Sustainability Reporting by Water Corporations

Reporting requirements

Water corporations must report against 306 mandatory indicators, including:

• 29 indicators from FRD 24
• 277 indicators in the letter of expectations. 

Eighteen of the FRD 24 indicators overlap with the letter of expectations indicators.

2024–25 reporting

None of the 4 water corporations reported against all 306 indicators in their 2024–25 annual reports.

While their reporting was incomplete, the indicators they missed would likely not affect how users understand their sustainability performance.

For example, one indicator in the letter of expectations requires water corporations to provide written commentary to explain their reported renewable and non-renewable energy use from fuels. However, none of them explained all the figures they reported.

Another example is FRD 24 requires entities to include information on their organisational boundary. But Greater Western Water, South East Water and Yarra Valley Water did not do this. 

Climate adaptation reporting

The letter of expectations requires water corporations to demonstrate how they are reasonably progressing to integrate climate change adaptation and risk into planning and decisions across all aspects of their business. 

According to DEECA’s guidance, water corporations must explain:

• the governance and decision-making processes they use to manage climate risks
• the key climate risks they have identified 
• how they identified key risks
• actions they have taken to manage risks, including any case studies 
• metrics they use to measure success, for example, adaptation outcomes, progress against adaptation plans, strategies or frameworks. 

Water corporations must provide a written summary to address each of these points.

Completeness of climate adaptation reporting

As Figure 2 shows, in 2024–25 water corporations did not meet all their climate adaptation reporting requirements.

Figure 2: Completeness of water corporations’ 2024–25 climate adaptation reporting

Responsibility for complete reporting

Water corporations are responsible for making sure their reporting is complete and meets user needs. 

Water corporations use checklists, internal reviews and DEECA’s proformas to meet their reporting requirements. 

We saw evidence that senior management and the board at Melbourne Water, South East Water and Yarra Valley Water reviewed and signed off on their 2024–25 annual reports, including their sustainability reporting. 

Melbourne Water also used a compliance checklist to map where it addressed each reporting requirement in its report.

Greater Western Water provided evidence that its board approved its annual report. But it could not show that it internally reviewed its sustainability reporting before the board approved it. 

While water corporations have some documented review processes and other controls, they did not pick up all of the gaps in their 2024–25 reporting.

DEECA'S guidance and tools

DEECA provides guidance and tools to help water corporations report against FRD 24 and the letter of expectations, including:

• the Annual Reporting Indicator Handbook, which provides guidance about letter of expectations indicators
• annual report proformas
• the Environmental Data Reporting Tool, which is a workbook for collecting data and reporting on FRD 24 indicators
• guidance about FRD 24 reporting
• a model report for FRD 24, which includes guidance and examples.

Inconsistent guidance

DEECA’s Annual Reporting Indicator Handbook does not align with one of its proformas. 

The handbook says entities must report their projected total emissions for each year leading up to their net zero target in 2030. However, the example in the proforma shows a graph ending in 2024–25.

In their annual reports, Greater Western Water, South East Water and Yarra Valley Water only showed their emissions until 2024–25 instead of 2030.

Guidance for climate adaptation reporting

DEECA has not specified how much detail water corporations need to include about their climate adaptation performance and how to report it. 

As a result, they often provide different levels of detail and disperse information across multiple sections of their annual reports. 

For example, demonstrating better practice, Yarra Valley Water reported the key actions it took in 2024–25 to manage its climate-related risks. However, South East Water only noted it is continuing to deliver the goals and actions in its 2022–27 Climate Adaptation Action Plan without saying what these goals and actions are.

DEECA told us it does not require a water corporation to include information about climate adaptation in its annual report if it has reported it in a previous year or in another public document.

However, this conflicts with the minister’s expectation that they annually report against this indicator. It also makes it difficult for annual report users to get a full picture of water corporations’ performance and compare their progress over time.

