Climate Change Legislation Changes 2025

This legislation aims to enhance transparency and accountability in corporate climate actions. The framework, while seemingly straightforward, will impact various aspects of business operations, necessitating thorough preparation by Australian boards.

Key Focus Areas for Boards

To effectively prepare for the new climate reporting requirements, boards should concentrate on the following four pillars:

Risk and Strategy: Boards must recognise that climate change already affects supply chains and competition. They need to integrate climate adaptation and mitigation into their strategic planning and risk management processes.

Board Skills: There is a need for boards to enhance their expertise in climate-related risks alongside other critical areas like cyber, AI, and digital risks. Financial and legal skills, while still important, should not overshadow the emerging climate risks.

Carbon Footprint Estimation: Initial estimates of carbon footprints may have significant margins of error. Continuous improvement in data accuracy and reporting is essential.

Net Zero Planning: Boards should develop and implement comprehensive net zero plans. Many have this in place, but London markets are already starting to deny insurance coverage to some firms with no plans for net zero. This ‘small’ market adjustment may have huge consequences for Australia PLC.

Steps for Better Preparation

Boards should take the following steps to better prepare for the new climate reporting regime:

Understand Reporting Requirements: Familiarize themselves with the standards set by the Australian Accounting Standards Board (AASB) and the International Sustainability Standards Board (ISSB).

Data Collection and Management: Boards should ensure robust systems for collecting, managing and verifying climate-related data are established and monitor them accordingly.

Risk Assessment: Conduct thorough assessments of climate-related risks and opportunities. Develop scenarios to understand the potential long-term impacts of different climate scenarios on the business.

Governance and Oversight: Strengthen governance structures to integrate climate issues into decision-making processes.

Stakeholder Engagement: Engage with key stakeholders, including investors, customers and employees, to understand their expectations and communicate the company’s climate strategy and performance.

Training and Capacity Building: Train board members and key staff on climate-related issues.

How prepared are Australian boards for this shift in legislation, and is integrated reporting the way forward?

The readiness of Australian boards for this legislative shift varies. Companies with international divisions are generally better prepared than purely domestic firms. Large, well-resourced, high-carbon emitting companies are, in general, well prepared as they have had to be (with existing legislation and market pressure). So, organisations operating within the energy, utilities and built environment arenas are likely to be better equipped for the transition to the new climate reporting regime.

Larger companies (e.g. ASX 200 and Government entities) already engaged with sustainability reporting are also likely to be more prepared, as they have more resources and experience to adapt to the new climate reporting requirements.

Disappointingly, much of the rest is less prepared despite the clear, early signals.

Some feel the best-prepared Australian boards are those who are already adopting integrated reporting, with sustainability disclosures (under the new Australian Sustainability Reporting Standards, ASRS) residing in an integrated report prepared in accordance with the International Integrated Reporting Framework (which is now owned by the world's peak corporate reporting body, the IFRS).

Such a report provides business context for the metrics and associated disclosures under ASRS. The integrated report is an outcome of the integrated reporting process, and it provides a window into the quality of the organisation's integrated thinking. Those that are not already adopting integrated reporting will be less well prepared than those that are, and will almost certainly come to realise that traditional sustainability reports and ESG disclosures will not be enough. 

We recommend looking at examples of high-quality integrated reports from around the world - for example, CPA Australia.

The introduction of mandatory climate reporting in 2025 represents a significant shift in corporate governance and accountability.

By doing so, they can better navigate the challenges and opportunities presented by this new legislative landscape.

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