On 22 August 2024, the Senate passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 which requires certain organisations to make mandatory climate-related financial disclosures in their annual reports for financial years commencing after 1 January 2025. The Bill passed the Government-controlled House of Representatives on 9 September 2024 and is currently awaiting formal assent.

For the first time, companies will move beyond voluntary disclosures to meet binding requirements with significant compliance implications.

This article unpacks the impending regulatory changes and the way forward under the new regulations.

From voluntary to mandatory reporting

Until now, Australian companies have operated in a largely voluntary climate disclosure environment. While ASX-listed entities faced some reporting obligations through the ASX Corporate Governance Principles, these frameworks allowed significant discretion in what companies reported and how they presented climate-related information.

This voluntary approach created several challenges:

• Inconsistent reporting methodologies making comparison difficult
• Selective disclosure focusing on positive outcomes while downplaying risks
• Limited assurance requirements compromising data reliability
• Variable reporting quality across sectors and company sizes

The shift to mandatory reporting stems from mounting pressure from multiple fronts. Institutional investors increasingly demand robust climate data for their investment decisions. Trading partners, particularly in regions with established climate reporting frameworks like the EU, expect Australian businesses to match their disclosure standards. Meanwhile, Australian regulatory bodies recognise the need to align with global best practices to maintain market competitiveness.

Australia’s new mandatory framework: what you need to know

The Australian framework and timeline

Australia’s mandatory climate reporting framework adopts the International Sustainability Standards Board (ISSB) standards, specifically the Australian Sustainability Reporting Standards (ASRS) and Australian Accounting Standards Board Standard 2 (AASB S2).

The implementation follows a phased approach based on company size:

Group 1 entities (Reporting from FY2025)

• Companies with 500+ employees
• Annual revenue exceeding $500 million
• Consolidated assets worth more than $1 billion

Group 2 entities (Reporting from FY2026)

• Companies with 250+ employees
• Annual revenue exceeding $200 million
• Consolidated assets worth more than $500 million

Group 3 entities (Reporting from FY2027)

• Companies with 100+ employees
• Annual revenue exceeding $50 million
• Consolidated assets worth more than $25 million

This staged introduction gives smaller organisations additional time to build capability and implement necessary systems.

Key requirements of the new framework

The new mandatory framework brings several significant changes from previous voluntary approaches:

Comprehensive emissions reporting All in-scope companies must report their greenhouse gas emissions across all three scopes:

• Scope 1: Direct emissions from owned or controlled sources
• Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
• Scope 3: All other indirect emissions in a company’s value chain

Climate risk disclosures Organisations must assess and disclose:

• Physical risks
• Transition risks
• Strategic resilience under different climate scenarios

Governance and strategy Companies need to explain:

• Board oversight of climate-related risks and opportunities
• Management’s role in assessing and managing climate issues
• Integration of climate considerations into business strategy
• Resilience of business strategy under different climate scenarios

Metrics and targets Reporting must include:

• Specific metrics used to assess climate-related risks
• Scope 1, 2, and 3 greenhouse gas emissions
• Climate-related targets and performance against them

Independent assurance The framework introduces mandatory assurance requirements for reported climate information, enhancing accountability and reliability.

The path forward

Mandatory climate reporting represents a fundamental shift in Australia’s corporate landscape. While the requirements bring new challenges, they also create a more level playing field where climate performance becomes transparent and comparable across organisations.

The transition brings with it new complexities and expenses, but companies that embrace this change proactively will find themselves better positioned for a future where climate considerations are central to business success.

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