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AASB S2 in plain finance: An end-to-end playbook for CFOs — Transcript

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0:04Good afternoon everyone. Uh my name is
0:06Chris Rabilad. Um we're coming up to
0:1012:00. We'll just give it um a minute
0:13till everyone joins. Welcome to those
0:15who have already logged on. Um we've got
0:17a big morning set. I think we have over
0:20uh over 200 uh attending today.
1:09Okay, the numbers look good. Um, let's
1:12go ahead and get started. So, welcome
1:14everyone uh to today's webinar which is
1:16designed to give CFOs plain English
1:19practical road mapap what needs to
1:21happen who owns what and um how to get
1:24this done. So over the next hour, we're
1:26going to walk through four themes um
1:29that together form an end to-end u path
1:33to comply with AA uh SB um and helping
1:37you meet your uh reporting obligations.
1:41So most of you on the call are group two
1:43and group three entities which means
1:44you're all facing a very similar
1:46problem. Stretch teams, limited budgets,
1:48limited time. So when the Australian
1:51sustainability reporting standards were
1:53finalized, one consistent theme from our
1:56CFOs came back and said, "Chris, we
1:58don't need more frameworks. We need a
2:00single practical way to get this done."
2:03So the partnership between Avani and
2:06Drover, which we're going to talk about
2:07today, delivers exactly that. A single
2:10end to-end process fully aligned to SBS2
2:13from emissions to risks and governance
2:16to a board ready, audit ready
2:18disclosure.
2:20So here's what each partner brings.
2:22Zavani brings the emissions and metrics
2:25foundation. So your scope one, two, and
2:28three, your supplier emissions, your
2:31finance emissions and the metrics and
2:32evidence required under DASB.
2:36Drover provides the governance and the
2:38reporting engine. So the materiality,
2:40the climate risk assessment, clause
2:42tracking, scenario alignment, controls,
2:45uh, and the full ASRS reporting
2:48workflow.
2:50So let's go ahead and meet our esteemed
2:52panel that we've gathered for you today.
2:55So all the way from Perth, thanks for
2:56getting up early, Jack. We have Jack
2:58Duffy from MIT, who is the head of, uh,
3:02finance. We have Rachel Riley, um, who
3:05is our co-founder of Drover. um also our
3:09chief commercial officer um and also
3:11recently certified in the Australian
3:13sustainability accounting
3:15um and we have Misha Kzik u from Avani
3:18of course uh who is our co-founder and
3:21our co-CEO um of Avani.
3:27So before we talk about the data or
3:29systems, we want to be clear on
3:31something. So you can't meet your
3:32reporting um obligations unless you're
3:34clear on what S2 actually requires and
3:38where the real work sits. So the biggest
3:40misconception we see today is it's just
3:44a sustainability project. Well, I'm here
3:46to say it isn't.
3:48SBS2 cuts directly across your finance,
3:51your risk, your governance, your control
3:53assurance, and ultimately your board. So
3:56it affects financial statements, risk
3:58registers, strategy, and the evidence
4:00trail you must produce for assurance. So
4:03with that in mind, let's go ahead and
4:05dive into what
4:08actually means for us. So Jack, you're
4:11first up.
4:12>> Yes. Our question from a CFO perspective
4:16what are your non-negotiable what are
4:18the non-negotiable pieces of
4:21S2 that organizations must understand
4:24first and which parts typically surprise
4:27the finance team when they realize
4:29what's required
4:31>> yes so thank you for having me um uh
4:34good question non-negotiable uh pieces
4:36of 22 that we have to understand so
4:39there's a lot um you know we uh within
4:42mito So basically starting from scratch
4:44and so the non-negotiable for us is to
4:46figure out how we actually measure our
4:47emissions first and foremost. So how can
4:49we map our organizational boundary um
4:53and then how can we uh you know figure
4:56out what our emissions actually are and
4:59what data do we have to capture those
5:01and what's the best way that we can do
5:02that. So um that's really the the the
5:05non-negotiable for us because we can't
5:07set targets or incorporate strategy or
5:10anything like that unless we have that
5:12that data behind us. So I believe for
5:14for me and for our team that's that's
5:16the first step and that's the
5:16non-negotiable. Um, as far as the
5:19surprise, um, uh, I think
5:24we're really we're not climate experts,
5:28particularly in the finance team. Uh,
5:29but we don't have anyone, we don't have
5:31the resources within me to know a lot
5:33about about climate, right? So, it's
5:36it's pretty intimidating to have to uh,
5:39sort of measure your climate risks and
5:41opportunities like how do you do that?
5:43You know, that's a big challenge for us.
5:45Um, you know, what what about
5:46governance? How do we how do we deal
5:48with that? Um like you said, this
5:50particular standard covers the entire
5:53business and and lots of different
5:54departments and how do you work with
5:55them to try and you know figure this all
5:58out? It's very challenging. So I think
5:59that's the that's the biggest surprise
6:00for for me.
6:02>> Great. Well, secondly, um what does it
6:04state uh for companies needing to
6:06comply?
6:08>> Yeah. So uh for me it's it's MTO's
6:12reputation, right? So, um, you know,
6:14we've prided ourselves on, you know, um,
6:18being able to provide really good
6:21financial statements to our parent
6:23company, you know, to to our customers
6:25if they require them. Um, and we we do
6:28that really consistent consistently and
6:30really well. Uh, and we don't want to
6:31ruin our good name because we can't
6:34comply with this particular standard. So
6:36for us it's very important to make sure
6:38that we can do it well and and provide
6:40really meaningful information um as part
6:42of the standard.
6:43>> Yeah, that was interesting you know
6:45mentioning your head office as well. Um
6:47obviously you're in other countries um
6:50are you seeing any you know particular
6:52these are the Australian um
6:53sustainability reporting standards. Are
6:55you seeing any uniformity um or you know
6:58where you can lean on other countries or
7:00is it all um um you know very different
7:04um country to country?
7:06Yeah, it's an interesting question. Um,
7:09I haven't found too many similarities.
7:12Uh, so we have a parent company in
7:14Japan. We have or our ultimate parent,
7:16we have a parent company in Singapore,
7:17we have group companies all around the
7:18world. Um, we don't we don't get too
7:21much uh assistance from from any of
7:24those companies. Everyone's sort of
7:25trying to figure it out themselves in
7:27some ways. And of course, some some of
7:28the group companies don't have to worry
7:30about this. Um I have found that um over
7:33the last year or so getting some
7:34information appears to potentially be
7:37getting easier as more companies are
7:39demanding it. Um so I have found that
7:42you know it's certainly something that
7:43is improving but um but we haven't had
7:45too much assistance from any of our
7:46group companies to this point in time.
7:49>> Excellent. Thanks Jack. So you're an
7:51early adopter and you know have a head
7:53start. you know, how do you see group
7:55two and group three organizations? You
7:57know, when do you think they need to
7:58start based on um what you're seeing
8:01today and what you've gone through?
