Mandatory climate reporting in Australia: six lessons from first-wave reporters

KEY TAKEAWAYS

• Australia’s first wave of mandatory climate reports gives Group 2 and Group 3 entities a clearer view of what strong reporting requires in practice. 
• The six lessons below point to a common theme: effective reporting depends on early decisions, clear documentation and assurance-ready processes. 
• Organisations should start early by mapping existing reporting, governance, risk and emissions data before building anything new. 
• Scenario analysis should help inform strategy and decision-making, not just satisfy a technical reporting requirement. 
• As assurance requirements increase, defensible judgement calls and clear audit trails will become more important. 

 

BACKGROUND

Mandatory sustainability reporting is well underway in Australia. Large and medium-sized entities are all now either reflecting on their first report, busily preparing it, or at the start of their first reporting year. Australia is among the first major economies to mandate, through primary legislation, climate disclosure aligned to the International Sustainability Standards Board (ISSB). As such, a cohort of Australian boards, finance teams, and sustainability functions have done something most of their international peers are still preparing for. 

The Australian Securities and Investments Commission (ASIC) recently shared its observations from the first cohort of reporters, Group 1, noting a general increase in the standard of reporting at least compared to those who had previously produced voluntary reports, and providing a series of recommendations for future improvements. We supported a number of the first cohort with their reports and share six lessons for Group 2 and Group 3 reporters: 

 

LESSON 1: REPORTING AMBITION OFTEN SHIFTS, AND MANY ORGANISATIONS SETTLE ON “COMPLIANCE PLUS” 

Reporting entities have often taken time to decide on their level of ambition, whether it is “international best practice,” “minimum viable product,” or some level in between. Different parts of an organisation may not see the sustainability reporting process in the same way. Views may vary on the aims of the process, the intended use of the final report, and on the necessary pace of organisational change that comes with this new regime.

Planning for a multi-year process of continual improvement is especially important in a regime which removes adoption relief provisions, drops modified liability protections, and increases assurance requirements over time.    

Most reporting entities have sought a phased approach that allows them to make achievable gains, deliver decision-useful information to stakeholders, and improve institutional capacity over time. For example, taking “no regrets” actions to improve: 

• governance processes, including further director training, skills matrices, and executive reporting lines;  
• risk management, including identifying climate risk controls that may previously have been unacknowledged within the organisation; and 
• data and evidence gathering within an organisation and its value chain (even if that gathered information is not yet at a stage that it can or should be disclosed). 

It is important to lay the foundations for successful, repeatable, and cheaper reporting in future years.  

 

LESSON 2: ADDRESS RESOURCING BEFORE YOU DECIDE ANYTHING ELSE 

A first mandatory sustainability report is a coordination problem as much as a technical one. It often requires organisations to gather information from operations, the supply chain, finance, risk, the executive, and board, as well as in-house legal, external assurance providers, specialist sustainability consultants, and external counsel. 

Though the result should be that an entity incorporates sustainability reporting as part of its standard internal financial reporting processes, this capacity takes time to build.  

Reporting entities should make resourcing the first decision. This means identifying the time, capability and executive sponsorship needed to ensure that input is collected from across the business in a timely manner. It also means designing a process that can be easily verified. 

 

LESSON 3: CONVERT EXISTING REPORTING; DO NOT START FROM SCRATCH 

Most Group 1 entities already had some voluntary climate content collected for the National Greenhouse and Energy Reporting (NGER) Scheme, including: 

• a statement aligned to the Task Force on Climate-related Financial Disclosures (TCFD); 
• sustainability narrative in their annual report;  
• climate-related risks included in their existing risk management framework;  
• climate-related opportunities included in their commercial strategy; or  
• emissions data.  

The efficient path to producing a mandatory sustainability report was to map existing material against the standard, identify the genuine gaps, and build only what was missing. The entities that treated the first report as a blank page spent time and budget rebuilding things they already had. The intersection of existing voluntary reporting and the new mandatory requirements is usually the fastest route to a compliant disclosure. 

 

LESSON 4: APPROACH SCENARIO ANALYSIS AS A STRATEGY CONVERSATION, NOT A MODELLING EXERCISE 

Scenario analysis has often been a new challenge for organisations. The analysis process does not require precision forecasting. It requires the organisation to think rigorously about how different climate futures would affect the business and its value chain.  This analysis should be documented and feed into an organisation’s assessment of its climate-related risks and opportunities, as well as the transition planning aspects of its strategy. Done well, scenario analysis can improve reporting entities’ resilience and unlock new commercial opportunities.

 

LESSON 5: DOCUMENT JUDGEMENT CALLS AS THEY ARE MADE, ESPECIALLY UNDUE COST OR EFFORT 

Australian Accounting Standards Board (AASB) S2, Australia’s mandatory climate-related financial disclosure standard, contains proportionality mechanisms, including the requirement to use reasonable and supportable information available without undue cost or effort. These proportionality mechanisms can be difficult to apply in practice, and as ASIC observed, early reporting entities have taken varied approaches to what that threshold means in practice. We welcome the government’s proposal to clarify the practical application of the key concepts to improve consistency and reduce uncertainty. 

The lesson is not to find the single correct answer. It is to make the judgement deliberately and record it. Where an organisation has relied on a proportionality mechanism, has made a materiality call, or has drawn a reporting boundary, its reasoning needs to be accessible and defensible.  

 

LESSON 6: EXPECT ASSURERS TO TEST THE BOUNDARIES 

Unlike other jurisdictions, the Australian sustainability-reporting regime has assurance requirements from the outset, with requirements increasing over the initial years of the regime. 

Over this year, as entities and assurers apply the requirements in practice for the first time, we have seen a variety of approaches taken to assurance issues. 

Reporting entities should expect to be challenged on their judgement calls and documentation of the key issues disclosed in their sustainability reports.  

These lessons point to a common thread that strong reporting is built deliberately over several cycles, not assembled once under deadline pressure. 

 

HOW WE CAN HELP 

Over the past two years, we have supported Australian organisations through the first cycle of mandatory climate reporting, so we understand where the key legal, governance, and practical implementation issues arise. Our team has both legal and advisory capability, helping clients move from interpretation to delivery with a coordinated and defensible approach. 

We support clients across the reporting lifecycle, including: 

• Understanding applicability and directors' obligations; 
• Resourcing and project-managing the reporting effort; 
• Setting an appropriate reporting ambition for year one and beyond; 
• Converting existing voluntary reporting into compliant Australian disclosures; 
• Designing proportionate approaches to scenario analysis, governance, and risk management; 
• Documenting materiality, boundary, and proportionality judgements so they are defensible; and 
• Providing legal review and opinions to support engagement with auditors and assurers. 

Clients value clear, pragmatic advice on the reporting regime and its intersection with directors’ duties, greenwashing risk, and governance. They also benefit from our international experience across comparable regimes in the UK, European Union, New Zealand, and the broader Asia-Pacific region. 

Whether you are preparing your first report, refining your second, or getting ahead of your reporting requirement for next year, please get in touch.