Mandatory climate-related reporting in Australia: What directors need to focus on in FY2026

2 July 2025

Mandatory climate-related reporting was legislated in Australia at the end of 2024, with requirements coming into effect from 1 January 2025.

Six months since the laws were passed, Sustainability Advisor Sophie Schlachter delves into how the landscape has evolved, and what companies should be focusing on as they prepare to report.

Key takeaways in this article:

  • Mandatory climate-related reporting began in Australia on 1 January 2025, with no major changes expected following the Labor election victory.
  • Many Australian companies are trialling climate disclosures ahead of their first formal reports, and learning from EU practices and common pitfalls.
  • Regulatory support is increasing, including: ASIC’s Regulatory Guide 280: Sustainability Reporting, updates to IFRS and ASRS climate standards, and the introduction of ASSA 5000 and 5010 for assurance standards
  • Key challenges for company directors include: upskilling on climate and legal obligations, establishing materiality and governance processes, and planning for long-term ESG data systems and integration
  • Zooss Consulting recommends adopting a Sustainable Business Planning model to break down silos and improve alignment across finance, risk, operations and sustainability reporting.

    No major changes to climate-related reporting legislation

    A Labor victory means no major changes to the legislation or progression of requirements are anticipated. Certainly nothing has been announced so far that would give rise to speculation about withdrawal or reduction of requirements, despite the USA signaling such a move. This should work to normalise the expectations now placed on listed firms to investigate, analyse and report on various climate-related aspects of their businesses.

    Learning from trial runs – and the experience of others

    Many companies preparing to report at the end of next financial year end are doing trial runs this year, following the same processes they already do for annual reporting, including executive sign off. This is helping businesses to uncover and start to work through the challenges involved in this new area of compliance.

    There are valuable lessons to be learned from those jurisdictions in which climate-related reporting is more mature, such as the EU.  The European Financial Reporting Advisory Group and KPMG have both released analysis on the first disclosures made by European companies using the European Sustainability Reporting Standards.  They identify common approaches and challenges observed by those early reporters, including approaches to materiality, value-chain assessment, data points and ESG governance.  Australian directors and ESG managers can benefit hugely from this analysis, to avoid common pitfalls and adopt proven practices.

    Legislation updates and guidance

    Updates from a regulatory perspective are all working toward facilitating the implementation of the new reporting framework, and providing support and clarity for responding firms.

    ASIC has released Regulatory Guide 280: Sustainability Reporting, which offers practical guidance to reporters, and explains when and how they will apply their specific powers as relates to ASRS reporting.  There are also clarifications around revenue definition, labelling and cross-referencing, modified liability settings, and provisions of relief from reporting requirements.

    The International Financial Reporting Standards (IFRS) Foundation recently proposed updates to their climate-related standards on which the ASRS are modelled. These are aimed at simplifying reported information with the goal of improving interpretation. All changes relate to GHG emissions, and directors should anticipate the ASRS standards being updated to reflect these changes, once finalised.

    The Australian Treasury released a consultation paper in January 2025 proposing to extend the modified liability setting for voluntary sustainability reports. Once adopted, this will mean that companies choosing to report before required by legislation can do so without the same degree of legal risk.

    Lastly, ASIC has announced that it will review 31 December 2025 sustainability reports as part of their 2025/2026 surveillance program. They have emphasised a “proportional and pragmatic approach to supervision and enforcement” while the requirements are being introduced.

    Compliance teams should familiarise themselves with ASSA 5000 General Requirements for Sustainability Assurance Engagements and ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001 –  both published in January 2025 – to ensure compliant disclosures.

    What should company directors focus on?

    Australian company directors face new challenges in signing off on climate-related reports. To give themselves comfort and to ensure directorial duties are upheld, directors should focus on;

    1. Upskilling

    Educating themselves as board members, not just on climate-related issues, but on their new legal obligations under the ASRS standards. They should also assess the company’s internal capacity to meet those new obligations, and upskill managers and teams as required.

    1. Establishing governance procedures

    Gathering and reporting new information requires new processes, particularly around defining and determining materiality. Ownership of this information can land across multiple teams, including risk management, legal compliance, human resources, and operations. It’s beneficial to establish those processes defining materiality early on, so that the climate risks and opportunities which fall out from the definition can be agreed on by the ELT team, and teams can get to work collecting the relevant data.

    1. Ensuring accuracy of information published

    The information elicited by the ASRS standards attracts different levels of assurance – which will all increase over time. Given the new information being reported, companies must establish a defensible position for whatever they are (or are not) disclosing. This includes information on data sources, and estimation practices – including assumption and uncertainty disclosures.

    1. Reviewing strategies and plans for IT systems for ESG data

    Whilst preparing for immediate reporting requirements, leadership teams should consider the medium-to-long term strategy for ESG reporting, from an IT systems perspective. Consider what information is being collected, and whether the best way to do it now is going to be the best way to collect it in the future.

    This is particularly important noting the emphasis which ASSA 5000 places on consistency of data across the sustainability report and the financial statements. It’s critical that the nexus between climate-related risks and opportunities, and financial impacts, is consistently and coherently interrogated. This will involve enhanced coordination between the financial and sustainability reporting teams, and should be serviced by well-integrated data modelling.

    Sustainable business planning as the foundation of compliant reporting

    Zooss Consulting has developed Sustainable Business Planning to help businesses to ‘join the dots’ between traditional business planning processes (such as financial, operational and workforce), and sustainability modelling. This approach has the power to deliver better outcomes for businesses, people and our planet.

    Reach out to learn more about how a Sustainable Business Planning model can help you create the linkages across strategy, operations, risk and reporting that climate-related financial reporting requires.

    About the author – Sophie Schlachter, Sustainability Advisor

    Sophie holds a Master of Sustainability from the University of Sydney and has worked across regenerative agriculture and waste management sectors, including for OzHarvest and the Taronga Zoo Conservation Society. Sophie is experienced in business and sustainability analytics, and is passionate about enabling sustainable business that balances profit with positive environmental and social outcomes.

    Find out more

    Better Planning. Better Planet.

     

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