8:04>> So, Mito's approach was to to start as
8:07early as possible. Um for me, it means
8:11because for me, we're starting from
8:12scratch, right? As I mentioned before,
8:14so we we don't feel like we had a good
8:16handle on anything to do with this
8:18particular standard. Um, and so we
8:21really wanted to be proactive, you know,
8:23to be able to to start as early as
8:24possible because while I mentioned
8:26before we don't have too many uh too
8:29much assistance from our group
8:30companies, our customers are all group
8:32one companies in Australia. We expect
8:34them to be well, they already do request
8:36us for certain information, but we
8:37expect that to increase and so we really
8:40want to be able to provide them the
8:41information that we we need because we
8:42want to be a trusted uh supplier to
8:44those companies. Um, and plus it gives
8:47me a bit of reassurance starting early,
8:49like we can we can, you know, sort of do
8:52a couple of test runs, make sure it's
8:54auditable, make sure our report is good
8:57without the pressure of actually having
8:59to do it in a mandatory way um, right
9:03now. So, it gives me some some sort of
9:06it eases the stress a little bit for me
9:08to be starting now. Um, knowing that we
9:10still don't mandate mandatorily, I don't
9:12even know if that's a word, have to
9:13report for for a couple of years. So I
9:15think that's the approach we've taken.
9:17>> Yeah, that's interesting. So you know
9:19the what what about you know the parts
9:21of av you know tend to create the
9:24biggest gap between what the the CFOs
9:27expect and you know and what's actually
9:29required.
9:31>> Yeah. So for me I I honestly believe
9:33it's sort of everything outside the
9:34metrics. So we're not experts in
9:37calculating emissions but at least we
9:39understand sort of numbers and and
9:41putting them together and we sort of we
9:43sort of can conceptualize that part of
9:45it I think in our brains. Um but you
9:50know being asked to have governance you
9:52know strategy on climate figuring out
9:55climate related risks and opportunities
9:57um you know to me that's that's
9:58intimidating like I I don't feel like
10:01I'm well prepared for that at all. Um,
10:04and so I think that's that's definitely
10:06the biggest gap. It's not just being
10:08able to report your emissions, it's
10:09everything else that comes along with
10:10that.
10:12>> Excellent, Jack. Look, I don't think
10:14you're alone. You know, um um it's what
10:17we're hearing out from a lot of CFOs. Um
10:20um and um obviously we're going to talk
10:22a little about about that education and
10:24you know, how the the parties here today
10:26can help with um with that gap
10:28knowledge.
10:30So that's a great foundation to start.
10:32So um what we see next is often
10:35confusion around responsibility. So who
10:38owns what, who signs off, who carries
10:41the risks. So if this isn't clear, the
10:43whole process can become fragmented.
10:46So Rachel, across finance, risk,
10:49compliance, and the board, where do you
10:51see responsibility naturally naturally
10:53sitting? Um and what breaks down when
10:56one of those roles isn't clearly defined
11:00early in the piece?
11:02Thanks Chris. Yeah. Um I think Jack sort
11:05of started to touch on it that it's not
11:08obviously like all things in business a
11:10oneman effort. We need um you know
11:13different parties around the business
11:16involved in this to make it happen. So
11:17I'll touch on that and I sort of see
11:19that in four lanes but ultimately you
11:22need one person responsible. Um and it
11:25has been a mixed bag and I think it
11:27actually comes from a bit of
11:28misconception around the sustainability
11:31um requirements. Um and obviously I'll
11:34focus a bit on S2 with that but
11:37essentially the person who needs to be
11:38responsible is the CFO or your CFO
11:41equivalent within an organization
11:43especially around S2 and the
11:46requirements around that. So part of
11:48that misconception comes from because
11:51you know people previously and sometimes
11:53still do view sustainability as like
11:56sustainability as something on the side.
11:59So something you know about doing good
12:02um you know doing things sustainably
12:04being greener you know doing it um for
12:07for for good's sake. Now it has those
12:10benefits but it is not the purpose of
12:14the clear remmit around S2. So really
12:19you know the the misconception and
12:20ownership um at least from what we see
12:23stems from that. So the the ifus remitt
12:27and S2 is there because climate actually
12:29creates real risk you know financial
12:33risk and real opportunities for a
12:35business. So those risk and
12:37opportunities actually affect the
12:38business outlook, they affect cash flow,
12:40they affect affect cost of capital. So
12:43it's driven from an investor lens and
12:45obviously it's the same you know
12:47probably most people on the call are
12:49aware you know you have to um pull
12:52together a P&L and balance sheet. It is
12:54to give users of that financial report
12:57clear guidance so they can make
12:58decisions and that exact is exactly what
13:02is trying to do with S2. So it's a very
13:04financial lens. So absolutely makes
13:06sense to sit with the CFO who needs to
13:09understand the impacts of that and that
13:12can have flow through impacts on those
13:14things I mentioned in the P&L and
13:16balance sheet. So ownership sits there
13:18but obviously it's a joint effort. So
13:20obviously you've got the CFO and finance
13:22team looking at that from a numbers
13:23perspective and how that might flow
13:26through um to other decisions and then
13:29you know Jack started to touch on one of
13:31the you know key things around that is
13:33the identification of risk and
13:34opportunities. So you know bringing um
13:38risk in into the party is critical. So
13:41one of the requirements is of S2 is not
13:44that these risks and opportunities that
13:46are coming out are sitting on the side
13:48but they actually have to be brought
13:49into your risk register and part of that
13:51risk framework in terms of that control
13:53environment. So your you know chief risk
13:56officer or your head of risk needs to
13:59make sure that those climate risks and
14:01opportunities um and should be involved
14:04in that identification as well are then
14:06flowing through and being
14:08operationalized
14:09um across the business. I think you know
14:12thirdly um would be compliance and
14:15sustainability if those roles exist
14:17within your business. Um so you know I
14:20think people have made mistake a higher
14:23sustainability they can take care of
14:25everything. Um they're not the ultimate
14:27owner of responsibility as I've touched
14:29on but they can absolutely aid in
14:32helping translate sustainability risks
14:35and opportunities and specifically S2 as
14:37the webinar is on today and making sure
14:40that you're telling that story in those
14:42disclosures through market. So the more
14:45um qualitative disclosures and the feed
14:47into that and then obviously fourthly um
14:52but not not lastly is the board right so
14:55and the auditors will be looking for
14:56this as well the board have to be
14:58involved there's clear accountability
15:00for the board overseeing climate risks
15:02and opportunities and obviously
15:04transition plans and and and what
15:06they're doing around strategy um and
15:09ensuring that these risks and
15:11opportunities identified are now baked
15:13into strategy and risk of a business. Um
15:16so I think you know to the second part
15:17of your question like what gets broke
15:20you know what tends to get um gapped or
15:22or or or missed if you don't um head
15:27sustainability uh with responsibility as
15:29CFO and get people the right people
15:31involved is you end up with duplicated
15:33work inconsistent numbers you're going
15:35to end up with risk for climate sitting
15:39over here not brought in to your risk
15:41register and not being operationalized
15:43through the business and that's
15:45definitely going to get picked up by um
15:47the auditors and if not the regulator as
15:49well. So it's really important as a
15:51business that you set that
15:53responsibility and then go through um
15:55you know a structure like a racy where
15:57people know exactly what they're
15:59responsible for um and are brought in as
16:02you navigate um through the various
16:04requirements of S2.
