At the turn of the century, Australian reporting seasons and annual general meetings (AGMs) focused primarily on financial statements for investors. However, this focus has expanded significantly.

According to Martin Currie portfolio managers Will Bayliss and Naomi Bant, sustainability discussions are now an integral part of corporate reporting.

Moreover, this dialogue extends beyond investors to include unions, activists, regulators, employees and consumers.

As such, Bayliss and Bant have identified key environmental, social and governance (ESG) themes that ASX-listed companies need to work harder to address in the 2024-25 financial year.

Leading the charge will be climate transition, according to the duo, with decarbonisation a prominent theme at the AGM in recent years.

“From 1 July 2024, the government requires mandatory disclosure of climate information for scope 1 and 2 emissions from large emitters and large organisations. Next year's reporting will be even more decisive," Bayliss and Bant said.

Namely, companies will also need to provide scope 3 material emissions, scenario analysis and transition plans.

"Few companies currently share their scenario analyses, so this will mark a significant informational shift," they said.

“We expect to see increased revenues and profits, growth in capital spending and R&D from solution-oriented companies, and significant investment in heavy industry transitions. We also expect to see higher costs and depreciation due to climate change, as well as reduced asset life and value due to stranded asset risks.”

Another critical focus, Bayliss and Bant said, is natural capital and biodiversity.

However, with the short deadline for implementing mandatory climate reporting, portfolio managers believe companies may focus less on nature this reporting season.

"We are already hearing that many companies are de-prioritizing biodiversity policy development and only five listed Australian companies have committed to early adoption of the Task Force on Nature Financial Disclosures (TFND)."

Turning to workplace safety, the duo noted that such concerns have expanded beyond labor-intensive sectors such as resources to include the industrial and consumer sectors, with significant increases in injuries and fatalities.

“This surge is linked to increased mechanization and automation, a growing migrant workforce and reliance on imported goods and online retailing, which increases warehousing and manual handling. High quality training and education is critical in all cases,” said Bayliss and Bant.

"Mining companies have traditionally been very transparent, but now all companies need to recognize and mitigate risks."

In addition, Australian companies are increasingly focusing on improving outcomes for First Nations people.

Noting that resource companies have traditionally been leaders in this area, Bayliss and Bant said more companies are expected to report their efforts this year, which are likely to include diversity initiatives aimed at local employment, training programs and public orders.

Gender diversity will also guide engagement with boards and management, the duo added, stressing that "diverse teams lead to better decision-making and business results."

While progress has been made on gender, much work remains, according to portfolio managers. Namely, figures from the Workplace Gender Equality Agency (WGEA) show that roughly half of the Australian workforce is female, while only 34 per cent of board members and 22 per cent of chief executives are female.

“We are focused on seeing better gender balance across the workforce. While improvements are being made at the senior management and board level, we want to better understand the talent pool that companies have to inherit from the next generation,” Bayliss and Bant said.

They also flagged ethical sourcing as a key topic to monitor, particularly as reporting requirements under the Australian Modern Slavery Act have been around for several years.

“However, Australian supply chains run through the riskiest region in the world. Companies must remain vigilant as much work is still needed to eliminate the risk of modern slavery from their supply chains,” the two said.

"We found that companies that are more transparent about modern slavery cases, rather than trying to hide or downplay them, invest the most in mitigation and have the most positive impact."

Rounding out the themes to watch this year was greenwashing, as regulators and investors are expected to redouble their scrutiny of companies' annual reports.

Bayliss and Bant said they would look for concrete evidence that a company has implemented strong policies and processes to ensure it does what it says it does, along with full transparency about the risks and opportunities involved.

“Sustainability is not just a marketing tool; it requires real commitment and action,” they said.