DEECA told us that from 2025–26 this indicator will change to seek information on key climate risks and metrics. 

Overlapping and onerous requirements

Many requirements in FRD 24 and the letter of expectations overlap. According to DEECA’s handbook, when indicators overlap, a water corporation does not need to report against both in its annual report.

However, there are instances where overlapping indicators have different reporting requirements. 

For example, both the letter of expectations and FRD 24 require water corporations to report how much electricity they use each year.

FRD 24 requires entities to report their energy use in megawatt hours and segment their use by source.

In addition to FRD 24’s requirements, the letter of expectations requires water corporations to report: 

• how much electricity they used in the previous reporting year for all sources
• written commentary on their total electricity use and use by source.

In this example, if a water corporation chose to only report against the FRD 24 indicator it would not meet the letter of expectations’ additional requirements.

Of the 306 mandatory indicators, water corporations must provide written commentary to explain each result for 59.

In addition to their National Scheme reporting, this level of commentary makes it repetitive and at times onerous for water corporations to meet their obligations. It also reduces accessibility for readers, who may have to read through repetitive or overlapping information.

Balancing reporting effort with its value

DEECA told us it uses water corporations’ reporting to inform its sustainability policies and prioritise its work program. 

The government used some collated sustainability data from across the public sector to inform its Whole of Victorian Government emissions reduction pledge 2026–30. 

Beyond this and other ad hoc use cases, it is unclear if the government uses public sector entities’ sustainability reporting to systematically monitor and report against its climate change commitments or for other purposes.

FRD 24 states its purpose is to provide transparency on sustainability performance and promote continuous improvement in the public sector’s sustainability reporting. 

The Commissioner for Environmental Sustainability Victoria uses FRD 24 data reported by departments to audit their environmental management systems. 

In its 2022–23 report, the commissioner noted there is no single database for analysing FRD 24 data across the broader public sector. This means it may not be feasible to assess and compare data for the more than 300 entities required to report under FRD 24.

Collecting and reporting sustainability information can be a significant administrative burden for some entities. And the government’s current approach for collecting, storing and using this information limits its practical value. This suggests the effort required is not proportionate to its overall impact on the government’s decisions and accountability for climate change.

Materiality threshold for FRD 24

Under FRD 24, if an activity makes up more than 1 per cent of an entity’s total scope 1 and 2 emissions it is considered material and the entity must separately report it. 

Compared with the industry threshold of 5 per cent used in the National Scheme, the FRD 24 threshold is low. 

As many Victorian public sector entities only contribute a small share of the state’s total emissions, the 1 per cent threshold requires them to measure, monitor and report many minor emission sources. 

The administrative effort required for this level of reporting is disproportionate to its overall impact. 

In addition, using a 1 per cent materiality threshold may set a low tolerance for error and elevate immaterial issues. 

Revising FRD 24’s materiality threshold would:

• focus reporting on activities that are meaningful to understanding an entity’s total emissions and broader sustainability impact 
• align FRD 24 with contemporary sustainability reporting
• balance the administrative effort for public sector entities with the value and usefulness of the data. 

Material misstatements

We recalculated the sustainability metrics water corporations reported in 2024–25 to check if they are accurate and reliable.

We found material misstatements in 3 water corporations’ reporting. 

Both Greater Western Water and South East Water excluded some facilities we assessed as under their operational control from their National Scheme reporting. This led to material understatements in their emissions and electricity use metrics.

We also found one material overstatement in Melbourne Water’s reporting due to a calculation error.

We consider an error or omission to be material if the variance is equal to or greater than 5 per cent of the entity’s total emissions or energy. We determined this threshold based on industry thresholds, including the threshold National Scheme auditors use.

See Appendix C for more information about our method. 

Operational control

Under the National Greenhouse and Energy Reporting Act 2007 an entity is required to report emissions and energy use for all the sites and facilities it operationally controls.

The Act considers a facility under an entity’s operational control when it has the authority to set its health and safety, operating and sustainability policies. 

