What is Sustainability Reporting
As of the 1st of January 2025, sustainability reporting became mandatory for Australian businesses in order to increase accountability around sustainability and carbon footprint. These new regulations require certain businesses to disclose climate-related risks, threats, and opportunities in the form of an annual report. As well as being a legal obligation, adhering to these mandates can help your organisation position itself as a sustainability leader to staff, stakeholders, and investors.
Who is required to report?
Entities that meet at least two of the following thresholds will be subject to the requirements:
Group 1 (from 1 July 2025)
- Consolidated revenue of $500 million or more
- Gross assets of $1 billion or more
- 500 or more employees
Group 2 (from 1 July 2026)
- Consolidated revenue of $200 million or more
- Gross assets of $500 million or more
- 250 or more employees
Group 3 (from 1 July 2027)
- Consolidated revenue of $50 million or more
- Gross assets of $25 million or more
- 100 or more employees
In addition, an entity will be subject to the requirements if it:
- Is a registered corporation under the NGER Act, or is required to apply for registration under the Act; or
- Is an asset owner—including registrable superannuation entities, registered schemes, and retail Corporate Collective Investment Vehicles (CCIVs)—with assets (including those of controlled entities) of $5 billion or more at the end of the financial year.
Exemptions
The following entities would be exempt:
- Small businesses that fall below the relevant size thresholds
- Entities that are exempt from lodging financial reports under Chapter 2M of the Corporations Act (e.g. ACNC-registered Australian charities and not-for-profits)
The Cost of Inaction
If your business does not adhere to sustainability reporting requirements, you may be subject to ESG non-compliance penalties. Your organisation may face legal, financial, and reputational ramifications, as carbon accounting is now legislated as part of the Corporations Act 2001. Penalties for non-compliance include:
Fines and Sanctions
If an organisation does not comply with regulations, fines can apply, particularly for large and listed businesses. Fines apply for ignoring sustainability mandates and for not following specific instructions around the annual report. CEO’s and directors may be personally liable for more severe consequences, such as prison sentences or greater fines.
ASIC Enforcement
The Australian Securities and Investments Commission (ASIC) can take action against organisations that publish misleading or falsified reports. If a business makes exaggerated or false claims in its annual report, ASIC can pursue legal action, which can subsequently result in fines.
Operational Risks
Sustainability reporting helps organisations identify the impact of their operations on climate change and can help pave the way forward to improve their carbon footprint. Businesses not disclosing all carbon-related risks and opportunities can leave them unprepared for the future.
Reputational Damage
There is an increasing focus and interest from stakeholders and investors on sustainability within organisations, so not disclosing activity may result in damage to your organisation’s reputation. This may make it more difficult to attract employees, clients, and investors.
Conclusion
The consequences for non-compliance range from legal to financial to reputational, and it is imperative that organisations adhere to mandates. Sustainability reporting is not just a legal obligation, it is also an opportunity to improve your carbon footprint and organisational reputation. Compliance avoids penalties, while positioning your organisation as a sustainability leader and reducing overall impact on climate change.
Get Started Today
For more information about compliance, regulations, and how to proceed with carbon accounting, speak to one of our consultants today. Contact us by filling out the form below today and learn how we can help your business navigate these mandates and thrive in the new era of sustainability reporting.
