Foreword by ASIC chair

The report outlines Australia’s shift to mandatory climate reporting, driven by increasing expectations from regulators, investors, and stakeholders. It emphasises that reporting will commence from 1 January 2025 for large entities, with phased implementation for smaller organisations. Boards are expected to oversee high-quality disclosures addressing climate risks and opportunities, recognising reporting as both a compliance and value creation exercise.

Chapter 1 | The mandatory climate reporting landscape

This chapter explains the development of international and Australian sustainability standards, including IFRS S1 and S2, and their alignment with TCFD principles. Australia’s regime requires disclosures on governance, strategy, risk management, and metrics and targets, including Scope 1, 2, and eventually Scope 3 emissions.

The framework introduces a Sustainability Report as a fourth component of annual reporting, alongside financial, directors’, and auditor reports. Reporting applies to entities in three size-based cohorts, beginning with large emitters in 2025 and extending to smaller entities by 2027.
Assurance requirements will be phased, with full reasonable assurance mandated by 1 July 2030. Non-compliance may result in civil penalties or imprisonment, although a transitional period includes regulator-only enforcement for certain disclosures.

International alignment is highlighted, with IOSCO endorsement and global efforts to harmonise reporting standards. This supports comparability and consistency across jurisdictions.

Chapter 2 | What are the duties and expectations of me as a director

Directors must declare that sustainability disclosures comply with legal requirements, including AASB S2. Initially, a qualified declaration applies, requiring confirmation that reasonable steps have been taken, transitioning to full declarations after three years.
Boards are expected to exercise due care, ensuring robust governance, data systems, and reporting processes. Directors should develop sufficient climate literacy to critically assess disclosures, risks, and assumptions.

Key expectations include integrating climate considerations into financial reporting, assessing materiality, and ensuring consistency between sustainability and financial information. Directors should also evaluate internal controls, data quality, and assurance mechanisms.
Oversight extends to understanding jurisdictional requirements, supply chain data challenges, and disclosure risks. Directors are encouraged to question management on readiness, data collection, and alignment with evolving regulatory expectations.

Chapter 3 | Practical steps to support mandatory climate reporting

This chapter provides guidance on implementing climate reporting. Organisations must identify climate-related risks and opportunities across short, medium, and long-term horizons, including physical and transition risks. Scenario analysis is required, including at least one 1.5°C-aligned scenario.

Directors should ensure development of climate strategies and transition plans, supported by clear targets, resource allocation, and monitoring processes. Disclosure expectations include detailed information on targets, use of offsets, and progress tracking.

Metrics and targets reporting requires robust measurement of Scope 1, 2, and 3 emissions, with emphasis on data quality and transparency. Scope 3 reporting presents challenges due to reliance on value chain data and associated uncertainties. Organisations are advised to strengthen data management systems and engage suppliers to improve data reliability.

Governance structures should clearly allocate responsibilities across boards, committees, and management. Integration of climate considerations into remuneration and performance metrics is expected.

Finally, organisations should continuously review strategies, monitor progress, and adapt to evolving regulatory and market expectations. Regular board engagement and assurance processes are critical to maintaining compliance and credibility.