Organisational Focus on ESG in 2025

Jan 29, 2025 | DataESG, ESG

Environmental, Social, and Governance (ESG) requirements are set to play a pivotal role in 2025 as countries, corporations, and investors intensify their focus on climate-related risks and sustainability goals. In Australia, regulatory bodies such as the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) will prioritise climate-related disclosures, including greenhouse gas (GHG) emissions. Below is an overview of the key developments in mandatory emissions reporting for 2025.

Mandatory ESG Reporting

The drive for mandatory ESG reporting stems from government regulations and market demand for increased transparency on environmental impacts. Organisations listed on the Australian Stock Exchange (ASX) are already required to disclose their environmental performance under APRA’s climate risk guidance. In line with Australia’s commitment to achieving net-zero emissions by 2050, the government is phasing in a mandatory reporting framework for climate-related financial disclosures. This will supplement existing annual financial reporting with the introduction of Sustainability Reports.

The phased implementation includes:

  • From 1 January 2025: Group 1 – Large organisations meeting at least two of the following criteria:
    • AUD 500 million+ consolidated revenue
    • AUD 1 billion+ consolidated gross assets
    • 500+ employees
  • From 1 January 2026: Group 2 – Medium-sized organisations meeting at least two of the following criteria:
    • AUD 200 million+ consolidated revenue
    • AUD 500 million+ consolidated gross assets
    • 250+ employees
  • From 1 January 2027: Group 3 – Small organisations meeting at least two of the following criteria:
    • AUD 50 million+ consolidated revenue
    • AUD 25 million+ consolidated gross assets
    • 100+ employees

Australia’s Emissions Reporting Framework

Mandatory reporting on GHG emissions, energy consumption, and production will take effect from 1 January 2025. Oversight of this reporting is managed through the National Greenhouse and Energy Reporting (NGER) scheme under the Clean Energy Regulator (CER). Entities exceeding defined thresholds will need to comply.

Reporting Thresholds:

  1. GHG Emissions: Entities emitting 25,000+ tonnes of CO2-equivalent annually.
  2. Energy Consumption/Production: Organisations consuming or producing 100 terajoules (TJ) or more annually.
  3. Industry-Specific Intensity: Certain activities, such as coal mining or oil extraction, may require reporting regardless of thresholds.

Reporting obligations may extend to entities controlling facilities that exceed these limits.

Reporting Process

What to Report:

  • Scope 1 Emissions: Direct emissions from owned or controlled sources (e.g., vehicles, industrial processes).
  • Scope 2 Emissions: Indirect emissions from purchased electricity, heat, or steam.
  • Scope 3 Emissions (Voluntary): Indirect emissions within the value chain (e.g., suppliers and product usage).
  • Energy Production and Consumption: Details of energy usage, including renewables.

When to Report:

  • The reporting year aligns with the Australian financial year (1 July – 30 June).
  • Reports must be submitted by 31 October following the end of the reporting year.

Consequences of Non-Compliance

Failing to meet mandatory reporting obligations can result in significant penalties, reputational damage, and diminished investor confidence. The Clean Energy Regulator can impose fines of up to:

  • AUD 66,600 for individuals
  • AUD 333,000 for corporations

Mandatory emissions reporting in 2025 signifies a significant step towards addressing climate change and aligning businesses with global sustainability goals. Companies must prepare to meet these stringent requirements by aligning with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD).
For tailored advice on compliance, organisations are encouraged to consult with legal experts or sustainability consultants specialising in ESG reporting.

Sources

Task Force on Climate-related Financial Disclosures (TCFD):

  • TCFD framework since it’s a global benchmark for climate-related disclosures, and Australia’s framework is heavily influenced by it.
  • Source: TCFD Official Website

Australian Prudential Regulation Authority (APRA):

  • Include APRA’s guidelines on climate risk management for organisations, which highlight mandatory disclosures for ASX-listed entities.
  • Source: APRA Climate Risk

Clean Energy Regulator (CER):

  • Reference the CER’s official guidelines on the National Greenhouse and Energy Reporting (NGER) scheme for mandatory reporting details.
  • Source: CER NGER Reporting

Australian Government’s Net-Zero Plan:

KPMG’s Sustainability Reporting Survey 2024:

  • Reference for the percentage of Australian businesses already reporting sustainability metrics.
  • Source: KPMG Sustainability Reporting

Herbert Smith Freehills ESG in Australia Report: