Australia’s New Mandatory Climate Reporting: What Businesses Need to Know

Introduction: The Climate Reporting Era Has Arrived

The way businesses operate in Australia is about to change significantly. With mandatory climate reporting set to take effect, companies will soon be required to disclose their carbon emissions, climate risks, and sustainability strategies. What was once a voluntary initiative is now becoming a legal obligation, and businesses that fail to comply could face financial, reputational, and operational consequences.

For some, this shift represents a much-needed step toward corporate transparency and accountability in tackling climate change. For others, it may feel like yet another layer of regulatory burden. However, one thing is clear: this is not just about ticking boxes. These new reporting requirements will fundamentally influence corporate strategy, financial planning, and risk management, making sustainability an essential part of business operations.

So, what do businesses need to know? Who will be affected, what exactly needs to be reported, and—perhaps most importantly—how can companies prepare for these changes? Let’s break it all down.

1. Why is Climate Reporting Becoming Mandatory?

The introduction of mandatory climate reporting in Australia is not happening in isolation. Countries worldwide are enforcing stricter climate disclosure laws, and Australia is following suit. The push for transparency comes from governments, investors, and consumers, all of whom are demanding more accountability from businesses when it comes to their environmental impact.

One of the biggest drivers behind this shift is global market alignment. The European Union has already implemented the Corporate Sustainability Reporting Directive (CSRD), requiring thousands of companies to disclose their sustainability data. In the United States, the Securities and Exchange Commission (SEC) is preparing similar rules for publicly listed companies. The United Kingdom and New Zealand have already made climate risk reporting compulsory. To remain competitive in international markets and attractive to global investors, Australian businesses must now play by the same rules.

Beyond global alignment, there are significant financial risks tied to climate change that businesses can no longer ignore. Extreme weather events such as bushfires, floods, and heatwaves are already impacting industries across the country, causing supply chain disruptions and financial losses. As carbon pricing and government regulations tighten, businesses that fail to plan for these risks will likely face higher costs and declining profitability.

Investors are also a major driving force behind these changes. More than ever, financial institutions are factoring climate risk into their lending and investment decisions. Banks are offering preferential loan terms to businesses with strong sustainability credentials, while investors are actively divesting from companies with poor ESG (Environmental, Social, and Governance) performance. On the consumer side, customers are showing a growing preference for brands that prioritize sustainability. Businesses that fail to adapt could lose both financial backing and customer loyalty.

2. Who Will Be Affected by the New Rules?

The Australian government is rolling out climate reporting requirements in phases, gradually expanding the number of businesses that must comply.

The first phase, starting in 2024-25, will apply to large corporations and ASX-listed companies. This includes businesses with a revenue above $500 million or more than 250 employees. Companies that already report under ASX corporate governance rules will be among the first required to disclose their emissions and climate risks.

By 2026-27, medium-sized businesses with a revenue above $50 million will also be required to comply. Additionally, any business considered to have significant climate-related financial risks will fall under these regulations, regardless of their size.

Finally, by 2027 and beyond, even smaller businesses will be impacted, particularly those that supply larger corporations. While they may not be legally required to report their own emissions, they will likely need to provide sustainability data to their corporate clients, who in turn must report their supply chain emissions.

Even if a company isn’t directly included in the first phases, it would be wise to start preparing now, as investors, customers, and business partners will soon expect climate transparency from all sectors.

3. What Must Businesses Report?

Under the new climate reporting framework, businesses will be required to disclose three main areas related to their climate impact.

1. Greenhouse Gas Emissions (Scope 1, 2 & 3)

Companies must measure and report their carbon footprint across three categories:

• Scope 1 emissions come directly from company-owned operations, such as fuel combustion in company vehicles or manufacturing processes.

• Scope 2 emissions refer to indirect emissions from purchased electricity, such as energy used to power office buildings or production facilities.

• Scope 3 emissions include all other indirect emissions, such as supply chain activities, business travel, transportation of goods, and the eventual use of sold products.

While Scope 1 and 2 emissions are relatively straightforward to track, Scope 3 emissions are often the largest and most difficult to quantify. Businesses will need to engage their suppliers and implement new tracking systems to ensure accurate reporting.

2. Climate-Related Financial Risks & Strategy

Beyond emissions data, businesses must disclose how climate change is impacting their financial performance. This includes reporting on risks such as extreme weather events, regulatory changes, and shifts in market demand for low-carbon alternatives.

Companies will also be required to conduct scenario analysis, assessing how different climate-related risks could affect their operations, assets, and long-term profitability.

3. Governance & Accountability

To ensure transparency, businesses must also explain how climate risk is managed at an executive level. This includes outlining board-level oversight, ESG policies, and how sustainability is integrated into decision-making.

4. How Can Businesses Prepare?

For many companies, these new requirements will require significant changes in data collection, reporting, and strategy development. Businesses should begin preparing now to avoid last-minute compliance challenges.

The first step is to measure emissions accurately. Companies should conduct a carbon footprint assessment, tracking Scope 1, 2, and 3 emissions. Many businesses will need to invest in carbon accounting software or work with climate consultants to ensure data accuracy.

Next, businesses should build internal reporting systems. This means training employees on sustainability data collection, integrating ESG factors into financial decision-making, and appointing climate risk leaders within the company.

Developing a net zero roadmap will also be crucial. Companies must set clear emissions reduction targets, identify low-carbon business strategies (such as switching to renewable energy or reducing waste), and determine how to offset unavoidable emissions.

Finally, businesses should align with global reporting frameworks such as the International Sustainability Standards Board (ISSB) and Task Force on Climate-related Financial Disclosures (TCFD) to ensure their reports meet international best practices.

5. Why Acting Now is a Smart Business Move

While some businesses may see mandatory climate reporting as an additional burden, it actually presents several opportunities. Companies that embrace sustainability early will enjoy easier access to green finance, as banks and investors increasingly favor businesses with clear climate risk strategies.

Those who take proactive steps will also gain a competitive advantage, winning more contracts and supply chain partnerships. Reducing carbon emissions can also lower operational costs by improving energy efficiency and streamlining supply chains.

Finally, businesses that prioritize transparency will build stronger customer loyalty and brand trust, as today’s consumers expect companies to be accountable for their environmental impact.

Conclusion: The Time to Act is Now

Australia’s mandatory climate reporting laws are set to transform the way businesses operate. Companies that prepare early will not only avoid compliance headaches but also position themselves as leaders in the transition to a low-carbon economy.

With reporting deadlines approaching, now is the time for businesses to assess their emissions, strengthen sustainability strategies, and ensure compliance with the new regulations.

Is your business ready for the new disclosure rules? The time to act is now.

Would you like help with carbon accounting, sustainability reporting, or compliance strategy? Let’s talk.