Climate-Related Disclosures: Why It’s Important and How Quadrent Can Help

As the global population’s awareness of environmental, social and corporate governance (ESG) has grown, governments have been working to establish a regulatory framework that keeps companies accountable. In recent years, companies have had the option to self-disclose their environmental impact, typically through a sustainability report, as part of their ongoing financial reporting.

Now, climate-related disclosures are becoming a legal requirement for companies. This means that companies must provide transparency about their climate-related financial risks. Keep reading to understand more about climate-related disclosures, what they mean for your company and how holistic asset financing and leasing solutions can help you prepare for mandatory reporting and manage ESG risks.

What are climate-related disclosures?

Climate-related disclosures broadly relates to a mandate that companies disclose the current and future impacts of climate change on their operations. By mandating the reporting of how companies manage ESG risks, such as climate-related financial risks, the objective is to provide more transparency to investors so that capital flows to “good corporate citizens”, making a demonstrable commitment to minimising (or mitigating) their organisation’s environmental impact. Like other material risks that must be reported, mandated organisations are expected to assess, understand and disclose material climate risks.

What do companies need to report in climate-related disclosures?

The things that companies must disclose depend on the phase of implementation in the jurisdiction. In New Zealand, for example, reporting against the new climate reporting standards was required from 1 January 2023. Specific companies (Climate Reporting Entities) with over NZD$1 billion in total assets are required to report, including registered banks, licensed insurers, credit unions, building societies, managers of registered investment schemes, and some Crown Financial Institutions. Large, listed debt or equity issuers with over NZD$60 million are also required to report.

New Zealand is phasing its implementation process. The second phase in New Zealand requires these companies to have independent assurance of their disclosures on greenhouse gas emissions for accounting periods ending on or after 27 October 2024.

In Australia, the legislation to mandate climate-related financial disclosures hasn’t been passed, but the proposed commencement date for Group 1 entities (companies with $500 million or more of consolidated revenue) is 1 January 2025. Similar to New Zealand, implementation will be phased based on a company’s consolidated revenue, assets and number of employees. Reporting content will be focused on Scope 1 and Scope 2 greenhouse gas emissions in the first year of reporting, while Scope 3 emissions must be included from the second year of reporting.

What are Scope 1, Scope 2 and Scope 3 emissions?

Greenhouse gas emissions are considered direct or indirect and are categorised into three “Scopes” based on international accounting standards. The table below outlines examples of Scope 1, Scope 2, and Scope 3 emissions.

How can companies prepare for climate-related disclosures?

If your company hasn’t already, preparing for when climate-related disclosures are mandated in your jurisdiction is critical. Accurate reporting will require detailed information on your supply chains and how they impact the environment, especially when it comes to reporting on Scope 3 emissions. The systems and processes that your company implements now can make climate-related disclosures more transparent and streamlined. One key way that companies can prepare is by reviewing their asset ownership and considering providers that will make reporting efficient and accurate.

How can leasing assets make climate-related disclosures easier?

By using leasing as a funding model, companies can access the assets they need, such as laptop fleets and mobile devices, without upfront capital investment. Further, a holistic asset finance and leasing provider, such as Quadrent, will not only allow companies to adjust their device fleet numbers easily to meet staffing requirements, but will also properly dispose of or refurbish the assets at the end of their corporate life.

As part of Quadrent's Green Lease offering, its built-in reporting can improve companies’ ability to disclose Scope 3 emissions, such as those required under the Aotearoa New Zealand Climate Standards. The reporting includes details on the emissions from individual IT assets (e.g., asset-level emissions data) and emissions avoided from landfill (e.g., e-waste, recycling and digital inclusion metrics). With all information stored in a secure, central location, it’s easy for companies to get the data they need to meet the growing climate reporting requirements. Further, all reporting is assured by an independent third party, all asset recycling is completed by R2v3-certified ITAD partners, and Quadrent is currently working towards its B Corp Certification, demonstrating its commitment to high ESG standards.

By tracking how these assets are disposed of through trusted providers and knowing exactly where the devices end up, companies can provide greater transparency and meet the regulatory requirements for climate-related disclosures. This is especially important for reporting Scope 3 emissions, as it can be challenging to track climate impacts across the supply chain.

Proactively address ESG risk with Quadrent’s Asset Finance and Leasing Solutions

The operational and financial risks of ignoring the environmental impacts of a company’s operations continue to grow, with mandated reporting being implemented in many jurisdictions, including New Zealand and, soon, Australia. Companies that prepare now by reviewing how they can gain more transparency and manage financial risk, especially through the activities and assets that fall under Scope 3 emissions, will be in a strong position to meet the evolving requirements. And by proactively preparing, companies can make a demonstrable commitment to managing their climate impacts, which can attract more investment to a company.

Quadrent's asset financing and leasing solutions, such as the Quadrent Green Lease, can help you unlock cash flow, prepare for mandated climate-related financial disclosures, and proactively manage ESG risk. Click here to contact our team for more information.