Treasury considers easing climate reporting requirements

It has outlined proposals to reform the climate-related financial disclosure framework, which is based on standards issued by the International Sustainability Standards Board, following international developments and early stakeholder feedback.

It said these developments suggested that certain tweaks to the sustainability reporting regime could reduce compliance costs while maintaining the quality, consistency, and international comparability of reporting.

Mandatory climate reporting began for Australia’s largest emitters in January 2025 under Australia’s AASB S2 standard. They must include climate-related disclosures in their annual reports to encourage investment in the transition to a net-zero economy.

The regime phased entities into three groups based on consolidated revenue, gross assets, and employee thresholds. Group 1 entities were impacted first and meet two out of three threshold requirements: 500 employees, $500 million in revenue, or $1 billion in assets.

Group 2 medium-to-large entities that meet two out of three criteria ($200 million in revenue, $500 million in assets, or over 250 employees) started reporting on 1 July 2026. The remaining Group 3 entities must begin reporting on or after 1 July 2027. They must meet two of the following criteria: over $50 million in revenue, assets over $25 million, or over 10 employees.

However, since the regime began in 2025, Treasury has indicated that entities have found it challenging, particularly if they have no prior experience in sustainability reporting.

Keeping the limited assurance requirement

As such, Treasury has outlined several proposals to improve the efficiency of reporting requirements, including maintaining the limited assurance requirement instead of moving to reasonable assurance across all disclosures by 2030.

This would require independent review of climate-related financial disclosures while recognising the practical challenges of assuring climate-related information.

“While reasonable assurance may strengthen confidence in sustainability disclosures over time, maintaining limited assurance as the mandatory requirement would better align compliance expectations with current market capability and data maturity,” Treasury said in its consultation paper.

The second option proposed is to delay the transition to reasonable assurance until 2035 to give companies additional time to build mature sustainability reporting systems and processes. This would improve the quality of data for reasonable assurance while easing the undue burden that companies could face if reasonable assurance is introduced in 2030, the paper said.

Treasury explained that this balances the need to preserve the long-term policy objective of strengthening disclosure reliability with the challenges of implementation during the regime's establishment phase.

The third proposal is to introduce a two-tier assurance model, where assurance requirements would match the maturity of underlying sustainability metrics and reduce reporting requirements in a “proportionate and practical manner”.

Under this approach, entities whose data availability and maturity meet a “defined baseline standard” would be required to transition from limited to reasonable assurance.

“For example, this could involve requiring reasonable assurance for Scope 1 and Scope 2 emissions disclosures, while Scope 3 emissions disclosures could continue to be subject to limited assurance,” the paper said.

While Scope 1 emissions refer to direct emissions and Scope 2 emissions refer to indirect energy emissions, Scope 3 refers to indirect greenhouse gas emissions across the broader upstream and downstream value chain, including supply chains, product use, and financed emissions. Scope 3 reporting began this year.

Industry responds to the proposals

Responding to the consultation paper, carbon accounting platform Avarni co-founder, Misha Cajic, noted that Treasury has made it clear that it is “not seeking views on changes to Scope 3 emissions reporting requirements or the entities required to report under the regime". He said this means that businesses still must produce “genuine and defensible Scope 3 numbers”.

“We find the challenge is never the calculation itself. It's being inundated with information across different systems and formats, from invoices to supplier records to data-led activity across different business streams,” Cajic said.

“Delaying or softening the assurance rules doesn't mean companies get to stop doing the underlying data work. Now is the right time for businesses to get their data in proper shape."

The Australian Chamber of Commerce and Industry (ACCI) welcomed what it called a “red tape review”, and said Treasury's consultation paper, along with the Productivity Commission’s review into non-financial reporting, was a positive step towards reducing unnecessary compliance costs.

As part of the consultation process, ACCI said it will push to remove mandatory Scope 3 emissions reporting requirements.

“Reporting Scope 3 emissions creates significant compliance costs and administrative burdens that flow through supply chains and traps small businesses in a regulatory nightmare,” ACCI chief executive Andrew McKellar said.

"Many small businesses will be expected to provide complex emissions data, despite having little ability to measure it accurately and no clear evidence that the additional reporting will lead to better environmental outcomes.”

The Australian Sustainable Finance Institute said it is vital to cut unnecessary costs without diluting the quality of information the market relies on.

It called for proportionate assurance settings, clearer guidance on concepts like undue cost or effort, and clearer boundaries on supplier information requests to address practical implementation challenges, particularly for small businesses.