16:06>> Excellent. And as you're going through
16:08and defining these roles, Rachel, um I
16:11think you know where Jack mentioned
16:13where there are substantial skill gaps
16:16or knowledge gaps in there. Um what what
16:19is your advice to people out there um is
16:21to looking at partners obviously, you
16:23know, like Cabani and Drover um to fill
16:26those gaps. Um
16:29>> yep. Yeah. So I think um I I'll touch on
16:32sort of um before the end of the webinar
16:34the outputs that we provide but I think
16:37you know Jack you know you touched on
16:39like okay I understand the numbers and
16:41we can quantify the the emissions and we
16:44know to bring those numbers in and how
16:46they may impact things but it's the
16:48other lens that needs to take place. So
16:51what um Drover does as an example is
16:54allow the business which is very
16:55engaging for the board um to go through
16:58a process and a platform that takes you
17:01through from a S2 perspective and
17:03actually looks at what are my material
17:06risks and opportunities. So you might
17:08have five five risks under climate. You
17:10know it's not all about quantification
17:12of scope one or scope two and you might
17:14have opportunities sitting there. So the
17:16drover platform allows you to step
17:18through a process to actually identify
17:21what those risks and opportunities are
17:22and that enables buying in especially
17:25from the board because these things are
17:26going to impact decisions and strategy.
17:29Um so so that helps one obviously meet
17:32the requirements of S2 but it also helps
17:35bring the business along from a cultural
17:37perspective and perhaps identify
17:38opportunities that are out there that
17:40you haven't thought of.
17:42>> Excellent. Thanks Rachel. So, we've
17:45ground ourselves in what S2 actually
17:47requires, who's responsible for what?
17:50Um, and now we need to address the
17:51biggest blocker um for most group two
17:54and group three um CFOs, the big word
17:58data. So, what data do we actually need?
18:00Where does it come from? And what counts
18:03as [clears throat] excuse me as
18:06assurance ready? [snorts] So, let's
18:08break this down. Misha um from your
18:11experience working with midsize
18:13organizations what do we actually need
18:16for S2 particularly around scope 1 2 and
18:18three and what does good enough for
18:20asurances look like
18:23thanks Chris uh so look I think where
18:27you really need to begin is obviously
18:30right at the standards what do they say
18:32and for metrics and targets it tells you
18:35you need to disclose summarily you need
18:38to disclose scope 1 to three emissions.
18:40Those emissions need to be disclosed in
18:42line with the greenhouse gas protocol
18:45standard and when you disclose them you
18:48have to document the measurement
18:50approach inputs and justifications. Now
18:53that third part is probably one of the
18:56biggest differences in the mandatory uh
18:59in this mandatory uh era versus
19:02previously involuntary when the reasons
19:04to do these kinds of disclosures was
19:06very different.
19:08uh but practically these are the most
19:11important things that you need to do at
19:12a high level and it's exactly what is in
19:14the standard.
19:15So some of these terms you might not
19:18obviously be familiar with at all. So
19:20let's dive into a little more detail and
19:22start with uh just overall what the
19:25process is that you need to do to
19:28properly set yourself up for this
19:30disclosure not just of the numbers but
19:33those justifications uh those
19:35limitations in that basis of
19:37preparation.
19:39So the square is where we're going to
19:42focus on in terms of the actual
19:44practical measurement and where you get
19:46the data from. But that doesn't mean
19:49that the other parts outside of the
19:51square aren't really important. It's
19:53essential to start with setting an
19:56organizational boundary which for most
19:58of you in group two and group three are
20:00just going to be is just going to be
20:02exactly the same as your financial
20:04reporting boundary.
20:06uh group ones have the problem where
20:08some of them are anger reporters and so
20:10they had to report emissions based on uh
20:14facilities which aren't actually within
20:15their financial boundary but are within
20:17their operational control. For most
20:19group two and three organizations that
20:21won't be the case and so the
20:23organizational boundary will usually be
20:25the same uh as the financial boundary
20:28reporting boundary. Operational is a lot
20:32more complex. That is actually mapping
20:35out all of the emission sources. So in
20:38our operations and what we have control
20:41over, who's where does the electricity
20:43get consumed or fuel get consumed? Who
20:46pays for it in the value chain when it
20:48comes to scope 3 emissions that are
20:50outside of your control? Uh how do we
20:53get that data? Where are we going to use
20:55estimates? Um, those are all questions
20:58that you need to ask yourself when
20:59you're setting the operational boundary.
21:01And that's an essential step to really
21:03map out all of the emission sources. And
21:06often there's emission sources in there
21:08which you will be surprised by um that
21:11you need to report. things that are
21:13completely out of your control, such as
21:16the transportation that your customers
21:18do of your product once you've sold it.
21:21Even though that's not something that
21:23you really have any control over, or
21:25your employees commuting to and from
21:27work, for example, it's still something
21:29that needs to be included. So,
21:30operational boundaries are really
21:31important exercise and it's also an
21:34opportunity to identify uh emission
21:37sources which aren't material so that
21:39you don't need to report them. And so
21:40that's this is a step where you can end
21:42up uh eliminating categories which will
21:46cause too much undue cost and burden uh
21:49when you begin collecting them. You just
21:51don't need to do it.
21:54Uh and then the next few steps is what
21:56we're going to obviously get into a
21:57little more detail uh with the thing
22:00that I want to really focus on. Uh
22:02before we get to that though is just
22:04going stepping back and going to some of
22:06those basics of you know what is scope 1
22:08to three? How does scope 3 work in
22:11particular and how do you begin to set
22:13the foundation for these calculations?
22:17So very simply, scope one is just the uh
22:22fuel combustion and the refrigerants
22:24leakage that happens within your
22:27operational boundaries and what you have
22:29control over. So fleet of vehicles that
22:31you own or perhaps you got diesel
22:34generators, all of that's going to be in
22:36scope one. Scope two is your purchased
22:39electricity. So, if you've got an energy
22:40provider that you pay for electricity,
22:43uh they're going to have emissions often
22:45generated uh based on that uh generation
22:49of electricity. And then scope three is
22:51everything that is outside of your
22:53direct control but is within your value
22:55chain and that you have some sort of
22:58influence over. And that's split between
23:00upstream and downstream, which is
23:02upstream, that's your supply chain, and
23:04downstream is what happens to your
23:07products and services after they get
23:08sold.
