Mandatory climate reporting in Australia | What does it mean for your business?

Introduction of mandatory climate-related financial disclosures

Australia made a significant shift in corporate transparency with the introduction of mandatory climate-related financial disclosures. From January 1^st, 2025, certain businesses are required to disclose their climate-related risks and opportunities, aligning with international standards and strengthening accountability across the corporate sector.

You can check our guide to determine if your organisation meets the requirements to report under this new legislation, but in summary if your business meets certain size thresholds, or operates in financial / investment sectors, or entities that already prepare annual financial reports (under Chapter 2M of the Corporations Act) will need to disclose how climate risks and opportunities impact your operations through Climate-related Financial Disclosures.

The Australian Sustainability Reporting Standards (AASB) S2 – Climate Disclosures introduces a standardised reporting framework for Australian companies, improving the quantity and quality of information available on climate-related risks and opportunities. This consistency enables the primary-users of general-purpose financial reports (e.g. investors, lenders and other creditors) to easily compare disclosures across organisation and make informed financial decisions. Ultimately, better information also supports.

Why mandatory climate disclosure matters

In 2024, over 4,000 companies reported climate targets to the Climate Disclosure Project (CDP) in PwC’s Decarbonization Report, which represents nine times increase over the last five years. So, by embedding climate considerations into financial reporting, Australia joins a global movement recognising that climate risk is financial risk. Ignoring these risks can have direct implications for cash flow, asset value, supply chain resilience and access to finance.

Around 37% of companies are raising their climate action ambitions, while only 16% are scaling back (PwC Report 2025).

This demonstrates that transparency drives accountability. When companies publicly disclose climate-related risks and opportunities, they are also expected to report on the governance and strategies, not only to meet regulatory demands, but also to build trust with investors, customers and employees. The process itself encourages organisations to assess their vulnerabilities and opportunities more rigorously, becoming more responsive to the future challenges they will face, or identifying where best to apply strengthening. This is critical to developing long-term business resilience.

The business implications

This regime affects a broad range of entities – listed and unlisted companies, financial institutions and registered investment schemes – particularly those already preparing annual financial reports. These organisations will now need to provide detailed disclosures about climate risks, emissions and governance structures.

The impacts, however, extend beyond those directly required to disclose under the AASB S2. Businesses operating within the value chains of reporting entities will increasingly be asked to provide climate-related information, such as emissions data, climate risks and opportunities as part of their customers’ disclosure obligations. Climate action is no longer confined to large corporates.

The median revenue of companies setting climate commitments has shifted from $3.6 billion in 2020 to $1.3 billion in 2024, indicating that a growing number of smaller organisations are now setting targets. The shift reflects how supplier engagement is accelerating and expectations are cascading through entire value chains. So, even if your organisation is not legally required to report, you may face growing pressure from clients demanding credible climate-related data (such as scope 1 and 2 emissions).

This growing participation reinforces that climate reporting is becoming a business norm, not an exception. For many, transparency is now a marker of strategic maturity and a source of competitive advantage helping them build credibility, stand out in the market and be better positioned with potential client and business opportunities.

Strengthening Governance and Accountability

In an era of heightened scrutiny, strong governance is essential for managing climate-related risks and opportunities. A Harvard Business School article emphasises that a board’s foundational understanding of its climate profile is its first line of defence. Climate risk connects directly to fiduciary duties such as risk management, strategic resilience and long-term value creation.

Although this guidance is directed at boards, its principles are equally relevant to any organisation, including small and medium enterprises, where business owners or directors and key decision makers hold ultimate responsibility. Regardless of structure, leaders must ensure their organisation’s approach to climate risk is well-informed, credible and integrated into core strategy and decision-making

Decision makers should:

• Stablish a comprehensive understanding of the organisation’s climate exposure
• Implement an independent verification of emissions data to ensure credibility
• Align internal decisions and public communications, such as in marketing and advertising material. Inconsistency can erode trust and create unnecessary risk. Stakeholders increasingly expect companies to act in line with their sustainability claims.
• Apply the same level of rigour used in financial planning to the organisation’s climate strategies and targets. This includes analysing the assumptions underpinning emissions targets, ensuring accountability for the delivery of transition plans, and being able to defend the organisation’s position to shareholders, regulators and the public.

Looking ahead

Mandatory climate disclosure is not just a compliance exercise. It represents a fundamental shift in how companies plan for, respond to, and communicate climate risks. The new regulation offers organisations an opportunity to identify, assess, and manage risks that could otherwise remain hidden until too late, such as climate risks related to severe weather events causing, operational disruption or supply chain vulnerabilities affecting production, logistics, or energy reliability. By uncovering these exposures early, businesses can strength governance and sharpen strategy to demonstrate leadership in a rapidly changing economy.

Even if your organisation is not currently legally required to report, preparing now delivers tangible benefits. Establishing systems now allows you to approach disclosure in an organised and efficient way, rather than scrambling with a reactive process that can be costlier and riskier. Early action builds credibility with customers and partners, positions the business competitively and lays the groundwork for a future in which reporting may become mandatory.

Getting started takes time, and demand for skilled support will only increase as deadlines approach. The most effective approach is to act now by understanding whether your likely reporting obligations, assess your current climate governance and build the systems necessary for robust, credible disclosure.

Have further questions?

Contact the team at Losee Consulting for more information or guidance on how to comply with the new mandatory climate reporting requirements.

References

• PwC