Australia has entered a new era of corporate transparency and environmental responsibility with the introduction of mandatory climate accounting laws. As of January 2025, large and medium-sized Australian businesses, as well as financial institutions, are legally required to disclose detailed information about their climate-related risks, opportunities, and greenhouse gas emissions.

This landmark legislation not only aligns Australia with global sustainability standards but also sets a new benchmark for Environmental, Social, and Governance (ESG) compliance.

The Legal Backbone: What the Law Requires

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 amends the Corporations Act 2001, making climate reporting a legal obligation for thousands of organisations. Under this law, eligible entities must prepare annual Sustainability Reports alongside their financial statements.

These reports must include:

• Material climate risks and opportunities relevant to the business
• Governance processes for managing climate-related issues
• Scenario analysis showing business resilience under at least two climate futures, including a 1.5°C warming scenario and a higher warming pathway
• Detailed greenhouse gas emissions data, covering Scope 1 (direct), Scope 2 (indirect energy), and Scope 3 (value chain) emissions

Directors are personally accountable for these disclosures, and there are significant penalties for non-compliance, including fines that can reach into the hundreds of thousands of dollars. During the initial phase-in period, directors can declare that they have taken “reasonable steps” to comply, but full compliance will be expected as the regime matures.

Who Must Comply and When?

The law is being rolled out in phases, targeting the largest emitters and businesses first:

• Group 1: Entities with 500+ employees, $500 million+ in revenue, or $1 billion+ in assets, and large asset owners, must report for financial years beginning 1 January 2025.
• Group 2: Entities with 250+ employees, $200 million+ in revenue, or $500 million+ in assets, begin reporting from 1 July 2026.
• Group 3: Entities with 100+ employees, $50 million+ in revenue, or $25 million+ in assets, start from 1 July 2027.

Not-for-profits that meet these thresholds are included, while charities are exempt.

ESG Compliance and the Rise of Carbon Accounting Services

With climate reporting now a legal requirement, ESG compliance has shifted from a voluntary practice to a core business obligation. Companies must demonstrate not only their awareness of climate risks but also their proactive management and reporting of these risks. This has led to a surge in demand for carbon accounting services, which support businesses in:

• Accurately measuring and tracking emissions across all scopes
• Developing and implementing emissions reduction strategies
• Ensuring data quality and readiness for independent assurance
• Aligning disclosures with both Australian and international sustainability reporting standards

Carbon accounting services and ESG awards are now essential for companies navigating the complexities of climate reporting, helping them avoid penalties and maintain investor confidence.

Why This Matters for Australian Business

Mandatory climate disclosures are designed to provide investors, regulators, and the public with clear, comparable information about how companies are addressing climate change. This transparency is expected to:

• Direct investment toward more sustainable and resilient businesses
• Encourage innovation in clean technology and emissions reduction
• Help Australia meet its national and international climate commitments

For businesses, the new law is both a challenge and an opportunity. Those that act early to build robust climate risk management systems, engage expert advisors, and integrate carbon accounting services into their operations will be best positioned to thrive in a decarbonizing economy.

Preparing for the Future

The introduction of mandatory climate accounting marks a turning point for Australian corporate governance. Companies should begin by assessing their current climate risk and reporting frameworks, identifying gaps, and seeking professional support where needed. Engaging with carbon accounting services and ESG specialists will be crucial for ensuring compliance, building stakeholder trust, and securing long-term competitive advantage.

Australia’s new climate reporting law is more than regulatory change—it’s a call to action for every business leader committed to sustainability, transparency, and future growth.