Australia Implements Mandatory Climate-Related Reporting Requirements

As of January 1, 2025, Australia’s largest companies and asset managers are now required to produce climate-related reports as part of their annual reporting obligations. The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth) has officially come into effect, marking a significant step towards increased corporate transparency regarding climate risks and sustainability efforts.

Who Must Comply?

The reporting requirements apply to Australia’s largest entities, determined by their financial size and environmental impact. Companies must disclose climate-related risks and opportunities, governance measures, and emissions data (Scope 1, 2, and 3) in their sustainability reports. The legislation follows a phased approach, ensuring gradual compliance from eligible businesses over the next three years.

Entities producing financial reports under Chapter 2M of the Corporations Act are now obligated to submit sustainability statements, with thresholds set for large companies based on their revenue, asset value, and workforce size. Additionally, businesses registered under the National Greenhouse and Energy Reporting (NGER) Scheme must comply, regardless of size.

New Reporting Standards and Compliance

Companies must now prepare sustainability reports in accordance with the Australian Sustainability Reporting Standards (ASRS), developed by the Australian Accounting Standards Board (AASB). These reports are expected to align with the International Financial Reporting Standard (IFRS) S2, albeit with certain Australia-specific modifications.

A key requirement is scenario analysis, where businesses must evaluate their resilience against at least two climate change scenarios:

• High warming scenario (2.5°C or higher above pre-industrial levels)

• Low warming scenario (1.5°C above pre-industrial levels)

This ensures companies assess both extreme and moderate climate futures in their financial planning and risk assessments.

Auditing and Legal Considerations

All sustainability reports are subject to auditing standards set by the Australian Auditing and Assurance Standards Board (AUASB). The AUASB is in the process of developing an Australian equivalent to the International Auditing and Assurance Standards Board (IAASB) ISSA 5000 standard, ensuring consistent and credible reporting.

To ease the transition, businesses have been granted temporary relief from civil liability for Scope 3 emissions, transition plans, and forward-looking climate statements until June 30, 2028. During this period, legal actions regarding these disclosures can only be initiated by the Australian Securities and Investments Commission (ASIC), with remedies limited to injunctions and declarations.

The Road Ahead

With the legislation now in force, Australian companies are adapting their governance structures, reporting systems, and compliance strategies. ASIC has emphasized the importance of businesses preparing early to meet these obligations efficiently.

The implementation of mandatory climate reporting places Australia alongside other global economies that have introduced similar regulations, reinforcing the country’s commitment to climate transparency. As organizations continue to refine their sustainability disclosures, these reports are expected to shape corporate strategies and investor decision-making for years to come.

Source: treasury.gov.au