23:12Scope 3 is an interesting one in
23:14particular, and the thing that I want to
23:16highlight here is that people are
23:17usually surprised that in scope 3,
23:20you're actually double counting uh the
23:22emissions of other organizations too,
23:25which is very different to financial
23:26accounting, right? That's not something
23:28that you you would never include your
23:30supplers's financials in your own
23:32financial report. But with carbon
23:34accounting, it's different. And the
23:36justification behind scope 3 is that
23:39influence factor. The fact that you're
23:40able to actually work with your supply
23:43chain to help them uh implement better
23:46practices such as energy efficiency to
23:49reduce their emissions.
23:51But this diagram uh sorry this diagram
23:55is essentially just to illustrate how
23:57that scope 3 stacks up when you've got a
24:00multi-layered supply chain. So by the
24:02time it gets to you at the end you're
24:04actually counting not only uh the part
24:07of the scope one and two of your supply
24:10immediate supplier that was required to
24:13deliver the products but also the scope
24:15three of all of the suppliers before
24:16that. So there's a lot of double
24:18counting happening uh in this chain but
24:21that is what the standards require.
24:27Now, emission factor, that is one of the
24:30foundational uh things that you're going
24:32to have to use in order to uh calculate
24:35your emissions. And it's essentially a
24:37way to translate your business data
24:40you've already got such as your
24:41accounting data and fuel fuel energy
24:43consumption into emissions that you're
24:45going to report underbs2.
24:48And these emission factors are published
24:51by the Australian government. They're
24:53also published by other governments. and
24:56the standards do not require you to use
24:58a specific database. So, it's up to your
25:01discretion. That's where it helps to
25:04rely on a partner such as Avani to help
25:06you make the right choice of what to use
25:08there.
25:12Now, in terms of the principles, like
25:15what is an auditor actually going to be
25:16looking for? These are the uh principles
25:19of the GHG protocol and they're very
25:22closely aligned to the principles in the
25:26like in financial accounting in
25:28particular. Completeness is one of the
25:30top things that your uh that your
25:33auditors are going to be looking for.
25:35How do you know that you've reported all
25:37of your emissions? And that's what we'll
25:38go into a little more detail with. Um
25:41but there are also challenges with
25:43consistency, transparency, and accuracy.
25:46There's a lot of uh different emission
25:48factor databases as I said that can
25:50affect accuracy.
25:52Doing consistent calculations yearon
25:54year can be difficult when your data
25:56sources and uh vendors change over time.
26:00So all of those are challenges that you
26:01need to make sure you're tackling. Um
26:03but completeness is one of the most
26:06important ones by far and it's of course
26:08uh so core to financial accounting too.
26:10So we'll get into a little more detail
26:12with that one.
26:17uh to give you a bit of an idea of
26:20answering the question, how do you
26:22answer the question, where do I actually
26:23get the data from? Like if I don't even
26:26know where to begin with calculating
26:28these emissions, this gives you a little
26:30bit of a hierarchy to understand where
26:32you can look. So number one, direct data
26:35is the ideal. Most of you won't have it.
26:37This is only going to be the case if you
26:39actually measuring emissions at the
26:41source. So most of you are going to
26:43start with number three and four. Spend
26:46based is going to be your general ledger
26:48data and activity based is what I was
26:50referring to uh you know your fuel
26:53consumption, your energy consumption,
26:54the distances your freight travels.
26:56Supplier specific is what we we usually
27:00see people and organizations work up to
27:03in year two. And that's where you've
27:05done your initial baseline measurement
27:08of your of your emissions. And then in
27:11the second year, you can begin to engage
27:13with the most material suppliers in your
27:16supply chain based on that first
27:17analysis and collect data directly from
27:20them. So you can develop proper
27:22strategies for emissions reductions and
27:25climate uh climate risk mitigation. And
27:27on the right is just some uh sources uh
27:31that you can think about in terms of
27:32databases or where you would find this
27:34data. Uh the webinar will be sent uh
27:37after this conversation so you can of
27:40course take your time to go through and
27:42read this a little more.
27:46>> Excellent. Thanks Misha. U Jack a
27:49question for you. A hard um act to
27:51follow obviously. uh practically
27:54speaking um how do companies avoid
27:56turning this into a huge project? So I
27:59mean with CFOs they go oh my gosh more
28:01regulatory requirements huge projects
28:03are going to have to bring on additional
28:04people etc. Um how does you know in your
28:08experience how has Avani um um helped
28:11organizations verify um and structure
28:14this data in a way where it's made this
28:17you know the workload more manageable
28:19you know for constricted teams without
28:22bringing additional people on.
28:24>> Yeah. So um Misha slides were were
28:26really um uh a good summary I believe of
28:30hopefully what I'm about to to explain.
28:32Um really for us the starting point was
28:34trying to figure out well you know what
28:37do we what do we actually have to do
28:39like what you know what does the
28:40standard say like Misha said before what
28:43what are we what are we required to to
28:45to find out right what are our
28:47boundaries uh what are our emissions and
28:50so Avani really helped us work through
28:53those steps in a really practical manner
28:56um they were the experts on those areas
28:58and they helped us with all their tools
29:00that they have to work through that
29:02process really nicely. Um, and then of
29:04course the next step once you have that
29:06is determining what methodology you're
29:09going to use or what estimates you're
29:10going to use. You know, we don't we're
29:12not familiar with those things at all.
29:14Um, you know, what what do we have to
29:16report? What's material, what's not
29:17material. So, Avani really work with us
29:20to be able to determine those things.
29:21So, we have great confidence um that we
29:24actually are complying to the standard
29:27to an auditable level. Again, as as
29:29Misha said, you know, this has to pass
29:31pass pass an audit. And so the the tools
29:34that they have have really helped us
29:36sort of be able to use our current
29:38resources without adding any one
29:40additional um to to to work through that
29:42really systematically in a way that we
29:44can assign, you know, just a certain
29:46amount of time every week to be able to
29:48to work through this process. Um the
29:51other uh tool that I really like that um
29:54maybe Rachel mentioned before is is the
29:56racy chart. So really helps us map out
29:58within the organization who's
30:00responsible for what areas, who might
30:03have what data, who do we need to keep
30:05informed or consulted um um within, you
30:08know, the the research that we're doing
30:10as we start to to set this up. So lots
30:13of useful tools um that we've been able
30:15to implement that keep our workload
30:17down, but we're still getting the
30:18expertise that we need to be able to do
30:20this the right way, which has been
30:21really helpful.
30:23>> Great, Jack. Fantastic insights. you
30:25know it's always nice to hear the theory
30:27but you know to hear the practical
30:28insights you know from the so field um
30:32you know is amazing thanks for uh for
30:34sharing so that was a great leadin to
30:37our next section um because for us you
30:40know once the emission data and
30:41foundational metrics um are in place the
30:45next challenge is connecting everything
30:47together so S2 um which defines the
30:50climate related content within that
30:52report isn't just about producing a data
30:55set. It requires a complete board ready
30:58disclosure and it's going to bring
31:00together the governance, the risk, the
31:02controls, the scenarios, metrics,
31:04targets um and supporting evidence.
