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Australia's ESG landscape: Preparing for mandatory climate disclosures by 2025

Written by Matthew Thompson

 

 

The importance of Environmental, Social and Governance (ESG) criteria has grown significantly worldwide, reshaping how businesses operate and comply with regulations. In Australia, this shift is increasingly driven by new regulatory requirements, including new mandatory climate-related disclosures starting in 2025.

 

 

This article explores the key concepts of ESG, the current legislative framework, and the future of Australia’s regulations as businesses strive to align with global standards for sustainability and compliance.

 

 

 

 

What exactly is ESG?

 

Environmental, Social and Governance (ESG) represents a commitment by businesses to operate transparently, act responsibly towards the environment and society and uphold strong governance standards. The key areas include:

 

  1. Environmental (E): This aspect evaluates how a company manages its environmental impact, including energy use, carbon emissions, climate change response, waste management and resource conservation. Companies are also assessed on their environmental risks and how they manage them, such as their response to climate change.

 

  1. Social (S): This focuses on a company’s relationships with employees, suppliers, customers and communities, addressing issues like labour practices, diversity, human rights and social responsibility. It assesses how companies manage social justice and human capital.

 

  1. Governance (G): Governance examines a company’s leadership, ethical practices, transparency, and management of conflicts of interest. It also oversees how companies integrate environmental and social responsibilities into their strategic frameworks.

 

 

 

 

 

Legislative requirements for ESG in Australia

 

In Australia, several pieces of legislation, including Acts and regulations, relate to each of the ESG categories. Here is a brief overview of some of this legislation:

 

  1. Environmental
    • Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act): This is the primary piece of federal environmental legislation in Australia. It provides a framework for the protection of the environment, including biodiversity, heritage and the management of natural resources.
    • National Greenhouse and Energy Reporting Act 2007 (NGER Act): This Act requires certain companies to report their greenhouse gas emissions, energy production and energy consumption. It forms the basis for Australia’s carbon reporting obligations.
    • Recycling and Waste Reduction Act 2020 (RAWR Act): This Act provides a framework for managing Australia’s recycling and waste reduction objectives. A key objective of the Act is to encourage the development of a circular economy, including through product stewardship.

 

Although it doesn’t contain set requirements for people or organisations, the Climate Change Act 2022 sets out Australia’s greenhouse gas emissions reduction targets.

 

  1. Social
    • Fair Work Act 2009: This is the key legislation governing workplace relations in Australia. It covers minimum wages, working conditions, unfair dismissal and the rights of workers.
    • Workplace Safety Legislation (WHS/OHS): Each state in Australia has their own workplace health and safety legislation, largely based on the Model WHS laws (except in Victoria). The legislation provides a framework to protect the health, safety and welfare of all workers at work. It is designed to ensure that workplace environments are safe and that risks are managed appropriately.
    • Racial Discrimination Act 1975 and Sex Discrimination Act 1984: These Acts prohibit discrimination on the basis of race, sex, and other factors. They form part of the broader human rights framework in Australia.
    • Modern Slavery Act 2018: This legislation requires certain entities operating in Australia to report on the risks of modern slavery in their operations and supply chains, and the actions they are taking to address those risks.

 

  1. Governance
    • Corporations Act 2001 (Corp Act): This is the primary legislation regulating companies in Australia, including their incorporation, governance, and reporting obligations. It includes requirements for financial reporting, director duties, and shareholder rights.
    • Australian Securities and Investments Commission Act 2001 (ASIC Act): This Act establishes the Australian Securities and Investments Commission (ASIC) and provides it with powers to regulate company and financial services laws, to protect consumers, investors, and creditors.
    • Privacy Act 1988 (Privacy Act): This Act governs the handling of personal information about individuals, ensuring that companies maintain the privacy and data protection standards required by law.
    • Competition and Consumer Act 2010: This Act addresses anti-competitive practices, consumer protection and fair trading. It also includes provisions related to corporate conduct, which can influence governance practices.

 

 

 

 

 

 

ESG obligations covered in Environment Essentials’ products

 

The legislation mentioned above helps to guide companies in Australia on how to incorporate ESG considerations into their operations and reporting. Environment Essentials covers helpful summaries of some of these ESG-related obligations, including:

 

  • requirements to create a safe workplace
  • harassment, discrimination and hostile workplaces
  • prohibitions on taking actions which could have an impact on matters of national environmental significance
  • protection of habitats and communities from interference
  • registration, reporting, and recording requirements under the National Greenhouse and Energy Reporting Scheme and Australian Carbon Credit Unit (ACCU) Scheme
  • product stewardship
  • exporting waste,

and more.

 

You will find the above obligations in your Environmental Essentials subscription under topics such as Psychological Hazards, Product Stewardship, Waste Export, National Greenhouse and Energy Reporting and Biodiversity Conservation, among others.

 

 

 

 

 

The future of Australia’s regulations

 

However, the current legislation and subsequent obligations are just the beginning. The Australian government recently proposed new requirements for climate-related financial reporting, and sought feedback on multiple consultation documents including an exposure draft of the legislation in 2024. This was discussed in detail in our previous article on Australia’s proposed climate-related financial reporting system.

 

 

Since then, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 has been released and passed, introducing standardised, internationally‑aligned reporting requirements for businesses, to ensure they are making high quality climate‑related financial disclosures.

 

 

Reporting requirements will begin on 1 January 2025 for Australia’s largest companies, with other businesses and financial institutions to be gradually phased in over time.

 

 

In addition, the Australian Treasury has released the sustainable finance roadmap, setting out its vision for the implementation of key sustainable finance reforms and related measures.

 

 

 

 

 

 

Other noteworthy strategies

 

While ESG serves as a broader framework for managing a company’s overall impact and sustainability, it is closely related to other strategies, including Corporate Social Responsibility (CSR), Governance, Risk, and Compliance (GRC), Environment, Health, Safety, and Sustainability (EHS&S), and Ethics & Compliance (E&C). These strategies can support the successful implementation of ESG by addressing specific aspects of environmental stewardship, social responsibility, ethical governance, and regulatory compliance, among other things.

 

 

If you don’t have an Environment Essentials subscription but are interested to see how our products can help you further understand ESG obligations, get in touch or sign up for a free trial.

 

 

 

 

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