverse requirements necessitates robust data collection and reporting processes.
The importance of continual engagement
A critical insight from our research is the trend towards continual engagement with stakeholders. Companies are increasingly publishing reports online and repurposing data across various formats. This approach enhances transparency and keeps stakeholders informed and engaged throughout the year. Companies can build stronger relationships with investors, customers, and the broader community by maintaining regular communication.
Conclusion. Navigating the future of corporate reporting
Corporate reporting in New Zealand and Australia is evolving rapidly, driven by compliance requirements, stakeholder expectations, and global sustainability trends. Companies must navigate complex regulatory environments, adopt multiple reporting frameworks, and address various ESG issues. By embracing transparency, strong governance, and continual engagement, businesses can differentiate themselves and create long-term value.
The trends highlighted in this blog underscore the importance of a strategic approach to corporate reporting. Companies that proactively address these trends and invest in robust reporting practices will be better positioned to meet the challenges and opportunities of the future. As the landscape evolves, staying informed and adaptable will be crucial to success.