31:08So for group two and three, this is
31:10often where we see things break down if
31:12the process isn't structured and
31:14repeatable. Um so let's focus on what
31:17CFOs should prioritize right now.
31:20>> [snorts]
31:21>> So Misha, if you were advising a CFO
31:24starting now, what they should focus on
31:26in the next 90 days to be a repeatable
31:29board ready ASRS process, what would you
31:33say to them?
31:35So uh on the metrics and target side
31:39which is definitely one of the more
31:40complicated uh areas to focus on the one
31:45key thing that I would advise a CFO to
31:48focus on is really start uh with what
31:52the data you've already got of course so
31:54start with the data that finance already
31:57owns that will get you a lot of the way
31:59there and in particular the general
32:01ledger uh you know think about it the
32:03general ledger is going to have all of
32:05your spend on your supply chain which
32:07will help you identify at least an
32:10operational boundary of which categories
32:14are going to be relevant in scope 3
32:16upstream and scope one and two. Scope 3
32:19downstream is obviously a bit of a
32:21different beast because you have to
32:22understand uh you know do you sell any
32:25do you sell any products which generate
32:27their own emissions? What's the kind of
32:29waste uh the emissions associated with
32:31the waste after that? But starting off
32:34with just those upstream categories and
32:36in particular uh scope one and two is
32:38the thing that's required in the first
32:41year. So if you can just get a handle of
32:43that, that's a really great place to
32:45start. And from our experience, finance
32:48is the main data owner uh of all of
32:51that. You don't really have to work with
32:53anybody else across the organization.
32:56that data source is your GL and of
32:58course any invoices which will always
33:00get approved by finance through some
33:02sort of workflow.
33:05Uh so that would really be the first
33:07area that I would focus on. When you go
33:09to the board then you'll be able to give
33:11at least some sort of screening to help
33:13them understand what's the magnitude of
33:16those metrics and targets. You don't
33:18need to actually have a target in place
33:20in the first year as well. That can be
33:22developed later on. Um and then in terms
33:26of the other pillars and uh you know in
33:28terms of governance, risk management and
33:31strategy, I think it's really important
33:33to take a look uh take a look online in
33:37terms of uh there's resources out there
33:40uh free risk registers that can help you
33:43begin to understand what are potential
33:45climate risks that could be faced by my
33:47business. uh you know Avani's got some
33:50there's also some that are published by
33:51the uh Australian government the New
33:54South Wales government in particular has
33:55a great resource on that um and yeah
33:59just asking around uh with your peers
34:01and with organizations such as Drover
34:04and Avani is a great place to begin to
34:06understand how is your governance uh and
34:10risk management strategy going to have
34:12to evolve uh over time to fulfill these
34:16compliance requirements.
34:18Excellent. So, back to you again, Misha.
34:21Um, we talked about roles and
34:22responsibilities obviously with this
34:25being a finance le. Um, but how do the
34:27finance risk compliance and the board
34:29each plug into this process? Um, so it's
34:32not solely left on one person. Um, and
34:36so the basic so the final disclosure
34:38reflects a full um what we want a whole
34:41of business um ASRS response.
34:45>> Yeah. So finance uh ultimately is going
34:48to own the processes uh that actually
34:52you know it's going to end up becoming
34:54part of month end where when you close
34:56the books you're also going to uh
34:57ultimately close the emissions books
34:59that will that's what we're recommending
35:01and seeing um seeing evolve now in
35:04market. Uh the board really just needs
35:09to stay informed. Uh and what we've seen
35:12recently, especially this year, is that
35:15for group ones, auditors have flagged at
35:18the end of financial year, hey, ASRS and
35:21climate risk is something that you now
35:22have to consider as a board. That's
35:25ultimately where we see the board has
35:27actually taken action and be begin to
35:30begun to thought think about this
35:32problem. So uh the board doesn't really
35:36need to get operationally involved uh
35:38just like most other uh most other
35:41responsibilities across the organization
35:43but they do need to stay informed. Um
35:46risk and compliance don't really have an
35:50operational role that we've seen at the
35:52moment it really does sit uh very much
35:55on finance to implement the processes.
35:58But beyond those uh beyond those teams,
36:02there's also others in the organization
36:04that do get involved. So when you start
36:06measuring your scope 3, logistics might
36:09get involved. Uh you also might get PNC
36:12involved or health, safety and
36:14environment involved. Uh you know, we're
36:16working with the health, safety, and
36:17environment team uh with meto as well.
36:20And they act as good coordinators. They
36:23also might have relationships with parts
36:24of the business that are data owners
36:26that finance doesn't. Um, so ultimately
36:31finance is responsible for the output
36:33and the outcome, but there are other
36:35areas of the business that will be
36:37contributors and that's where that racy
36:39chart and making it very clear who's
36:41responsible and accountable for
36:43everything uh is really important. But
36:46the board just needs to get the highle
36:48summary of here are the metrics and
36:50targets. uh here's how we're managing
36:53these risks. And of course, if any
36:55climate risks actually end up uh turning
36:59into reality as they increasingly are
37:01for many organizations, then obviously
37:04the board needs to be informed about how
37:06we measuring these risks and rating them
37:09so that they're on our risk register and
37:11we can end up actually uh managing them
37:14properly and anticipating them going
37:16forward.
37:17>> Excellent. Thanks, Misha. And I think
37:19back to Jack's point um we obviously go
37:22into a lot a lot of companies and meet
37:24with teams um if you know Jack mentioned
37:27that it's important to have you know all
37:30the roles defined early in the piece um
37:32so people know their responsibilities
37:34they know what they're doing etc and
37:36they you know we have a nice um
37:38structured process to move through
37:41so dovetailing into that a little bit
37:43Jack um from a practical um perspective
37:47as head of
37:48of finance. Um you've been meeting with
37:50the boards uh your board a lot. Um how
37:53do you navigate the board communications
37:56and ensure the process is you know from
37:58capturing the data to the disclosure
38:00actually happens?
38:02>> Yeah. So so you're right. I'm lucky in
38:04in a way because I have constant access
38:06to to the directors um of the company.
