ESG Reporting Requirements: What Are They And Why All Companies Should Understand Them

While most business owners understand the concept of Environmental, Social, and Governance (ESG) principles, the practicalities and mandates of ESG reporting are rapidly evolving and impacting all businesses – directly or indirectly – across Australia. The landscape is shifting faster than many anticipated and the implications reach far beyond large corporations.

In this article, we’ll help you demystify the current and upcoming ESG reporting requirements, explain the critical importance of accurate reporting, and provide practical steps for Australian SMEs to get started. At Bentleys, we’ve been navigating these complex reporting requirements with our clients, and we’re here to help you understand what lies ahead.

Understanding Australian ESG Reporting Requirements

ESG reporting involves the systematic collection, measurement, and disclosure of data about a company’s environmental, social, and governance performance. It’s essentially a way for businesses to communicate their non-financial impact and value creation to stakeholders. Most formal ESG disclosures happen annually, often aligning with financial reporting cycles.

The pressure to report comes from two directions: direct mandates and indirect requirements.

Direct Mandates

Australia’s mandatory climate-related financial disclosures for large entities commenced on 1 January 2025, following a phased approach targeting large businesses and financial institutions first. However, the thresholds for mandatory reporting are being progressively lowered, which means more companies will fall under direct obligation soon.

By FY28, businesses with revenue of $50 million or more, assets of $25 million or more, or 100 or more employees will need to comply with formal sustainability reporting requirements. This timeline might seem distant, but preparation takes time – and the indirect pressures are already here.

Indirect Reporting Pressures

Even if your business isn’t directly mandated to report, larger clients, investors, and banks are increasingly requiring their SME suppliers and partners to provide ESG data to meet their own reporting obligations. This creates a cascading effect throughout supply chains.

You might already be receiving requests for Scope 3 emissions data, ethical sourcing policies, or diversity metrics from your supply chain partners. The reality is that these requests will only intensify as reporting requirements tighten.

Key Australian Reporting Standards

The Australian Sustainability Reporting Standards (ASRS) are aligned with the International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD). These standards are setting the benchmark for climate reporting in Australia, providing a framework that businesses can use to structure their ESG disclosures.

Why ESG Reporting is Crucial for Your Business

The benefits of proper ESG reporting extend far beyond regulatory compliance, offering tangible business advantages that can drive growth and profitability. Accurate ESG data and reporting enhances access to capital through better financing terms and ethical investment opportunities, whilst building enhanced reputation and credibility with customers, employees, and the wider community. This transparency demonstrates that your business operates responsibly and sustainably, creating a competitive advantage in tender processes and market positioning where ESG criteria are increasingly standard.

Additionally, the ESG reporting process often reveals unexpected operational benefits, with data collection frequently uncovering inefficiencies and identifying areas for cost savings that might otherwise go unnoticed. These combined advantages make ESG reporting a strategic business tool that can set your company apart from competitors, while also improving overall operational performance.

The Risks of Getting ESG Wrong

The consequences of getting ESG reporting wrong, or avoiding it altogether, are significant and growing across many areas of business. Reputational damage from “greenwashing” can lead to backlash, a loss of trust, and negative publicity that can spread very quickly, which can cause lasting harm to your business. This reputational risk is compounded by the loss of business opportunities, as companies are increasingly excluded from supply chains or lose out on contracts due to inadequate ESG credentials.

The financial and operational impacts are equally serious, with regulatory scrutiny and penalties presenting serious risks including fines, legal action, and increased oversight that can be costly and time-consuming. Access to finance may become restricted as banks and investors grow reluctant to provide capital or offer less favourable terms to businesses without proper ESG reporting. Additionally, talent attrition is becoming a growing concern, as skilled workers increasingly seek purpose-driven employers who demonstrate genuine commitment to sustainability and social responsibility.

Steps for SMEs to Get Started with ESG Reporting

Getting started with ESG doesn’t have to be overwhelming. A practical approach is to begin by identifying what ESG data your business currently collects and where the gaps lie. Consider what ESG topics are most relevant to your business and industry for reporting purposes. Understanding who will be reading your reports (clients, investors, or employees) and what data they require is crucial for focusing your efforts effectively.

Getting Started with Reporting

1. Align your approach with an established framework, such as a streamlined version of the ASRS, to structure your data collection systematically. Establish baselines by consistently tracking key metrics; for example, kilowatt-hours of electricity used, litres of water consumed, number of employees, and waste generated.
2. Focus on reporting a few key, measurable areas first. Emphasise honesty and progress over perfection – stakeholders appreciate transparency about challenges and improvement efforts.
3. Explore how ESG data collection can be integrated into your existing accounting, HR, and operational software systems. This integration can streamline the reporting process and improve data accuracy.

[Watch our Financial Reporting Update Webinar – navigate to 01:20:17 for Sustainability Reporting]

The Indispensable Role of an Experienced Advisor

The ESG landscape is complex and constantly evolving, making expert guidance invaluable for navigating what applies to your specific situation. An experienced ESG advisor ensures accuracy and credibility by verifying the completeness of your ESG data, providing stakeholder assurance and mitigating risks of misrepresentation. Professional help also makes it easier to identify gaps and opportunities, helping you recognise weaknesses in current practices and recommend improvements for better ESG performance.

For SMEs not yet subject to mandatory ESG reporting, now is the perfect time to establish strong foundations and stay ahead of evolving regulations. By working with an experienced adviser early, you can develop robust data collection systems and ESG practices before requirements become mandatory, giving you a significant advantage over competitors who wait until the last minute.

Beyond compliance, strategic guidance from an experienced advisor can help you integrate ESG into your business strategy for long-term value creation and competitive advantage, rather than treating it as merely a reporting exercise. At Bentleys, we specialise in ESG and Carbon Accounting services, offering tailored solutions that meet the specific needs of Australian businesses. Our expertise helps clients navigate the complexities of ESG reporting and positions them for future success.

Moving Forward

ESG reporting is a vital component of modern business success, offering benefits that extend well beyond compliance. The regulatory landscape will continue to evolve, but the direction is clear: ESG reporting is becoming standard practice for businesses of all sizes.

The time to start your ESG journey is now. Early preparation will position your business advantageously as requirements tighten and stakeholder expectations increase. Partnering with experienced advisors like Bentleys will ensure effective and credible ESG reporting and strategy development. 

Want to know more about how Bentleys can help you?

Contact Bentleys today for a consultation with one of our expert tax advisors who can offer tailored advice specific to your industry, business structure, and growth ambitions. With the right strategic tax partner, you can turn tax management from a necessary obligation into a competitive advantage. We’re here to help you get where you want to be.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.