Australia's new era of corporate transparency: mandatory climate reporting begins on 1 January 2025

It’s official, Australia’s mandatory climate disclosure regime will take effect from 1 January 2025, following the passing of the Government’s legislation through Federal Parliament.

On 22 August 2024, the Senate passed the mandatory climate reporting bill, which was subsequently passed by the House of Representatives on 9 September 2024. This landmark legislation will require certain organisations to disclose detailed information about their climate-related risks and opportunities. The requirement will begin with the largest emitters and corporations from 1 January 2025.

This marks a significant step towards increasing transparency and accountability for businesses in addressing climate risks and opportunities.

Key Highlights of the Legislation

Since our feature in the PKF Clarity magazine on 2 April, there have been some minor changes to the legislation. Here’s a summary of the key points:

Who must report and when?

Mandatory climate reporting will apply to entities already required to prepare financial reports under Part 2M of the Corporations Act (reporting entities) that meet specific size thresholds. Entities will be phased into the regime in three cohorts.

Where will the disclosures be set out?

Disclosures are to be made annually in a separate Sustainability Report, which will form part of the Annual Report, alongside the Financial Report, Directors’ Report, and Audit Report.

What disclosures will be required?

Entities will be required to disclose information according to the Australian Sustainability Reporting Standards (ASRS) Climate Standard, AASB S2, which is an Australian adaptation of the International Sustainability Standards Board (ISSB) climate standard, IFRS S2.

Both the ASRS and ISSB standards build upon the Taskforce for Climate-related Financial Disclosure (TCFD) framework. This framework includes governance, strategy, risk management, and metrics/targets disclosures, but under the ASRS, the requirements will be more detailed and granular.

What assurance will be required?

Mandatory assurance for all climate disclosures will be required from 1 July 2030. The Auditing and Assurance Standards Board (AUASB) will issue interim assurance requirements, with a proposed assurance timetable to be released for consultation soon.

What are the consequences of non-compliance or poor compliance?

Failure to keep and retain sustainability records or to make the Sustainability Report publicly available after lodging it with ASIC will result in civil penalties, and in some cases, could lead to imprisonment.

Company directors will also be legally responsible for signing off on annual reports, which will now include a climate statement.

“Whilst it seems like the legislation has been a long time coming for Australian companies to report on their climate and sustainability disclosures, this Federal Government mandated reporting may well catch companies off guard. There are some significant actions that need to be taken to comply with the legislation, taking a whole-of-company effort to get up to speed quickly.  We have seen some challenges in getting the correct processes and systems in place to collect meaningful and reportable data in a short space of time, once again we would encourage everyone to be proactive in their approach to Climate related disclosures and get started or keep going in a systematic way. Having this legislation in place does assist us and our clients to be able to know exactly what is required and get to work in implementing the correct approach. It has been difficult to know where to start in Sustainability reporting previously – we now have a clear and direct pathway for not only group 1 & 2 entities in the short term, but also those that are on their value chain and will be required to supply data upwards.”

Jim Allenby, Managing Director, Parvate ESG

With considerable experience in ESG and Sustainability reporting in our group, please reach out to your local PKF partner so they can help you get started.