Australia’s mandatory climate disclosure laws come into effect on 1st January 2025, requiring large corporations and financial institutions to prepare now.
Organisations will need to meet minimum mandatory reporting requirements and have robust green procurement policies in place, which Nature Positive says will impact many downstream Australian businesses that supply to large corporations due to supply chain pressure.
Maria Wasley, Principal Climate Consultant at Nature Positive, is calling on companies to look at the benefits that accompany the new laws.
“While large corporations will start to deliver annual sustainability reports, small-to-medium businesses, which are often suppliers, will also need to clean house,” she said.
“Going green is a laudable objective for organisations, but behind that quest lies a lot of hard work and smart technology. SMEs should expect to meet green procurement policies from large entities they are supplying to – and will need to prepare now. A well-managed sustainability policy will also lead to better risk management and enhance the company’s value in the long term.
“While it may seem daunting at first, companies that adhere to these laws could have better access to financing from sustainability-focused investors and institutions and gain a competitive market advantage by being green.”
Recent research from the Australian Competition & Consumer Commission (ACCC) found that 57 percent of companies had made sustainability claims that were labelled ‘false, misleading or had no reasonable basis’, which the new disclosure laws aim to rectify through a clear and verifiable reporting framework.
The new disclosure laws, which will align with those set by the International Sustainability Standards Board and incorporate previous work by the Task Force on Climate-related Financial Disclosures, will be rolled out in phases:
- Large corporations (Group 1, those with consolidated revenue of $500 million-plus) are required to comply from 1st January 2025
- Medium-sized companies with over 250 employees and consolidated gross revenue of $200 million-plus should comply by 1st July 2026
- Smaller entities with 100-plus employees and $50 million-plus in consolidated revenue will join by 1st July 2027
Nature Positive points to Scope 3 greenhouse gas emissions as being of particular concern for organisations, as they occur outside the boundary of an entity but are caused by its actions.
Specialists in navigating the landscape of environmental and social sustainability, the RSK Group company cites data from Science Based Targets initiative (SBTi), which reveals more than 70 percent of a company’s Scope 3 emissions can typically be attributed to activities outside of their direct control, with Scope 3 emissions frequently 11 times higher than direct Scope 1 emissions.
Australia follows the lead of New Zealand, which was the first country to implement the mandatory reporting of climate-related risks. Elsewhere, businesses in the UK and EU have been preparing voluntary climate-related financial disclosures for a number of years.
“Businesses globally are recognising the importance of early preparation,” adds Maria.
“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.”
Nature Positive has identified seven steps Australian organisations must take if they are 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
“While these new laws might seem like an obstacle for organisations, they’re actually a step forward,” concludes Maria.
“By embracing sustainability, organisations can position themselves for long-term success, build trust with consumers and grow new business opportunities. It’s about seeing compliance not just as a requirement, but as an opportunity to create a more resilient and future-focused business.”
