You may have heard the term, ESG (Environmental, Social and Governance) compliance, spoken about in the corporate world over the last few years. Businesses have felt compelled to develop an ESG policy for long-term sustainability and to meet regulatory requirements in an ever-evolving market.

Now, climate reporting has become an essential aspect of corporate accountability (which falls under the “Governance” of ESG) as the global trend towards sustainability continues.

In Australia, the introduction of mandatory climate reporting marks a significant shift in corporate governance. Recent legislative reforms, such as the Treasury Laws Amendment Bill 2024, require large businesses and financial institutions to disclose climate-related financial data. The idea is to ensure companies are better equipped to manage climate risks while meeting the growing expectations of an environmentally conscious market.

What is Mandatory Climate Reporting?

On 27 March 2024, the Australian Government introduced the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) to Parliament, focusing on modernising financial market infrastructure. Part of this is mandatory climate reporting, which requires large businesses and financial institutions to disclose climate-related financial risks and opportunities in their annual sustainability reports.

The main purpose of this movement is to enhance transparency, promote informed decision-making and help manage climate risks over the short, medium, and long term.

Why is Climate Reporting Becoming Mandatory?

Global efforts like the Paris Agreement and the TCFD (Task Force on Climate-Related Financial Disclosures) aim to limit global warming and achieve net-zero emissions and influence corporate governance worldwide. Moreover, consumers, investors, and other stakeholders are increasingly demanding transparency on environmental impacts, influencing corporate decisions and thus shaping businesses’ reputations.

Key Requirements for Businesses from January 1st 2025

The Australian Securities and Investments Commission (ASIC) has established a sustainability reporting page that businesses can refer to. It outlines everything businesses must include in their sustainability reports to comply with the new climate reporting regulations.

  • Climate Reporting Requirements: A comprehensive overview of climate-related financial risks, such as carbon footprint, and opportunities.
  • Emissions Data: Reporting on Scope 1, 2, and 3 emissions, including direct and indirect greenhouse gas emissions.
  • Risk Analysis: An assessment of climate-related risks and opportunities, including short, medium, and long-term impacts.
  • Metrics and Targets: Clear environment and climate-related goals, such as emissions reduction targets (with progress updates).
  • Governance and Strategy: Information on the entity’s governance structure for managing climate risks and strategies for mitigating those risks.
  • Scenario Analysis: Disclosure of how the business’s resilience to climate risks has been assessed under at least two future climate scenarios, based on global temperature rise predictions.

Mandatory Climate Reporting Impact on Businesses

ASIC is urging large corporations to prepare for this mandatory climate reporting now as it could have significant operational and financial implications for businesses. Some examples include:

Data

Companies may need to adopt new technologies and establish processes for collecting, tracking and analysing climate-related data, such as emissions and energy consumption. Hiring specialised personnel such as a dedicated data scientist may be necessary for some businesses.

Financial

Financially, businesses will face costs associated with compliance, including reporting tools, staff training, extra bookkeeping, and potential investments in sustainability initiatives.

The plus side is that effective climate management can lead to cost savings, improved efficiency, and enhanced access to capital.

Reputation

Businesses can strengthen their brand by complying with climate reporting and demonstrating environmental responsibility. This can lead to attracting eco-conscious investors, customers, and partners.

Conversely, non-compliance can result in negative publicity, a lack of consumer trust, as well as legal penalties. As stakeholders increasingly prioritise sustainability, failure to meet these new standards may lead to significant reputational and financial risks.

How to Prepare for Mandatory Climate Reporting

To prepare for mandatory climate reporting, businesses should follow these five steps:

  • Conduct a Climate Risk Assessment: Identify and evaluate climate-related risks and opportunities specific to your business. This will form the foundation of your reporting and help inform strategic decisions.
  • Establish Data Collection and Reporting Systems: Implement systems to gather and track relevant environmental data. This could include energy use, emissions, waste management and water usage.
  • Integrate Reporting into Existing Compliance Frameworks: Integrate your climate reporting with other regulatory requirements your business may already have, such as your current ESG (Environmental, Social, and Governance) compliance, ensuring a seamless process for future disclosures.
  • Consult with ESG and Sustainability Experts: There are experts available who can guide you through the complexities of ESG reporting, and the adaption of regulatory changes to help you stay on track with ESG performance.
  • Utilise Tools and Resources for Compliance: Leverage available tools to simplify your compliance efforts. Many platforms offer guidance on reporting frameworks, carbon accounting, and sustainability metrics.

If all of this seems overwhelming, get in touch with Priority Management who consult large organisations making the shift to climate reporting. Our workshop will guide you through the requirements to complete the reporting.

Is Your Business Ready for Mandatory Climate Reporting?

Businesses that take action now to address climate-related risks and opportunities will be better positioned for long-term success. By conducting a climate risk assessment, establishing data collection systems, and consulting with experts, companies can ensure compliance and strengthen trust in their brand.

So, don’t wait until the last minute—take the necessary steps now to get a head-start on these changes. If you need guidance on how to navigate the new regulations, Priority Management is here to help. We can explain exactly what’s needed and walk you through the whole process. Reach out to our team today and future-proof your business.