Australia has enacted groundbreaking climate reporting regulations requiring businesses to assess their greenhouse gas emissions and develop strategies to address potential climate-related risks.

Approved in 2024, this legislation marks a major overhaul of corporate reporting and director responsibilities, according to the Australian Institute of Company Directors (AICD). The new rules mandate that businesses provide detailed sustainability reports alongside financial statements, including an analysis of how various climate scenarios could affect their operations.

Initially targeting Australia’s largest corporations, the requirements will expand by 2027 to encompass thousands of entities, including corporate and not-for-profit organisations. AICD Managing Director and CEO Mark Rigotti described the changes as a transformative shift in how companies handle mandatory disclosures.

According to ABC.net, Rogotti said: “It’s actually quite a fundamental step change in reporting and there probably hasn’t been as significant a change since 2003, when we moved from sort of domestic financial standards to international financial reporting standards.”

Annual “climate statement”

Under the legislation, businesses are obligated to issue an annual “climate statement” detailing significant climate risks they face, along with their scope one, two, and three greenhouse gas emissions.

They must also provide insights into their strategies, governance frameworks, and risk management approaches related to these risks and emissions.

Additionally, companies are required to assess these risks using various scenarios, including at least a global temperature rise of 2 degrees Celsius and another at 1.5 degrees Celsius.

From now until 2027, the legislation will capture more listed and private companies, as well as a range of superannuation and investment trusts with more than $5 billion of assets under management.