What's the minimum I can get away with? That's one of the most common questions I'm asked when it comes to Australia's new mandatory climate reporting requirements. Not always in those exact words, but some version of that question is clearly on the minds of many.
The question comes from more places than you might expect. Some companies ask because climate just isn't a priority for them right now. Others ask precisely because climate is a priority—and they would rather focus their limited time and resources on reducing their emissions and climate risk than on documenting them.
A more constructive version of the question might be: "What's the right amount to invest in climate reporting?" There is, in theory, no upper limit. Companies could endlessly refine governance structures, pursue ever-more sophisticated scenario analysis, and collect scope 3 emissions data from every company in their supply chain. Conversely, the lower limit does exist, but it's uncertain and different for each company.
Getting the balance right starts with understanding your audience’s expectations—and the risks of not meeting them. This article outlines a framework to help guide that process.
The question comes from more places than you might expect. Some companies ask because climate just isn't a priority for them right now. Others ask precisely because climate is a priority—and they would rather focus their limited time and resources on reducing their emissions and climate risk than on documenting them.
A more constructive version of the question might be: "What's the right amount to invest in climate reporting?" There is, in theory, no upper limit. Companies could endlessly refine governance structures, pursue ever-more sophisticated scenario analysis, and collect scope 3 emissions data from every company in their supply chain. Conversely, the lower limit does exist, but it's uncertain and different for each company.
Getting the balance right starts with understanding your audience’s expectations—and the risks of not meeting them. This article outlines a framework to help guide that process.
1. Identify your audience
Before deciding how much to invest in climate reporting, you need to identify who your report is for. Understanding the different groups who will read, interpret, or rely on your sustainability disclosures is essential to determining the appropriate level of detail and effort.
Investors
Investors are the primary audience for these new reports, including shareholders and lenders. For privately held companies, this group may consist of just a few individuals or institutions. Publicly listed companies, by contrast, must consider a broader and continually changing base of shareholders, each with varying levels of interest in climate-related issues.
Regulators
ASIC is the primary regulatory body responsible for enforcing compliance with the AASB S2 sustainability reporting standards. While investors are the intended audience of these reports, many companies are paying closer attention to ASIC's expectations, given its reputation for coming down hard on greenwashing.
Other stakeholders
Sustainability reports will be accessible to the public. Both public and private companies are required to submit these reports to ASIC, which then makes them available for a fee via ASIC Connect. As a result, employees, customers, NGOs, journalists and other stakeholders could all access your report.
2. Understand their expectations
Once you've identified your audience, the next step is to understand what they expect from your sustainability disclosures. Expectations can vary widely both between and within groups of stakeholders.
Investors
Investors are increasingly integrating climate risk into decision-making. They expect disclosures that are relevant, comparable, and decision-useful. Institutional investors, in particular, are increasingly asking for detailed scenario analysis, emissions targets, and transition planning.
Investor expectations are shaped by precedent. What your company has done in the past will influence how current disclosures are perceived. Similarly, disclosures by your industry peers set informal benchmarks that many investors use to gauge your relative performance.
Regulators
ASIC has released regulatory guidance outlining how they interpret AASB S2 and intend to enforce its adoption. However, the guidance is high-level where many were hoping for something more prescriptive.
One of the challenges is that the bar is different for each company. The AASB S2 standards regularly refer to taking an approach that is commensurate with the company's exposure to climate-related risks and "the skills, capabilities and resources available". That's reasonable but it's left most asking what exactly it means for them.
Unfortunately, we're not going to know exactly what ASIC's expectations are until after the first reports are released and scrutinised by the regulator. In the meantime, expert opinion and examples by early adopters offer the best available guide. Companies would be wise to err on the side of caution until expectations become clearer—especially those with early reporting obligations or high climate exposure.
Other stakeholders
The general public, advocacy groups, and employees often expect companies to show that they are taking climate change seriously and acting responsibly. These stakeholders may focus more on the tone, ambition, and perceived sincerity of your disclosures than the technical details.
Expectations are typically higher for companies that are publicly listed, consumer-facing, or operating in sectors with obvious climate exposures—such as those involved in the extraction, processing, transport, or consumption of fossil fuels.
3. Weigh the risks of falling short
Understanding the consequences of not meeting stakeholder expectations is critical. The risks vary depending on your audience and the nature of the shortfall.
Investors
Failing to meet investor expectations on climate disclosures can lead to reduced access to capital, higher borrowing costs, or an increased cost of equity. For example, this study demonstrated that Australian stock market investors allocate more capital to companies with more complete climate risk disclosures while this study found higher valuations and this study a lower cost of capital for those that voluntarily disclose more climate-related information.
More practically, insufficient climate disclosures could lead investors to ask tougher questions. These might include demands for greater transparency, requests for supplementary information, or scrutiny of your assumptions and methodologies. Even if there's no immediate financial repercussion, it can consume time, strain investor relations, and raise doubts about how well your company is managing climate risk.
Regulators
Climate disclosures, as part of the annual report, are subject to the same enforcement mechanisms as financial disclosures under the Corporations Act. This includes potential liability for both the company and its directors if disclosures are found to be misleading or incomplete. Companies can face civil penalties of up to $15.65 million per contravention, while directors can be fined up to $1.565 million. In more serious or aggravated cases, penalties may be higher, and criminal prosecution is also possible depending on the nature and intent of the breach.
In practice, however, the more likely outcome is that ASIC will require companies to simply do more work. This could mean requests for additional information, explanations of the approach taken, revisions to the report, or clearer disclosures in future reporting cycles.
Many companies are concerned about ASIC, given its strong enforcement stance on greenwashing. However, ASIC has indicated it intends to take a "pragmatic and proportionate" approach to regulating sustainability reporting.
Other stakeholders
During the initial transition period, certain forward-looking statements in sustainability reports—such as climate scenarios, transition plans, scope 3 emissions, and emissions reduction targets—are protected from private litigation. This modified liability regime applies for the first three years in most cases and means that only ASIC can bring enforcement action related to these specific disclosures during that time. The aim is to give companies time to build capability and improve the quality of reporting without the immediate risk of private legal action.
However, this protection does not shield companies from reputational consequences. A report that reveals inadequate climate governance, lacks credible emissions reduction targets, or otherwise falls short of stakeholder expectations may still lead to negative media attention, employee disengagement, or public criticism.
At this point, you might be thinking, "Hey, you didn't answer the question!" And that's fair—this article doesn’t spell out the minimum reporting requirements. But I’ll get into those details in the next article.
I started here because it’s important to get the framing right. How much effort you put into climate reporting is ultimately a judgement call. Lawyers and consultants can help guide you, but we tend to err on the side of doing more rather than less. If you've read this far, it may be because you’ve received a daunting quote for full compliance. If that’s the case, I hope you now feel better equipped to assess where you can scale back—and where a more robust approach may be worth the investment.
