Understanding the New Climate-Related Financial Reporting Legislation: What It Means for Australian Businesses.

The Australian Government has recently passed new legislation mandating climate-related financial reporting, under the Corporations Act 2001 (Cth). This new regulation will come into effect on January 1, 2025. The move is in line with global trends toward more robust climate risk management and aims to enhance transparency and accountability in how companies assess and disclose climate-related risks and opportunities.

Under the new legislation, directors will be required to certify that their company’s Sustainability Report complies with the updated requirements. This marks a significant shift in the expectations placed on businesses, ensuring that they are not only aware of their climate impact but are also proactive in managing and reporting on it.

What Does This Mean for Australian Businesses?

The legislation applies to entities that are already required to prepare and lodge annual reports under the Corporations Act. This includes both listed and unlisted companies, financial institutions, registrable superannuation entities, and registered investment schemes. These businesses must now incorporate climate-related financial disclosures into their reporting, aligning their practices with emerging global standards.

For businesses, this means a need for heightened diligence in understanding and reporting on climate risks and opportunities. It will also likely require enhanced internal processes to ensure compliance and transparency in sustainability reporting.

Looking Ahead: Future Phases of Mandatory Reporting

This legislation marks the first phase of a broader strategy, with additional phases planned over the coming years. By 2027, mandatory reporting requirements will extend to all businesses with 100 or more employees, $50million in consolidated revenue or $25million in consolidated assets (only 2 criteria met are required to report). 

While not all companies will be required to report in 2025, reporting carbon emissions can offer several significant benefits to small and medium-sized enterprises (SMEs) in Australia including unlocking new opportunities for business growth, innovation, enhanced brand reputation, attract new investors and cost savings.  

By proactively engaging in carbon emissions reporting, companies can position themselves as forward-thinking and responsible businesses, ready to meet the demands of a rapidly evolving market and regulatory landscape.

As a business owner, it is crucial to understand this new legislation and take proactive steps to engage with a reputable ESG advisory firm to make a positive impact on climate change. Staying informed, and prepared will help ensure compliance and foster sustainable business practices.

 Official policy statement here.