From 1 January 2025, all companies with more than 500 employees and revenue of more than $500m (Group 1) are required to include climate-related disclosures in a separate Sustainability Report, which will accompany their Financial Report, Directors’ Report, and Audit Report. This new report must adhere to the Australian Sustainability Reporting Standards (ASRS).
At the time of writing, sustainability reporting requirements have just kicked in for Group 2 organisations (more than 250 employees, revenue of more than $200m). These organisations are required to start reporting for financial years commencing on or after 1 July 2026.
Lastly, Group 3 organisations (more than 100 employees, revenue of more than $100m) will be impacted from 1 July 2027. Please note that the thresholds for Group 3 were increased as per the Federal Budget 2026-2027 announcement.
Notably, a three-year modified liability (referred to as “limited immunity”) will apply to disclosures related to scope 3 emissions, scenario analysis or transition plans, limiting regulatory actions for breaches to the regulator during this initial period. The limited immunity framework aims to prevent claims related to "protected statements" unless they are brought by ASIC or are criminal in nature.2 I.e. During the first three years, the legislation intends to exclude claims such as securities class actions or third party claims alleging greenwashing in respect of an entity's disclosure statements. After the three years, standard liabilities under the Corporations Act and the Australian Securities and Investments Commission Act will apply.
What’s required in the Sustainability Report?
The key disclosures required under a Sustainability Report include:3
- Risks and opportunities: Including the reporting entity’s identification, assessment and management of these.
- Greenhouse gas emissions: Any metrics and targets of the reporting entity related to climate, including gross scope 1, 2 and 3 emissions, including financed emissions.
- Governance: Processes and controls used to monitor and manage climate-related financial risks, opportunities, metrics and targets.
- Strategy: For identifying and addressing climate-related risks and opportunities, including scenario analysis.
- Transition planning and climate-related targets: Related to offsets, target setting, mitigation strategies and progress towards the targets.
- Industry-based metrics: Using well-established and understood metrics available for the reporting entity (eg. area of properties located in 1 in 100-year flood zones, by property subsector).
Auditing requirements
Because sustainability reporting is now mandatory rather than voluntary, it is also subject to the same compliance requirements applicable to a company’s overall financial reports. Sustainability reports must be prepared and lodged in accordance with Chapter 2M of the Corporations Act. I.e. They must be audited, lodged with ASIC and sent to members within four months of the financial year end.4
Directors’ declaration
Climate statements within a sustainability report need to be accompanied by a directors' declaration. Typically, the declaration is a positive statement reflecting the directors' opinion that the report complies with the Corporations Act and relevant ASRS.
To help organisations and directors through the transition, the directors' declaration will be subject to a lower standard for the first three years, which only requires a statement in relation to the entity taking reasonable steps to ensure the climate statements are in accordance with the Corporations Act and the applicable AASB standards.5