If more than one entity has this authority (and one has not been formally nominated as the operational controller) then the entity with the greatest authority has operational control. Entities must document their operational control assessments.

We found material misstatements in both Greater Western Water’s and South East Water’s 2024–25 National Scheme reporting due to missing documentation about facilities under their operational control. 

Greater Western Water's material misstatements

Greater Western Water excluded the Sunbury Recycled Water Plant from its 2024–25 National Scheme reporting. 

The water corporation told us Downer Group has operational control of the site. But it could not provide a documented operational control assessment to support this. 

In the absence of this documentation, we assessed the site as under Greater Western Water’s operational control because it:

• holds the Environmental Protection Authority licence for the site
• has a project deed with Downer Group that says it must review all policies it prepares for the facility.

Greater Western Water should have included the Sunbury site in its 2024–25 National Scheme reporting. As Figure 3 shows, this led to 2 material misstatements.

South Eastern Water's material misstatements

South East Water excluded the Boneo Water Recycling Plant from its 2024–25 National Scheme reporting. A John Holland–SUEZ–Beca joint venture manages the site. 

South East Water told its managing director it did not include emissions from the site in its reporting because it believes it does not have operational control. However, it could not provide a documented operational control assessment to support this.

In the absence of this documentation, we assessed the site as under South East Water’s operational control because the joint venture agreement refers to South East Water’s authority in several areas, including processes for approving policies and site access. 

We saw evidence that SUEZ (on behalf of the joint venture) reported 2024–25 emissions from the site in its National Scheme reporting. 

South East Water should have included the recycling plant in its 2024–25 National Scheme reporting. As Figure 4 shows, this led to 3 material misstatements. 

Melbourne Water's material misstatement

We found one material misstatement in Melbourne Water’s 2024–25 annual report.

Melbourne Water published figures for an FRD 24 metric that did not match its source calculations. As Figure 5 shows, this led to a material misstatement. 

The figures reported for landfill and recycling should add up to the total units of waste disposed, but there is a 1,286.3 kg variance. This means that Melbourne Water overstated the total kilograms of waste it disposed. 

The individual recycling waste streams (FOGO, paper and cardboard and mixed recyclables) should also add up to the total recycling figure, but there is a 329.7 kg variance. This is an immaterial misstatement. 

Audit opinions for future reporting

The Victorian Government has signalled it is reviewing the state’s sustainability reporting framework in response to AASB S2. 

Entities that must report under AASB S2 are subject to audits and/or reviews. Their reporting is independently checked to make sure it is accurate, complete and prepared properly. 

We prepared an illustrative ‘short-form’ audit opinion for each water corporation based on: 

• their FRD 24, letter of expectations and National Scheme reporting 
• the material misstatements we identified. 

See Appendix E for these audit opinions.

Manual processes

Water corporations need to collect a large volume of data from multiple sources to meet their reporting requirements. 

However, their processes for collecting and storing data are relatively immature. 

At all 4 water corporations, data is collected by different business areas and compiled in Excel workbooks that staff check and maintain. 

We saw many instances of hard-coded values, which makes it difficult to trace and replicate calculations.

This manual approach: 

• increases the risk of human error 
• may lead to incomplete, inconsistent or unreliable data
• makes it difficult to access, validate and audit source data. 

It also does not align with the more structured systems and controls entities typically use for corporate reporting, such as financial reporting.

We experienced this firsthand when water corporations could not always readily provide us with data. 

Our data analysis

As part of this audit we planned to assess if water corporations’ reported information was complete and reliable.

However, in some cases they could not provide all the data we requested. 

For example, we obtained reasonable assurance over all 4 water corporations’ electricity consumption data. They gave us all the information we needed to assess the data’s completeness and reliability. 

However, we could only obtain limited assurance over Greater Western Water, Melbourne Water and Yarra Valley Water’s water consumption data. These water corporations could not give us information about their original data sources or how they collected the data.

