Preparing for Australia’s new mandatory climate disclosure laws

New climate disclosure laws, which came into effect on 1 January 2025, is forcing large corporations and financial institutions to comply with new mandatory reporting requirements and have robust green procurement policies in place. Maria Wasley, Principal at Nature Positive, outlines what the new laws entail and how companies can prepare.
Australia’s government has rolled out a set of new climate-related financial disclosures laws, with the aim to establish a clear and verifiable reporting framework and address issues in the market, such as transparency on ESG and greenwashing.
The new mandatory climate disclosure laws aligns with those set by the International Sustainability Standards Board and incorporate the previous work by the Task Force on Climate-related Financial Disclosures to create a clear, consistent reporting system.
The disclosure laws will be rolled out in phases:
- Large corporations (companies with consolidated revenue of $500 million plus) are required to comply from 1 January 2025
- Medium-sized companies with over 250 employees and consolidated gross revenue of $200 million-plus should comply by 1 July 2026
- Smaller entities with 100-plus employees and $50 million-plus in consolidated revenue will join by 1 July 2027
Seven steps to prepare
In order to ensure effective preparations are taken, organisations must seven steps to meet their climate disclosure obligations:
- Conduct a gap analysis of current reporting and other ESG practices against current and incoming requirements
- Develop an internal ‘climate plan’ considering data collection and resourcing requirements
- Develop metrics and targets relating to climate, including GHG emissions for scope 1, 2 and 3
- Identify material climate- related financial risks and opportunities, integrating this into an overall risk management framework
- Prepare a sustainability report for inclusion with annual reporting, aligned with reporting standards.
- Engage with key stakeholders such as the Board and external advisors for validating your data
- Engage with compliance experts for guidance
Early preparation is key
New Zealand was the first country to implement the mandatory reporting of climate-related risks, and Australia can learn from its example. A key lesson is that companies there are treating this as a business issue first and started their preparations early. From a global perspective, businesses in the UK and EU have been preparing voluntary climate-related financial disclosures for a number of years and have maturity around how this process is integrated into the business.
Given the complexity of estimating, tracking and reporting on emissions, Australian companies should plan early and aim to integrate sustainability into their core strategies and avoid potential penalties.
Some organisations face the prospect of walking the tightrope between financial viability and climate reporting requirements with limited resources at their disposal. To alleviate their concerns, the Australian Securities and Investments Commission (ASIC) has promised support by working with business representatives to develop practical guidance and easing organisations into the mandatory compliance reporting requirements.
Impacts for smaller businesses
Although it may appear that the law is initially targeted at larger corporations, the policy will affect smaller businesses through supply chain pressure. SMEs may face indirect reporting obligations if they supply goods or services to larger entities subject to the policy.
Of particular concern for organisations are Scope 3 greenhouse gas emissions that occur outside the boundary of an entity but are caused by its actions. According to data from Science Based Targets initiative (SBTi), more than 70% of a company's Scope 3 emissions can typically be attributed to activities outside their direct control, with scope 3 emissions frequently 11 times higher than direct scope 1 emissions.
More than just compliance
While these new laws might seem like an obstacle for organisations, they’re actually a step forward. By embracing sustainability, organisations can position themselves for long-term success, build trust with consumers, and grow new business opportunities. Companies that adhere to these laws could also have better access to financing from sustainability-focused investors and institutions.
All in all, the key to long-term success is about seeing compliance not just as a requirement, but as an opportunity to create a more resilient and future-focused business.