The introduction of mandatory climate reporting in Australia marks a major shift in corporate sustainability compliance. With new climate-related financial disclosure requirements set by the Australian Accounting Standards Board (AASB) and aligned with IFRS S1 and S2, businesses must take immediate action.
These regulations require companies to disclose climate risks, Scope 1, 2, and 3 emissions, and financial impacts of climate change. Additionally, the Global Reporting Initiative (GRI) has revised its Climate Change Standard, further shaping sustainability reporting frameworks.
Understanding Australia’s New Climate Reporting Landscape
Mandatory Climate Reporting Requirements
The AASB released an Exposure Draft in October 2023, which adopts two international standards from the International Financial Reporting Standards (IFRS):
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IFRS S1: General sustainability-related financial disclosures.
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IFRS S2: Climate-related disclosures.
These standards align closely with the Task Force on Climate-related Financial Disclosures (TCFD) framework and require businesses to disclose:
- Material climate risks and opportunities.
- Scope 1, 2, and 3 emissions.
- Financial impacts of climate change on business operations.
- Transition plans and climate targets.
Voluntary Climate Reporting Standards
In addition to mandatory reporting, the GRI Climate Change Standard is undergoing revisions. The proposed changes integrate climate-related financial risks into sustainability reports and align with the latest international agreements. Businesses already using the GRI framework for sustainability reporting should review these updates to ensure consistency.
Steps to Prepare for Climate Disclosure Compliance
1. Conduct a Climate Reporting Gap Analysis
Businesses should start by assessing their current sustainability reporting practices against the new AASB and GRI requirements. This involves:
- Mapping out existing climate risk assessments and disclosures.
- Identifying gaps in financial and non-financial reporting.
- Planning for compliance with Scope 3 emissions reporting, which can take months to finalise.
2. Strengthen Climate Governance and Board Competency
Boards and executives must be equipped to manage climate risks effectively. This includes:
- Establishing a climate governance framework to oversee risk assessment and disclosures.
- Providing board training on climate-related financial disclosures.
- Aligning climate reporting with corporate risk management strategies.
Resources like the Climate Governance Initiative Australia provide training to help boards make climate a priority.
3. Build an Integrated Climate Reporting Team
Climate reporting should involve multiple departments, including finance, risk management, legal, and sustainability teams. A coordinated approach ensures:
- Alignment between financial statements and climate disclosures.
- Accurate and verifiable sustainability data.
- Preparation for third-party assurance and audits.
4. Strengthen Climate Data Collection and Management
Businesses will need robust data systems to track emissions, climate risks, and financial impacts. Key steps include:
- Implementing data analytics tools to monitor emissions and climate-related risks.
- Engaging with value chain partners to collect Scope 3 emissions data.
- Establishing internal verification and external assurance processes.
For complex supply chains, Scope 3 emissions reporting can take six months or longer to finalise, so early preparation is critical.
5. Treat Climate Reporting as a Continuous Improvement Process
Mandatory climate reporting is not just a compliance exercise—it’s an opportunity to improve business resilience, risk management, and sustainability performance. Companies should:
- Regularly update climate risk strategies.
- Leverage climate scenario analysis for long-term planning.
- Invest in technology and external expertise to enhance reporting quality.
Who Needs to Report Under the New Standards?
The Australian Government has proposed a phased approach to mandatory climate reporting, starting with:
- Large companies (>$500 million turnover, >250 employees, or >$1 billion in assets).
- Financial institutions and organisations already reporting under the National Greenhouse and Energy Reporting (NGER) Act.
Companies outside these categories may choose to voluntarily align with AASB standards to improve transparency and investor confidence.
What’s Next for Australian Businesses?
With mandatory climate reporting set to begin in 2024, companies should act now to ensure compliance. Naturaliste Solutions offers expert guidance on climate risk management, sustainability reporting, and regulatory compliance.
For more insights, explore our latest sustainability articles on our Insights page or contact us for tailored climate reporting support.
Additional Resources
AASB Climate Reporting Exposure Draft