Due to these gaps, we could only obtain limited assurance over their reporting and had to rely on the information they provided. 

Record keeping requirements

FRD 24 and the minister’s letter of expectations do not set explicit record keeping requirements. 

However, under the National Greenhouse and Energy Reporting Act 2007 an entity must keep records that support accurate reporting and allow the Clean Energy Regulator to assess if it meets its obligations. 

The National Greenhouse and Energy Reporting Regulations 2008 also requires entities to keep records in a format that is easy to access for audits and inspections. 

The Clean Energy Regulator recommends that entities use a basis of preparation document to:

• help meet these record-keeping requirements
• document their processes to ensure calculations are repeatable.

A basis of preparation document records the methodology an entity used to prepare its National Scheme reporting. It typically explains: 

• how the entity assessed operational control and its facilities’ boundaries
• an entity’s reportable activities, associated emissions and energy sources
• its calculation methods, including any sampling strategies
• quality assurance and review processes.

Beyond sustainability reporting, the Public Records Act 1973 requires Victorian public offices to completely and accurately record their activities and decisions to meet their needs, the government’s needs and the community’s needs. 

Record keeping for 2024–25 reporting

Greater Western Water and Yarra Valley Water did not have a basis of preparation document or other appropriate records for their 2024–25 annual report and National Scheme reporting. 

This made it difficult for us to access source data, understand their methods and replicate their calculations.

While they had developed some procedures, these were either out of date or incomplete.

South East Water told us it used the basis of preparation document it developed in 2022–23 for its 2024–25 reporting because it had not changed its underlying processes. 

DEECA's reviews

DEECA supports the minister by reviewing water corporations’ annual reports before tabling. 

It told us these reviews involve: 

• assessing each report against the Annual Reporting Indicator Handbook to confirm it covers all mandatory indicators 
• verifying line item values to check totals in tables add up
• crosschecking totals against the raw emissions data water corporations separately provide to DEECA.

Despite DEECA’s reviews, the 4 water corporations tabled incomplete information in 2024–25. The only changes DEECA asked water corporations to make to their 2024–25 annual reports were updates to the disclosure index.

Inconsistent understanding of DEECA's role

DEECA told us its role does not involve providing assurance to water corporations or checking if their reporting is accurate. 

However, we saw an instance where DEECA asked water corporations to review their calculations after identifying a potential issue. 

We also found water corporations do not consistently understand DEECA’s role and the extent of its compliance checks.

In a paper for its board, one water corporation said DEECA has a role in overseeing and coordinating its annual reporting process, including checking it complies with statutory requirements and providing feedback.

Another water corporation told us DEECA’s role involves providing guidance and overseeing compliance. It said DEECA uses a quality assurance process to make sure its reports are in the correct format. 

A third water corporation told us it submits its annual report to DEECA, which reviews it against reporting requirements and provides feedback. In prior years, DEECA told this water corporation that its reporting did not meet expectations and asked it to correct it. 

DEECA’s checks and feedback have contributed to a perception among water corporations that it provides assurance over their sustainability reporting. 

As a result, some water corporations rely on DEECA’s checks to assure their boards that their sustainability reporting is complete and reliable. 

No overarching assurance framework

The government does not have a framework to check, monitor and compare water corporations’ sustainability reporting. 

Unlike financial reporting, sustainability reporting is not subject to independent assurance to confirm it is free from material misstatements before it is tabled in Parliament.

This makes it difficult for the government to:

• assess if the sustainability information water corporations report is complete and reliable
• identify areas for improvement
• compare results across the public sector
• inform the public on its progress towards net zero. 

Without an assurance framework, users cannot have the same level of confidence in sustainability information that they do for financial information.

Additionally, given sustainability reporting informs the Whole of Victorian Government emissions reduction pledge 2026–30, the government cannot be confident it will meet the pledge’s targets without an assurance framework.