38:08My advice would be um just to make it a
38:11standard conversation um among the board
38:13as much as say a conversation about like
38:15a financial forecast would be um as soon
38:17as sort of we've become aware of the
38:20reporting requirements which was you
38:21know well over 12 months ago or maybe 24
38:23months ago uh we've or I've been
38:26proactively I suppose bringing it up you
38:28know updating them on the timelines
38:30updating them on what our plan is and
38:32trying to just make it a really standard
38:34uh standard conversation so that it
38:35becomes sort of a dayto-day well not
38:37dayto-day cuz I'm not speaking with them
38:39every day but you know very much
38:40business as usual discussion amongst the
38:41the directors. I think that really helps
38:45set their expectations and and helps
38:48align the whole business because you
38:50know they're also able to help align
38:53other departments within me to to head
38:56in the same direction as us whether
38:57that's operations whether as M said
38:59that's health safety and environment
39:01who've been pivotal um in the process
39:03for us really helps just make sure the
39:06whole business is on on the same page
39:08and and working together um to to make
39:11sure we're going to
39:13compant when we need to be and that that
39:14certainly makes my life a lot easier
39:17having everyone on board and and moving
39:20moving in the same direction. So um my
39:22my approach has always just been make it
39:25as standard a conversation as you can um
39:27talk about it as much as you can um and
39:29then that sort of um ensures there's no
39:32surprises as well for everyone. So
39:34>> excellent. So, just following up on
39:36that, Jack, briefly um you know, as
39:39you're obviously keeping them up to
39:40date, what did you you know, we're
39:42getting obviously there's a big topic of
39:44diversified um boards today. Um we're
39:46bringing on sustainability um directors,
39:50etc. Um and and different, you know,
39:52skill sets. Um did you find that you
39:55know initially that there was a and were
39:57you responsible for an education an
40:00education piece to the board on what
40:02this is what we have to do is scope it
40:04out etc.
40:06>> It's a great it's a great question. Yes.
40:08And and the thing that I've always found
40:10very difficult about that is I'm not an
40:12expert at all. Right. So I'm I'm trying
40:14to become an educator um to the board on
40:17things that really I'm still very much
40:19learning about. So, of course, you know,
40:22once again, the process we're going
40:23through with Avani has really helped me
40:26um with that, being able to feel like
40:27I'm a few steps ahead then in in terms
40:31of uh the the education piece. But
40:33certainly, you know, we don't have
40:35directors who've gone through this
40:36process before. We don't have directors
40:38who are overly familiar with with um how
40:41to calculate emissions or what they even
40:42really mean to to some degree. So, it's
40:46uh it's they're sort of starting from
40:47scratch as well, right? So it's very
40:49much um we're all we're all learning
40:51together and there's a there's a lot of
40:53education required for ourselves first
40:55within finance and then of course with
40:57the directors but also with the rest of
40:59the business as well.
41:00>> Excellent. Thanks Jack. So let's
41:02continue. So we're starting to get the
41:04clarity um that CFOs need. Um so once
41:08the structure is in place the final step
41:10is collecting uh connecting everything
41:12together. So emissions risk governance
41:15scenarios uh your controls into the one
41:18coherent um disclosure. So let's now
41:22look at how the Avani and the Drover
41:25partnership enable that. So for most
41:27group two and three organizations the
41:30real challenge um that we're seeing
41:32today isn't about capability, it's
41:34fragmentation. So emission data sitting
41:37in one of the one part of the business,
41:39risk and governance in another. Um, and
41:42it's a year-end scramble to meet these
41:44obligations, board and audit
41:46expectations. So, Rachel, can you walk
41:49us through what the actual outputs of
41:51the combined Avani and Dro solution look
41:53like from a CFO perspective? So,
41:56specifically what I want to look at is
41:57what does the full end solution deliver
41:59that goes directly into the annual
42:01report? Um, and how will it ensure the
42:04organizations meet these requirements?
42:08>> Thanks, Chris. Um yeah, I'll I'll talk
42:11about obviously the output. I think just
42:13listening to the webinar and the um and
42:17we've had some questions coming in. I
42:19think you know obviously there's a you
42:22know different um clauses and aspects
42:25and requirements of S2 and also
42:27sustainability. I just want to make it
42:30um I I'll dumb it down to two main
42:33things um and make it very clear. one
42:36which Mish has touched on um very very
42:39well is obviously the emissions in terms
42:42of your scope one and scope two and what
42:44you need to do around that. So that is
42:47one part of S2 but it is only one part
42:50of S2. So a mistake that we've seen
42:53people make is we go out and we just
42:56think it's all about capturing emissions
42:58um and getting scope one and scope two.
43:01That is a big part and you absolutely
43:03need to do that as part of the
43:04requirements. But it is very dangerous
43:07to start there and it is also not not
43:09the end of it. And then some of the
43:12things that Jack touched on in terms of
43:14you know getting the um people
43:16understanding what it is, how it
43:17actually impacts the business um in
43:19terms of just an emissions number um
43:23that those things can impact how it's
43:25baked in and how the board look at it.
43:27So the other side is actually what is
43:30like looking at it from a business
43:33perspective right because this is why as
43:35I said at the start of this webinar
43:37investors have driven this obligation
43:39and that's how it's coming through in
43:41IFRS for a reason right because it
43:43impacts the overall outputs of a
43:46business and the board need to
43:47understand that so with that in mind the
43:50very first place to start is really
43:52about you know what is material
43:55financially um for the business around
43:58sustainability and obviously
44:00specifically we'll focus on S2. So the
44:03starting place is what is material right
44:05and there's a process that you need to
44:07go through and going through that
44:09process actually helps to fulfill some
44:11of the requirements of S2. So Drover
44:14provides a um materiality
44:18um platform that allows you to step
44:21through financial materiality which is
44:23obviously the focus of um S2. So I'll
44:26stay there. But we also offer double
44:28materiality. So the impact side of that
44:30as well. So what that enables you to do
44:33is involve not just finance um you know
44:36but but risk sustainability and other
44:39parts of the business collectively in
44:41actually going through and identifying
44:43how could we be impacted by this and you
44:46might come up with you know five
44:48different risks and six six different
44:50opportunities. It's not just the
44:52emission calculation. So if you're a
44:54bank for example, that might mean you
44:56have credit risk in carbon you know
44:59intensive sectors. Um you you could be
45:01impacted um you know by branches or
45:04disruption through flood, fire, weather
45:07related events. But you also might have
45:09you know opportunities through green
45:11lending, transitioning finance into more
45:14sustainable products which obviously has
45:16an impact on consumers. If you're a
45:18manufacturer, you could be impacted by
45:20carbon pricing, but also have
45:22opportunities in carbon productled
45:24initiatives. Same with like tech.
45:26There's a fair few on here today from
45:28tech and SAS related firms. So, your
45:31direct emissions might be relatively
45:33small um in terms of what you do. You're
45:36online using, you know, obviously um
45:39data centers, etc. But there is
45:41significant upside in and big
45:44opportunities in helping some of these
45:46companies decarbonize. For example,
45:48software that optimizes energy use um
45:51you know enables remote work, reduces
45:54travel etc. So there's huge re risk but
45:57there's also huge opportunities and
45:59understanding that can actually point to
46:01further avenues and also impact how the
46:04board look at these things um and
46:07actually start getting you beyond just
46:09S2 but starting to touch on S1 as well
46:12um and getting you a head start on some
46:14of the other um reporting obligations
46:16that will come in. So you start with
46:18that materiality that's going to give
46:20you what is material and it's also going
46:22to give you some of those disclosures
46:24and evidence that you're going to have
46:26to have as you as you move through that.
