How to Prepare for a New Financial Year With Quadrent

As financial year-end and audit season approaches, unlike previous years, there are additional items that auditors may be looking at, especially when it comes to environmental, social and corporate governance (ESG) and what may become mandatory reporting items in the coming years. Quadrent, in collaboration with Grant Thorton, recently hosted a webinar outlining what auditors will be pinpointing this audit season, including the status of ESG reporting, and how to avoid greenwashing.

View the webinar recording here, and keep reading below for a summary of what was discussed.

The status of ESG reporting frameworks and what to look out for in FY23/24

In recent years, ESG has been one of the fastest growing areas of organisational change. This captures all of the non-financial aspects of a company outside of its financial reporting. Climate-related issues are likely to be the first area of ESG to have mandatory reporting requirements. And in terms of implementation, the finance team typically takes responsibility as it has the skills to collect, analyse and present large amounts of data. As a data-heavy area, it can present significant challenges for companies in building repeatable, auditable processes.

The International Sustainability Standards Board (ISSB) has brought together a range of ESG reporting frameworks to provide guidance on what mandatory ESG reporting may look like. The ISSB recently released initial standards that will be the first mandatory non-financial reporting standards adopted on a country-by-country basis:

• IFRS S1: General disclosures about sustainability-related risks and opportunities.
• IFRS S2: Climate-related disclosures.

New Zealand has had TCFD-aligned reporting standards from 1 January 2023, and it’s proposed that Australia will also adopt these standards from 1 July 2024. While the reporting standards may only be directly mandatory for listed companies, it impacts whole supply chains as the practices of the company’s suppliers can affect an organisation’s ESG performance. To that end, it’s important that all companies proactively prepare for mandatory ESG reporting.

Voluntary ESG reporting and managing stakeholders

While ESG reporting isn’t mandatory at this stage, many companies are voluntarily disclosing their ESG performance as part of their financial reporting. For companies that want to produce a sustainability report, they should identify what both internal and external stakeholders want addressed. Most companies in Australia use the Global Reporting Initiative (GRI) framework to inform how they structure their sustainability report. Under this framework, companies can map out the issues that their stakeholders care about, such as climate change, diversity, and community engagement, and then drill down further to ensure these topics are adequately addressed. Using a framework also helps companies to produce meaningful reporting and ensure they are implementing initiatives that have a measurable impact on ESG outcomes. 

A company, for example, may have installed LED lighting and solar panels, but it has a negligible impact on the environment and doesn’t contribute to the circular economy. In contrast, “social” product offerings help companies to access the products and services they need while doing good for the environment and their communities. Quadrent’s Green Lease is a good example, allowing companies to lease devices and when it comes time to decommission the assets for corporate use, they are securely wiped and refurbished for use by school students who otherwise may not have had access to a device for their studies. Environmentally, the Quadrent Green Lease ensures companies are only using assets that are managed and e-wasted responsibility. Socially, devices that can be given a useful second life are given to students who may not have otherwise had access to a laptop. And governance is addressed through the reporting processes and information provided through Quadrent’s Green Lease.

How to avoid “greenwashing”

As ESG becomes increasingly important, companies should be careful to avoid greenwashing, which is spending more time and money claiming to be “green” through advertising and marketing rather than implementing business practices that minimise environmental impact. There are five key steps to avoid greenwashing:

1. Be transparent (and honest)
2. Be specific
3. Avoid misleading imagery
4. Be able to back up any claims (get assured or verified by an independent and reputable third party)
5. Don’t exaggerate

By setting specific, measurable and verifiable sustainability goals, your company will have what it needs to implement ESG initiatives that have a measurable and meaningful impact.

Get organised for the new financial year and audit season with Quadrent

Companies have gone through a period of rapid change throughout COVID-19 and the macroeconomic changes and challenges. Further, as ESG becomes increasingly important and mandatory ESG reporting requirements are implemented, addressing both your lease management and ESG requirements through one provider can provide a measurable ESG impact and a more strategic approach to lease management. 

Quadrent works with businesses helping them to manage their leases and proactively manage their ESG risk. With a team that has in-depth leasing knowledge and specialised accounting backgrounds, we’ll help you get the most value out of your assets while addressing increasing ESG requirements. 
 
To optimise for the new financial year and leverage your data for better commercial decision-making, start your ESG journey simply and effectively with Quadrent, click here for more information.