Mandatory climate reporting effective from 1 January 2025

As foreshadowed in our previous article, new mandatory climate reporting came into effect on 1 January 2025. Despite the Coalition's vow to repeal the new laws if it wins the federal election this year, the new sustainability reporting obligations are currently incumbent on large business and financial institutions.

Who is impacted?

This is a significant reform that clients, including developers and Principals under construction contracts, will need to be aware of if they meet the following criteria:

•At least two of the following:

-Consolidated revenue of $500 million or more;

-Consolidated gross assets of $1 billion or more;

-Employees of 500 or more; or

• Registered corporations under the NGER Act 2007 (Cth) who are above the NGER publication threshold in section 13(1)(a).

The group of entities that must participate in climate reporting will expand on 1 January 2026 to lower thresholds of:

• At least two of the following:

-Consolidated revenue of $200 million or more;

-Consolidated gross assets of $500 million or more;

-Employees of 250 or more; or

• All other corporations registered or required to be registered under the NGER Act 2007 (Cth); or

• Registered schemes, registrable superannuation entities and retail corporate collective investment vehicles with assets under management of $5 billion or more.

Finally, the group of reporting entities will again expand on 1 January 2027 to entities with at least two of the following criteria:

-Consolidated revenue of $50 million or more;

-Consolidated gross assets of $25 million or more;

-Employees of 100 or more.

What items require reporting?

The sustainability report must include a climate statement, relevant notes to the climate statement, any mandated regulatory statements, and a directors' declaration.

In the climate statement will require inclusion of (among other things) reporting on scope 1, 2 and 3 greenhouse gas emissions:

-Scope 1 emissions refer to emissions that the entity owns or controls directly.

-Scope 2 emissions refer to emissions that the entity causes indirectly from whether the energy it purchases and uses is produced.

-Scope 3 emissions pertain to emissions that are not generated by the entity itself nor result from activities associated with any owned or controlled assets. Instead, they encompass the emissions for which the entity is indirectly responsible throughout its value chain.

The disclosure obligations, particularly in relation to emissions associated with construction activities, should be taken into consideration by all clients who currently, or will soon, meet the mandatory reporting criteria when contracting for projects in 2025. Although it is already common that a Principal will pass through to the Contractor the obligation to comply with any legislative requirements which are relevant to a project, moving forward parties should ensure that their contracts are sufficiently clear as to the obligations in respect of gathering and supplying data relevant for climate reporting.

For more information on how the new disclosure requirements may impact your organisation, please contact a member of our ESG legal team.