46:28Um then you've got the compliance side.
46:31So so Drover offer a full um compliance
46:34side around the clauses specific clauses
46:37for S2 and the disclosures that are
46:38required. Um and of course then Nani and
46:42Mish covered that off really well in
46:44terms of actually helping you navigate
46:46and calculate um those emissions and
46:49your scope one to three you know
46:51requirements those baselines and the
46:54evidence around that. So all all of
46:56these help guide you through um an
47:00approach that has an impact across the
47:02whole business and then together give
47:04you two I guess ultimate outcomes for
47:07the business. a S2 aligned disclosure
47:10report um that you can drop into your
47:12annual report and a financial
47:14materiality
47:16um lens across those climate risks and
47:18opportunities. So you're not just
47:20reporting emissions but you're actually
47:22actually surfacing what's financially
47:25material for the business and meeting
47:27those other disclosure requirements um
47:30that are sitting there. And then ju
47:32importantly is obviously you're going to
47:35identify out of here um admissions
47:38you're probably going to start tracking
47:39on um targets um you're going to start
47:43looking at well what are my risks and
47:44opportunities what do I want to do about
47:46them and so you're going to bring them
47:48into your risk register and you need to
47:50start operationalizing them so drover
47:53offer a platform that actually brings
47:55together a risk register controls and
47:58allows you to start tracking this and
48:00actually putting controls goals and
48:01doing something about it, which is
48:03something that the auditors are going to
48:05start looking for as we move forward.
48:08>> Excellent. Thanks, Rachel. Um, you did
48:11mention we've got lots of questions
48:13coming through. Um, as they come through
48:15um um what we'll do is we'll make sure
48:18that we get back to everyone um if we
48:21don't have time at the end. Um I'll I'll
48:24pause for one question because I think
48:26it was an interesting one to Jack. Um it
48:29was from Warren. says, "Hi, Jack. Um,
48:31what would be your key advice in working
48:34uh in you working with a sustainability
48:36manager if you had one in your
48:37organization? Um, and what insights
48:41could they assist uh what what what how
48:44could they provide insights to you to uh
48:47to help um you finance team?"
48:51>> Yeah, it's a good question. So, we don't
48:52we don't have a sustainability manager
48:54or anyone um that that provides that
48:56that role. Um, but I can certainly see
49:00um the value in having someone like
49:02that. I mean, I can even just touch on
49:04what our health, safety, and environment
49:05team has has done for us. They're not um
49:08sustainability people necessarily, but
49:10just just for them to have different
49:14different like we're we're finance
49:15people, right? So, we we're very much
49:18deskbound and we're we're working
49:20through on a on a computer screen all
49:22day and and we're not out in the
49:23business as much. Um, I'm not not sure
49:26if a sustainability manager would be out
49:27in the business a whole bunch as well.
49:28I'm not too sure, but I'm sure they
49:30would be more familiar with the
49:32operations of the business like
49:34practically having gone out there and
49:35seen it, more familiar with the the the
49:37yards for example, like we have yards or
49:40regional operations. And so when we're
49:42getting questions about uh from Avani
49:44for example about how things practically
49:46work, those insights have been really
49:49useful for us um to be able to provide
49:52good answers as opposed to being like
49:54well actually we we've never been to
49:57that yard before. So uh we only know
49:58what comes through on the invoice,
50:00right? It's very very difficult for us
50:02to have that that sort of uh different
50:04lens on the business. So um from a if
50:07you had a sustainability manager of
50:09course they would my understanding would
50:10be they would have much more expertise
50:12in terms of understanding what what your
50:15boundaries are what your emissions are
50:17maybe what methodologies you're going to
50:18use what estimates you're going to use
50:20and of course that's all going to be
50:21super valuable um as as part of the
50:24process working closely with the finance
50:25team but we we don't have that and we we
50:27treat Avani as our uh chief
50:30sustainability officer uh for sure.
50:34>> Excellent. Thanks, Jack. And and that
50:36backdrop that you have is one of your
50:38yards up at Dolby. So, a great picture
50:40there. Um you mentioned earlier that
50:42you've visited that and been on site.
50:45>> Yes. Yes. Many times to Dolby. Many
50:47times to Doby. I'm almost a local.
50:49>> Excellent. Okay. Well, let's push on.
50:52So, um we've got 10 minutes remaining.
50:54We're getting on the homewood stretch
50:56here. Um so for our panel which you have
51:00been focused and providing brilliant
51:02insights today I'd just like to get some
51:04final brief thoughts from each of you.
51:06Um so to Jack um for CFOs who have
51:11limited internal resources what's your
51:13advice on right sizing the work um how
51:16do they meet the standard without
51:18without overbuilding and in turn over
51:21complicating this process?
51:23>> Yeah. So this is a great question. And
51:25it sort of ties into the to the question
51:26I think I just answered in some way. So,
51:29so for for a company like mine to it's
51:33always a challenge in terms of
51:35resources, right? How how how what's the
51:37headcount going to be? How much are we
51:38going to spend? And so our approach has
51:39been to use a company in this case Avani
51:43to really be our our guiding light
51:46through through this process. Right? So
51:49um when when we considered you know do
51:51we need to hire someone for
51:52sustainability for example I think that
51:54would have been really valuable for us
51:55but can we can we afford that and then
51:57what if they leave and then what's the
51:59competition for those resources going to
52:01be like in the future. Uh in my mind I
52:04think that for for a company like me is
52:06going to be very challenging. So, so the
52:09the benefit for us of using a company
52:10like Avani is basically that they can
52:13provide the expertise that we need. If
52:15someone in in our company leaves, we
52:17have their expertise still there. They
52:19can train our new staff. They can they
52:21can train anyone in our organization to
52:23to be up to speed, not just in terms of
52:26what we need to do for the standard, but
52:27using their system. And so I feel like
52:29we have a really solid platform there to
52:32always be in a good position um to be
52:34able to meet whatever whatever
52:36requirements um we need. The other
52:38benefit I think that we've found um of
52:40using sort of like well a company like
52:43Avani of course is you know they're
52:45working with many many different
52:46businesses. So they're able to bring
52:48insights from such a wide range of
52:50businesses as opposed to someone who's
52:53just worked for meto for the last 10
52:54years doesn't doesn't have right and
52:57that would be the same same even if you
52:59if even if you had someone like in our
53:01environment team um who's only been at
53:03meto for a long time so they bring that
53:05that much more broad um experience you
53:09know across many industries across many
53:11companies of many different sizes I
53:12think gives us great comfort that you
53:14know we're getting the best information
53:15and we're acting in the best way which
53:17is which is really positive for us at at
53:20um a cost that is acceptable to the
53:24board to the business to the parent
53:25company as well which has been which has
53:27been really good for us.
