Australia has entered a new era of mandatory climate-related financial disclosure. If your organisation meets certain size thresholds, you are now legally required to report on your greenhouse gas emissions, climate risks, and transition plans. Here is what you need to know.
The legislation
In September 2024, the Australian Parliament passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024. Schedule 4 of this Act amends the Corporations Act 2001 to require large entities to include a sustainability report alongside their annual financial report.
The standards themselves — AASB S1 (General Requirements) and AASB S2 (Climate-related Disclosures) — were finalised by the Australian Accounting Standards Board and are closely aligned with the international ISSB standards (IFRS S1 and S2), adapted for the Australian context.
Who needs to report?
Entities are classified into three groups based on size. You fall into a group if you meet at least two of three criteria for the financial year:
| Group | Revenue | Gross assets | Employees | First reporting period |
|---|---|---|---|---|
| Group 1 | ≥ $500M | ≥ $1B | ≥ 500 | 1 January 2025 |
| Group 2 | ≥ $200M | ≥ $500M | ≥ 250 | 1 July 2026 |
| Group 3 | ≥ $50M | ≥ $25M | ≥ 100 | 1 July 2027 |
Entities reporting under the National Greenhouse and Energy Reporting Act 2007 (NGER) and asset owners with more than $5 billion in assets under management are automatically classified as Group 1, regardless of entity size.
What must you disclose?
Disclosures are structured around four pillars, consistent with the TCFD framework:
- Governance — Board and management oversight of climate-related risks and opportunities
- Strategy — Climate risks and opportunities across short, medium, and long term horizons, including scenario analysis (with a 1.5°C scenario) and transition plans
- Risk management — Processes for identifying, assessing, and managing climate-related risks
- Metrics and targets — Scope 1, 2, and 3 greenhouse gas emissions, industry-based metrics, and climate-related targets
Transition reliefs
The legislation recognises that mandatory climate reporting is new for many organisations. Several transition reliefs are available:
- Scope 3 emissions — Groups 2 and 3 receive relief from Scope 3 reporting in their first year (Group 3 receives two years of relief)
- Scenario analysis — Qualitative analysis is permitted initially; quantitative analysis is not required from day one
- Comparative information — Not required in the first reporting year
- Safe harbour — A modified liability framework protects entities from civil liability for Scope 3 disclosures and forward-looking statements, provided they are made in good faith and on reasonable grounds
Assurance requirements
Sustainability reports must be independently assured, with a phased approach from limited to reasonable assurance. From the first reporting year, limited assurance is required on Scope 1 and Scope 2 emissions. The pathway to reasonable assurance across all disclosure areas is expected from the fourth reporting year onward. The Auditing and Assurance Standards Board (AUASB) has published guidance on climate and sustainability assurance requirements.
What happens if you do not comply?
Because sustainability reporting sits within the Corporations Act, existing enforcement mechanisms apply. Penalties for false or misleading climate statements can reach up to $15 million or 10% of annual turnover for corporations. Directors face personal liability for ensuring reports are accurate. ASIC is the regulator and has published Regulatory Guide 280 with detailed expectations for sustainability reporting.
What should you do now?
Start by understanding which group your organisation falls into, and when your first reporting period begins. Key preparation steps include:
- Assess your readiness — Do you have the data, systems, and processes to measure Scope 1, 2, and 3 emissions?
- Understand the standards — Review AASB S2 and the KPMG guide to ASRS legislation and standards
- Engage your board — Governance disclosures require board-level oversight of climate risks
- Seek expert advice — Consider engaging sustainability consultants or leveraging carbon accounting software to streamline the process
Further reading
- AASB — Overview of Australian Sustainability Reporting Standards (PDF)
- PwC — Sustainability reporting standards and legislation finalised
- KPMG — Australian sustainability reporting standards finalised
- Allens — Mandatory climate-related financial reporting is here
- Deloitte — A new era of sustainability reporting