Australia's Climate, Sustainability, and ESG Reporting Requirements and Laws in 2024 - Last Updated: January 2, 2024

In January and June 2023, the Australian government released two consultation papers on the development of a climate risk disclosure framework for companies and financial institutions, with plans to introduce mandatory sustainability and ESG reporting requirements for large Australian entities in the next few years. The papers describe implementing these new rules using a 'phased' approach, beginning as soon as 2024.

Climate risk and corporate sustainability reporting has been a major business topic around the world. Certain markets like the EU, UK, and New Zealand have already enacted sustainability and climate disclosure laws, while the US SEC is expected to announce its own ruling in 2024. Australia's Treasury Department notes that climate-related risks 'are material to global financial risk', and companies and banks need to start assessing and communicating those risks to investors and other stakeholders:

"To ensure Australia remains aligned with major international capital markets, disclosure obligations need to be credible and comparable to other prominent jurisdictions. They need to provide investors with decision-useful information about the financial risks that firms face from climate change and provide regulators with information to identify and manage systemic risks" - Australian Treasury

According to the announcement, Australia's Treasury will lead the development of a broad sustainable finance framework for Australia, of which climate-related disclosure will form one part. These new developments are also in-line with the Australian government's net zero emissions target by 2050

Given that the evolution of Australia's climate, sustainability, and ESG regulations and standards can be challenging to track, we’ve prepared this guide to summarize the new standards the Australian government is proposing, and what they mean for organisations in 2024 and beyond.

Key Australian Climate and Sustainability Reporting Standards in 2024

An Overview of Australian Sustainability Reporting and Climate Disclosure Standards

The goal of Austalian's new climate disclosure standards are to ensure that climate-related financial risks are transparent, well-understood, and reported by Australian companies and financial institutions in a way that's aligned with international standards.

The disclosure proposal is designed around six key principles outlined by the Treasury:

Under Australia's proposed climate and sustainability reporting standards, disclosures will be mandatory for large, listed businesses (listed entities covered by the Corporations Act 2001), and financial institutions. Treasury is also considering whether or not large large private businesses should also be required to disclose.

Which Australian Companies and Entities Need to Disclosure Climate Information?

Australia's current proposal will requires quoted companies, as well as (eventually), any eligible Australian company with over 100+ employees, $50 million+ revenue, $25 million+ assets. The current implementation timeline is:

How to Comply with Proposed Australian Climate Disclosure Requirements

Australia's current proposal will requires quoted companies to assess, collect, and report the following annual data and disclosures:

1. Overarching climate risk governance and assessment - Provide climate risk disclosure consistent with the ISSB (IFRS) Sustainability Reporting Standards and TCFD (Task Force for Climate-Related Financial Disclosure), including disclosures related to an entity's climate and ESG governance, strategy, details risks and opportunities and metrics & targets. Many large, listed Australian companies are already reporting in line with TCFD today
2. Materiality - Australia’s corporate law requires material climate and sustainability risks to be assessed and disclosed using, at a minimum, financial materiality principles
3. Scope 1, 2 & 3 GHG emissions - Companies must inventory, calculate, and disclose their GHG emissions from direct operations, including 'material' Scope 3 emissions. The June 2023 proposal gives businesses an extra year to implement Scope 3 reporting, and introduces a 3-year transition period for enforcement of disclosures related to scenario analysis, climate transition planns, and Scope 3.
4. Climate and sustainability targets, offsets, and transition plans - An overview of the entity's quantitative climate and sustainability targets, include any emissions targets, net zero targets, carbon offsets, and other transition plans
5. Sustainability and ESG KPIs - Key climate, sustainability, and ESG metrics and KPIs that would assist reporting entities and investors to assess climate-related risks and opportunities
6. Reporting methodology - It's recommended companies use widely recognized independent sustainability reporting standards like the ISSB, GHG Reporting Protocol, and ISO 14064-1:2018

One question Australian regulators leave open for comment is the level of assurance these climate and sustainaiblity disclosures should meet. What level of assurance should be required for climate disclosures, who should provide assurance (for instance, auditor of the financial report or other expert), and should assurance providers be subject to independence and quality management standards?

Timeline for Australian Climate and Sustainability Reporting Standards

Australian regulators note that they want to implement these new standards around the same time as other major financial markets (US, UK, Canada, etc.) so there isn't a lag between what (or when) other global companies are disclosing vs. Australia's.

Because Australian regulators recognize larger entities have more resources to respond to new financial and non-financial reporting requirements, the proposed plan is for large Australian entities to begin reporting in financial year 2024-25, with Australian SME's required to report at a later date (and likely a more streamlined report).

A Few Helpful Australian Climate Risk Reporting Recommendations

Your Next Steps With Australian Sustainability Reporting

As you can tell from the length of this article alone, there are a lot of new and evolving considerations around Australian and global climate reporting laws and standards going into effect in 2024 and future years. In fairness, it can feel very complex and daunting. However, from a positive perspective:

For organisations in the early stages of their Australian climate, sustainability, and ESG reporting roadmaps (or capability assessments), we have a few general recommendations, additional reading, and suggested next steps:

Materiality assessment - The principle of Materiality is embedded in Australian and most international climate disclosure and sustainability laws, particularly within TCFD and the concept of double materiality. Materiality essentially asks and attempts to answer a fundamental question: what are the most important (re: material) ESG, climate, and sustainability risks and considerations for a business or investment? If your organisation hasn't already done so, a materiality assessment can help determine what your top sustainability goals, targets, risks, and priorities should be in relation to regulatory and investor sustainability reporting. In turn, this can help clarify where to focus, what to prioritize, and what aspects of pending or forthcoming Australian and/or international sustainability reporting standards matter most to you.

Understand the laws in depth - A full, in-depth breakdown of each law is outside the scope of this piece, but it is critical that, if your organisation meets Australian climate disclosure criteria, you work with your leadership, directors, legal counsel, auditors, and other stakeholders to learn your organisation's specific obligations under each law.

Sustainability data systems and process - While this might go without saying, in order to report your organisation's climate performance and risk, you need to know what it is - with a high degree of accuracy. Your materiality process can help guide you toward the main sustainability themes you may need to focus on and collect data around. Is employee travel a big source of your organisation's carbon footprint? Facilities? Manufacturing sites? Where does that data exist today, and how will you access or collect it? Many organisations start their sustainability reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger companies. If you're an organisation with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and data management software, like the kind we design here at Brightest to help organisations stay compliant with reporting requirements in different countries. Ongoing report archiving, version control, audit readiness, and governance are also important to think about, since you'll be reporting every year.

Further reading - Our free guides to sustainability measurement and sustainability reporting provide additional, detailed guidance and insights on how to measure and report your sustainability performance for TCFD and other standards.