53:29>> Excellent. Thanks Jack. So Misha um
53:33organizations early in their journey um
53:36where do you see auditors applying the
53:38most scrutiny um when it comes to
53:40emissions data? Um and you mentioned
53:42around metrics and targets early in the
53:46piece. You know that may not be the
53:47first piece that you want to do. Um so
53:50where where do you see the auditors
53:51applying this pressure? Um and what
53:53should people focus on?
53:55>> Yeah, look I think uh auditors are going
53:58to be auditors are also figuring out
54:01this standard themselves at the moment,
54:03right? It only uh came into law late
54:07last year. And so often when we speak to
54:09auditors, they're they're actually still
54:12in the process of understanding how
54:14they're going to audit the results that
54:16companies report. And I think everybody
54:18is uh waiting a little bit for the first
54:20group one reports to come out to see and
54:23compare what good looks like.
54:25>> Yeah. Uh so why that's important is to
54:28really just understand that auditors
54:30don't have this figured out 100%
54:32themselves yet and they're not going to
54:35hold you to every single letter uh of
54:38the standard right at the beginning. So
54:41it's okay if you know that there's some
54:44as long as you you clearly disclose in
54:46your first reports where the limitations
54:48are. For example, if you don't have the
54:51best quality data that is required by
54:54the standard, just saying, "Hey, we've
54:56used this estimate. This is why we think
54:58this estimate is conservative. Uh we
55:00understand that it's inaccurate. It's
55:03just a, you know, it's just an
55:04estimation, but uh we're going this is
55:08the plan that we have in place to
55:10improve that disclosure and that's going
55:12to be the same for the climate risks and
55:14opportunities as well." So I think it's
55:17important to understand that auditors
55:18aren't going to be really hard on you in
55:20the first year as long as you are
55:22transparent about the limitations in
55:24your report. Now that being said, there
55:27are some basics which are going to be
55:30which honestly we've seen a lot of
55:32people get caught out by the most
55:33important one for metrics and targets is
55:36that completeness principle. When you go
55:38to an auditor and you tell them here's
55:41our scope one and two and you don't have
55:43that tied back to the actual audited
55:45financials, they're going to ask how do
55:48you have any idea that this is your full
55:49scope one and two.
55:50>> Yeah.
55:51>> So the completeness principle, they're
55:53absolutely going to be looking for that.
55:54And of course those five principles that
55:57I mentioned are going to be the guiding
55:59force and of course they'll be looking
56:01for things such as the accuracy of the
56:04data have have the factors been properly
56:06applied have you used the reputable
56:09databases etc but completeness is by far
56:12going to be one of the most important
56:13things on that front. Great and thanks
56:16Misha you know and obviously you
56:17mentioned before you know the assurance
56:19of what processes have you gone through
56:21and being able to prove you know how you
56:23did it I think is crucial on that
56:25perspective so Rachel following on from
56:27Misha so from a governance and assurance
56:29perspective what will the orders that
56:31expect to see in year one um where do
56:33you think the most common gaps are going
56:35to be for CFOs
56:37>> yeah thanks Chris um as an ex KPMG
56:41auditor it's evidence evidence evidence
56:44right so Mitch started to touch on that.
56:46I think it's very um critical to say
56:49like you have to have this stuff in
56:51order, right? Because the assurance
56:53standards on sustainability for auditing
56:56have have been finalized, right? So,
56:59they're not going through as Misha
57:00touched on the full S2, but there's key
57:03areas that they need to focus on.
57:05Misha's touched on um the emissions
57:07data, scope one and scope two. That is
57:09one. So, they're going to want to see
57:10that evidence trail back to the numbers.
57:13Um and the other side is around the
57:15disclosures and the governance right so
57:18it it it's not a practice run they
57:20actually your financial auditor has to
57:22give limited assurance across this in in
57:25the next financial report right so
57:27you're going to have to have your stuff
57:28in order so in practical terms from a
57:30governance perspective um they're going
57:33to focus on that there's a clear chain
57:35of governance so you know is the board
57:39who on the board and is actually seeing
57:42this and is it being raised up, right?
57:44It's part of the risk of a business now
57:47and so the board need to be involved.
57:49So, you know, from an auditor
57:51perspective, they're going to um
57:52probably look at minutes. They're going
57:54to look for evidence from this that it's
57:56being raised up and getting looked at.
57:58Um a documented process about risks and
58:01opportunities. So, you've got scope one
58:03and two, but in the disclosures, you're
58:05also disclosing this is what we see as
58:08our climate risk and opportunity. So the
58:11auditor is going to want to know how you
58:14went through that process um of
58:17identifying what is um material and how
58:19you actually came up with that. So
58:21that's where tools like um the drove
58:24materiality software can can really
58:26help. Um and then I think it's going to
58:28show up um start showing up with a link
58:30to financials, right? So, they're going
58:32to be focused on that scope one and
58:34scope two um and risk and opportunities,
58:37but they're going to want to know that
58:39the CFO and the finance teams are
58:41actually starting to consider how this
58:44could impact things in the business.
58:45Now, that's going to vary um based on
58:48what business you're operating. And
58:49obviously, it's going to be um more of a
58:52focus for businesses who are directly
58:54impacted
58:56um by these things and and and you know,
58:58are sort of trading and dealing with
59:00these things. Um, and so the auditor is
59:03going to start to look at that, but I
59:04think essentially they're going to be
59:06focused on how is your process solid.
59:09Um, is there a governance practice, the
59:12risk factor, um, in terms of bringing it
59:16in to your risk framework? Making sure
59:18it's not a side, you know, it's not on
59:20the side and it's actually forming part
59:23of your overall risk register. Um, and
59:26and you're going to be looking at taking
59:27that forward through controls and
59:29management.
59:30Excellent. Look, thanks Rachel. Thank
59:32you everyone. Uh that's a wrap for us
59:34today. Um a big thank you to our panel
59:37for giving such practical insights into
59:40um um our our compliance to um uh ASB.
59:45Um so I suppose you know the big thing
59:48today if we showed anything it's it's
59:49absolutely ASB is absolutely achievable
59:53um with the right foundations. Um some
59:56of the message was start now, align the
59:58responsibilities, get your data right,
1:00:00build a process you can repeat. Um I
1:00:02think with confidence year in year out
1:00:05um it's all going to be essential in
1:00:06meeting your obligations. So we'll be
1:00:08sending out the full webinar recording.
1:00:10Um it's been a outstanding response to
1:00:14this. I think we had over 200 CFOs on
1:00:16the uh on the webinar today. We'll send
1:00:18a link how to get in touch um with the
1:00:20parties. There's a QR code um if you're
1:00:23ultra keen and you want to get the ball
1:00:25uh rolling. But thanks again. Um it's
1:00:29looking like a really big year ahead for
1:00:31um for financial reporting next year.
1:00:33The message is we're here to help.
1:00:36That's all for today. Have a safe and
1:00:38happy break everyone.
1:00:41>> Thanks Chris. Thanks everyone.
1:00:43>> Thanks everyone for joining. Have a
1:00:46great day.
1:00:46>> Thank you. Thank you.

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