Starting 1 January 2025, many large Australian businesses and financial institutions must prepare annual sustainability reports containing mandatory climate-related financial disclosures under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth).
This change ushers in a new era of transparency regarding corporate Australia’s environmental impact. Phased in over the coming years, beyond compliance requirements this brings opportunities to demonstrate leadership in sustainability. Australia is part of a wider global trend with many other global jurisdictions planning to enact – or already having in place – legislation to mandate climate-related financial disclosure including New Zealand, the European Union, United Kingdom, Japan, Hong Kong, and the United States.
Yet 2025 also starts with an element of uncertainty, with the Coalition vowing to scrap emissions reporting if they are elected and the Trump administration expected to dial back the equivalent regime in the United States. In this post we address the inevitable question: what happens now?
What the new disclosure requirements mean
As the mandatory climate reporting regime currently stands in Australia, large companies meeting specific revenue, asset or employee thresholds will be required to disclose their greenhouse gas emissions and climate-related risks. This includes not only direct emissions (Scope 1 and Scope 2) but also indirect emissions (Scope 3) from their supply chains and customers, which will come into effect for many by 2026.
Sustainability reports must include:
- a climate statement
- notes to the statement, and
- a declaration from directors regarding compliance with the Australian Sustainability Reporting Standards.
Furthermore, these reports will be subject to mandatory audit requirements, ensuring a level of accountability that aligns with global standards.
We have prepared a more detailed summary of these disclosure requirements here: Climate-related financial disclosure – KWM
Global trends in climate reporting
Some jurisdictions including the European Union already have climate reporting regimes in place and are in the process of finetuning, reflecting a growing consensus on the need for greater transparency in corporate environmental impact. However, in other jurisdictions, climate reporting is becoming increasingly politicised. This juxtaposition highlights the unpredictable nature of climate regulation, both domestically and internationally.
In the United States, the Trump administration is expected to roll back climate-related regulations at the federal level, particularly by the Environmental Protection Agency (EPA) and Securities Exchange Commission (SEC). Notably, the SEC’s mandatory climate-related financial risk disclosure rules for public companies and in public offerings (Climate Disclosure Rules) which was originally enacted in 2024 and has been suspended due to several legal challenges is unlikely to survive a Trump administration. The United States is also expected to again withdraw from the Paris Agreement, the main global treaty on climate change. Additionally, in response to Trump’s re-election, many large asset managers have pulled out of the Net Zero Asset Managers Initiative leading to the suspension of the climate finance alliance initiative – citing changes in regulation and environmental initiatives with the new administration – demonstrating questionable commitment to limiting growing climate-related risks in the economy from climate change.
Meanwhile, New Zealand’s climate-related disclosure regime was introduced in 2021 and similarly requires climate reporting entities to produce annual climate statements developed by the External Reporting Board. Its Ministry of Business, Innovation and Employment is currently seeking public feedback on potential adjustments to ensure that reporting thresholds and director liability settings are appropriate and proportionate. This is in response to stakeholder concerns about the cost and burden associated with reporting.
Closer to home in Australia, the Coalition has committed to unwinding mandatory climate reporting requirements if they are successful at the upcoming election.
In response to this uncertainty, the European Union has emphasised the importance of maintaining momentum in global climate diplomacy. Several prominent business groups including the Business Council of Australia, the Australian Institute of Company Directors and the Australian Council of Superannuation Investors have also shared their general support for a mandatory climate reporting regime in Australia.
Preparing for the future of climate disclosures
In light of these developments, Australian companies should remain committed to climate disclosures. The legislative framework remains in place, and shareholder demand for greater transparency will likely continue. We explore the importance of this in our related Owl Advisory article.
In addition, we are seeing extreme events on scales not seen before such as the recent devastation by wildfires in Los Angelos which are likely to have been exacerbated by global warming and changes in climate patterns. These highlight the importance of understanding and managing climate-related risks as part of an entity’s overall strategy.
As reported in our ASX50 Sustainability Reporting and Governance in 2023 report, an increasing proportion of the nation’s largest listed companies are already voluntarily embracing dedicated climate disclosures. We expect this to persist for years to come, irrespective of political changes.
Australian companies should:
- stay informed of any updates to the legislation and guidance from regulatory bodies such as the Australian Securities and Investments Commission (ASIC) and the Australian Accounting Standards Board (AASB)
- critically assess current reporting practices to ensure robust governance structures and accountability mechanisms for sustainability reporting are in place
- engage with key stakeholders about sustainability commitments and the importance of climate disclosures
- adopt a rigorous due diligence process for climate reporting, ensuring that all disclosures are accurate and reflect actual practices to mitigate the risks associated with potential greenwashing, and
- develop a long-term Climate Transition Plan that addresses the challenges and opportunities presented by climate change.
The road ahead: Ensuring compliance and leveraging sustainability opportunities
While political shifts may present uncertainties, the overall trend towards greater transparency in climate reporting is clear. Australian companies are encouraged to stay the course, preparing diligently for compliance and embracing the opportunities that come with enhanced sustainability practices.
For further advice on navigating climate reporting, please contact a member of the King & Mallesons or Owl Advisory team. We are here to steer you and your company through this transition to ensure you are well-positioned for the future.
Owl Advisory by KWM invite you to join us for an online event on Tuesday 4 February at 2-3pm to discuss New Zealand’s mandatory climate reporting regime, and lessons for Australia. Register here.