Proposed Mandatory Sustainability Reporting under the Corporations Act: Climate-Related Financial Disclosures

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The Australian Government has released consultation draft legislation that proposes phasing in mandatory sustainability reporting and standards from as early as 1 July 2024.

Through amendments to the Corporations Act 2001 (Cth) (Corporations Act) and Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), up to approximately 1,800 entities will be required to include sustainability reports in their annual reports.

The introduction of mandatory reporting obligations seeks to deliver on the Albanese government’s 2022 election commitment by:[1]

  • improving capital allocation in providing investors and firms in the Australian market with greater transparency of an entity’s climate-related plans and strategies;
  • establishing a standardised framework for reporting that provides for comparability, quality and timeliness of disclosure;
  • aligning climate risk management with international standards and best practice; and
  • supporting regulators to assess and manage systemic climate-related risks to the financial system.

If the legislation is enacted, Australia will follow New Zealand and the United Kingdom in regulating climate-related disclosures.  Other countries, such as the United States, Switzerland and Singapore, are in the process of developing similar obligations.

Who must report

Sustainability reporting obligations are proposed to be phased in over 3 stages in order to allow smaller entities time more lead time to build the capability and skills necessary to meet their obligations – see table below.[2]

Small and medium businesses below stipulated size thresholds (unless a registered NGER entity), entities with exemptions through ASIC class orders, and entities registered under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) will generally be exempt from the reporting obligations. Part-time employees will be accounted for at an appropriate fraction of a full-time equivalent.

Content of annual sustainability report

The sustainability report will comprise:

  • climate statements required by the sustainability standards;
  • any other statements required by legislative instrument relating to matters concerning environmental sustainability;
  • notes, required by the sustainability standards or legislative instrument, in relation to the preparation of the climate statements or other matters concerning environmental sustainability; and
  • a directors’ declaration, made in accordance with a resolution of the directors, regarding the compliance of the statements and notes with international sustainability reporting standards (if applicable) and the Corporations Act.

 The climate statements and notes must, together, disclose:

  • the material climate risks the entity faces and the material climate opportunities the entity has for the financial year (if any);
  • any metrics and targets of the entity for the financial year that are required to be disclosed by the sustainability standards, including metrics and targets relating to scope 1,2 and 3 emissions;
  • any governance policies of the entity that are required to be disclosed by the sustainability standards; and
  • except in the first year of reporting, the quantity of scope 3 emissions for the entity for the financial year, or other period specified by the sustainability standards.

Certain (generally, smaller) entities will be permitted to report that they do not face material climate risks or have material climate opportunities, where such assessment has been made in accordance with the sustainability standards.

Consistent with existing rules about record-keeping for financial reports, entities will be required to keep sustainability records for 7 years.  A failure to do so will be an offence of both fault-based and strict liability with a maximum penalty of 2 years imprisonment and 60 penalty units, respectively.

The sustainability standards

The Australian Accounting Standards Board (AASB) will be responsible for making the sustainability standards.  Auditing standards made by the Australian Auditing and Assurance Standards Board may also apply to sustainability reports.

 In October 2023, the AASB released an Exposure Draft of the ‘Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information’ comprising 3 draft Australian Sustainability Reporting Standards (Draft Standards)[1] and seeking public comment by 1 March 2024.

Two of the Draft Standards reflect the standards published by the International Sustainability Standards Board (ISSB) of theInternational Financial Reporting Standards (IFRS) Foundation, namely the General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and the Climate-related Disclosures Standard (IFRS S2).  However, notable departures proposed in the Draft Standards include:

  • a more limited scope of disclosure requirements to climate-related financial matters, rather than encompassing the broader sustainability risks and opportunities referred to in IFRS S1 (the AASB has indicated that broader sustainability reporting may be considered at a later time); and
  • specifying that reporting entities must provide climate resilience assessments against at least 2 possible future states (one of which must be consistent with the most ambitious global temperature goal set out in the Climate Change Act 2022 (Cth)) rather than leaving the entity to determine an appropriate approach to assess its climate resilience (as provided for in IFSR 2).

Sustainability reports will be subject to the same audit and assurance requirements as financial reports under the Corporations Act, with such requirements to be phased in between 1 July 2024 and 30 June 2030. The phased implementation will also give the professional services industry time to prepare for the increased demand for sustainability assurance and auditing services, although the Government intends to monitor industry capacity.

Sustainability reports will be required to be lodged with ASIC, made publicly available on company website, sent to members and/or laid before members at the company’s AGM - in some instances, within prescribed timeframes consistent with existing obligations for the sharing of financial reports, directors’ reports and auditor’s reports.

Alignment with National Greenhouse and Energy Reporting Act requirements

The proposed framework generally aligns sustainability reporting with the NGER Act.

For example, as outlined in the above table, one category of entities required to prepare sustainability reports is entities already required to report under the NGER Act.  In addition, “greenhouse gas”, “scope 1 emissions” and “scope 2 emissions” will be defined in the Corporations Act by reference to their definition in the NGER Act.

To assist Australian entities with consistent regulatory compliance, the Draft Standards also propose that entities convert greenhouse gases into a CO2 equivalent using global warming potential values from the Intergovernmental Panel on Climate Change (IPCC) assessment report referred to in the NGER Act (i.e. the 5th assessment report) rather than the latest available report (which is the reference in IFRS S2).

Further, the Draft Standards propose that relevant NGER methodologies are to be prioritised in measuring greenhouse gas emissions, before referring to other methods or frameworks.


Sustainability reports will be subject to the existing liability framework under the Corporations Act and ASIC Act, which includes directors’ duties, misleading and deceptive conduct considerations and general disclosure obligations.

A limited, modified liability regime will apply in the transition period between 1 July 2024 and 30 June 2027. During that time, only ASIC may bring civil actions in relation to statements made in a sustainability report regarding scope 3 emissions or scenario analysis.  ASIC may also give directions to an entity during that period in relation to statements in a sustainability report that it considers incorrect, incomplete or misleading in any way. This modified liability regime provides a limited safeguard for entities during the transition period.

A review of the operation of the regime will be undertaken after 1 July 2028, once full coverage is achieved.  The review will likely have input from the Council of Financial Regulators Climate Working Group, which already brings together ASIC, Treasury and others to coordinate action on financial climate-related risks.

[2] Commonwealth Treasury, ‘Policy Statement – Mandatory climate-related financial disclosures’ and ‘Exposure Draft Explanatory Materials’,

[3] Table adapted from Commonwealth Treasury, Policy Statement – Mandatory climate-related financial disclosures,


Please get in touch with James Bruining or Yvonne Jansen if you have any queries regarding this topic.

Phone: (08) 6500 4300

Limited Liability by a scheme approved under Professional Standards Legislation.

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