Understanding Australia's Climate-Related Financial Disclosure Requirements

24 Apr 2025

Australia's new climate disclosure laws turn compliance into a strategic opportunity for sustainable growth

Climate change is not just an environmental issue; it’s a financial one, too. For Australian companies, this connection is becoming more apparent with the introduction of climate-related financial disclosure obligations. Designed to increase transparency, manage risks, and seize opportunities, these requirements are not just about compliance but also a strategic moment for businesses to adapt, grow, and stay competitive in a changing market.

This blog post will break down what Australia’s climate-related financial disclosure requirements entail and why they matter to your business.

1. What Are Climate-Related Financial Disclosures?

Climate-related financial disclosures involve reporting the risks, opportunities, and financial impacts of climate change on a business. This process is crucial as it encourages organizations to integrate climate-related considerations into their decision-making.

These disclosures are guided by recommendations initially developed by the Task Force on Climate-Related Financial Disclosures (TCFD), which have been incorporated by the International Sustainability Standards Board (ISSB). Now, Australia is aligning its own reporting obligations with these global benchmarks.

Key elements of the disclosure legislation include:

• New local standards: Following the new accounting standards from the Australian Sustainability Reporting Standards (ASRS), namely the Australian Accounting Standards Board (AASB) S1 and S2, that are closely aligned with the ISSB standards, companies will be required to report under the four pillars of governance, risk management, strategy, and metrics and targets. This ensures that the disclosures are consistent and comparable, and focused on financial relevance.
• Greenhouse Gas (GHG) Emissions Disclosure: Companies will be required to report Scope 1 and 2 emissions from the first year, and Scope 3 emissions thereafter.
• Assurance Requirements: Companies must obtain limited assurance for their climate-related disclosures for the first year, progressing to reasonable assurance from the fourth year onwards.
• Climate Scenario Analysis (CSA): Companies will be required to model two potential future scenarios to understand how climate-related risks may impact financial performance under different climate conditions.

2. Did You Know?

Did you know that preparing for the first disclosure report could take up to 8 months? Any disclosure begins with materiality assessment and GHG accounting, both of which require a substantial amount of data. We’ve seen companies take over 12 months to prepare their first disclosure report due to breakdowns in their data collection process, challenges understanding the legal requirements, and roadblocks in internal communications.

We have found that almost half of Australian companies are still trying to understand their legal disclosure requirements; only a quarter are calculating GHG emissions, and even less are engaged in some form of GHG assurance. Only 1 out of 5 companies are actively incorporating climate-related disclosures into their strategy to maximize company performance and profitability.

3. Thinking Beyond Compliance

While it may initially appear as just another regulatory hurdle, this disclosure legislation represents enormous opportunities for growth and competitive advantage. By proactively incorporating climate-related factors into business strategy, companies can achieve the following benefits:

• Resilience: Prepare for volatility by mitigating the risks associated with extreme weather events or changing policies.
• Cost Savings: Save on operating costs by investing in energy efficiency and renewable resources.
• Appeal to Stakeholders: Attract environmentally conscious investors, customers, and top-tier talent.

These efforts often result in stronger long‑term revenue growth and profitability, while positioning companies as leaders setting the benchmark for sustainable success.

4. The Disclosure Process

The disclosure process does not need to be uncertain or unclear

1. Start off with familiarizing yourself with the AASB standards to understand what needs to be reported.
2. Conduct a gap analysis of your current processes. Identify what is already in place and what is missing.
3. Perform a single materiality assessment to identify topics that have a material impact on the company, taking into consideration at least two potential climate scenarios.
4. Start tracking key metrics like Scope 1, 2, and 3 emissions in alignment with the GHG Protocol Standards. Scope 3 can be particularly challenging but is vital for many industries, especially those with extensive supply chains.
5. Obtain limited and reasonable assurance as required to solidify stakeholder trust. Your sustainability report should provide clear, decision-useful information, detailing the financial impact of climate risks and opportunities on your company.

Are You Ready to Start Now?

This shift in reporting is about much more than ticking regulatory boxes. Companies that seize the opportunity to integrate sustainability into their strategies can future-proof their operations while contributing to a low-carbon economy.

The path to compliance may appear complex, but starting early allows businesses to better handle challenges, invest in data infrastructures, and align governance models with sustainability goals.

The Intertek Advantage

Intertek can support you at every stage of your disclosure journey. We’ve helped companies around the world overcome disclosure challenges by identifying where to start, conducting GHG accounting and assurance, engaging suppliers, setting decarbonization targets and strategies, and preparing effective reports. Contact us today to speak with our experts.