Mandatory Climate Reporting Now Australian Law

The Australian Government has officially passed legislation to mandate climate-related reporting from January 2025. The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill (the Bill) passed senate in late August, and gained the House of Representatives’ approval on 9 September 2024, solidifying its enactment into law.

The mandatory reporting requirements will apply to large and medium sized companies, including detailed disclosures on their carbon profiles, climate-related risks and opportunities, and greenhouse gas emissions across the supply chain.

Time is of the essence for certain organisations

Large organisations (Group 1), will be required to prepare their first mandatory climate report for the year ending 31 December 2025 – less than eighteen months away.

Time is of the essence for these organisations to get their houses in order regarding ESG compliance and carbon baseline accounting. There is still time for these organisations to reduce their carbon footprint with the assistance of specialist advice.

The mandatory reporting requirements will be introduced in phases however, allowing other organisations time to adapt and comply. This will also mean phased requirements for assurance of these ESG disclosures, ensuring the accuracy and reliability of the information provided.

Despite the phased legislation, other organisations not in Group 1 would benefit from timely action. Top-down supply chain pressure is likely to follow Group 1 mandatory compliance requirements, as the inheritance of carbon footprint via the supply-chain places pressure on who the larger organisations choose to do business with. This is likely to mean that suppliers who are carbon neutral, or have a lower carbon footprint, will have a competitive advantage in their market as a preferred supplier.

Further, implications of reducing an organisation’s carbon footprint extends further than benefits to the environment and legal compliance, with banks and insurers increasingly wanting to see carbon neutrality as an indicator of business longevity and sustainability.

Scope of Reporting

The mandate covers entities already required to prepare financial reports under Part 2M of the Corporations Act and meeting specific size thresholds. For Group 1 entities, reporting compliance is due on 1 July 2025. Group 2 and 3 entities will follow on 1 July 2026, and 1 July 2027, respectively.

Entities must disclose under the Australian Sustainability Reporting Standards (ASRS) which is adapted from the International Sustainability Standards Board (ISSB). The ASRS proposes a voluntary general sustainability standard (AASB S1) and the mandatory climate standard (AASB S2). This is currently under consultation.

The legislation also extends ASIC’s current powers of financial reporting relief to climate reporting.

Penalties for non-compliance

Failure to comply with mandatory climate reporting could result in significant consequences, including civil penalties or even jail time.

To ease the transition, a three-year regulator-only enforcement period will be in place from 1 January 2025 to 31 December 2027. During this period, only the Australian Securities and Investments Commission (ASIC) can bring civil proceedings for non-compliance with reporting requirements.

Private litigation will be temporarily barred, allowing organisations time to adjust to the new regulations without facing immediate legal action from third parties.

The transitional period provides a grace period for organisations to implement the necessary systems and processes. ASICs exclusive enforcement during this period ensures consistent and effective oversight.

Want to know more about how Bentleys can help your business?

To ensure compliance with the now-passed mandatory climate reporting legislation, reach out to our ESG and Carbon Accounting experts at Bentleys. Currently, few advisors have the depth of knowledge in ESG and carbon matters required to make informed decisions, however there is yet to be a “standard” implemented that prevents unqualified professionals from claiming expertise in the field.

David Papa – Partner & ESG Specialist at Bentleys SA – and the team are leading the way in carbon accounting advisory authenticity via their Australian Government Clean Energy Regulator credentials and Climate Active Certification. Find out more about the ESG and Carbon Accounting services available. Speak to the team today for an ESG health-check and for advice on measuring and/or improving your carbon baseline.

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.