Why are Australian companies slow to adopt ESG and climate disclosures?

As climate disclosure regulations tighten worldwide, Australian businesses are under increasing pressure to integrate Environmental, Social, and Governance (ESG) principles into their operations. However, many companies remain slow to act, despite looming regulatory requirements, including the new AASB S1 and AASB S2 climate disclosure standards.

Understanding the hesitation

Several key factors contribute to the reluctance of Australian companies to fully embrace ESG and climate reporting:

1. Lack of regulatory urgency until now
   For years, ESG initiatives in Australia were largely voluntary, leading to inconsistent adoption across industries. The introduction of AASB S1 and AASB S2 represents a major shift, but many organisations are only now realising the full extent of their compliance obligations.
2. Perceived cost and complexity
   Many businesses, particularly small to mid-sized enterprises, see ESG compliance as a costly and resource-intensive exercise. The need for data collection, reporting systems, and governance structures can appear overwhelming without the right guidance.
3. Short-term financial focus
   Australian businesses often prioritise short-term financial performance over long-term sustainability goals. This focus discourages investment in ESG strategies, as the benefits, such as enhanced stakeholder trust, risk mitigation, and competitive differentiation, are not always immediately tangible.
4. Limited internal expertise
   Few companies have dedicated ESG professionals, meaning responsibility for sustainability and climate reporting often falls on finance, risk, or legal teams unfamiliar with the evolving landscape of climate disclosure requirements. Notably, even some of Australia’s largest banks currently have open Executive ESG positions, highlighting a broader gap in leadership and expertise within the sector.
5. Unclear strategic benefits
   While ESG and climate reporting are increasingly seen as business imperatives, some organisations still struggle to see beyond compliance and recognise ESG as a value creation opportunity. Without clear linkages to revenue growth, operational efficiency, or investor appeal, ESG initiatives can be deprioritised.
6. Australian market focus
   Many industry associations, businesses, and media outlets in Australia tend to focus primarily on domestic market trends. While this local perspective is important, it can also create a selective bias that overlooks the broader global landscape in which businesses operate. Countries like China, Japan, and those across Europe are rapidly advancing their commitments to business and environmental sustainability.

Failing to recognise these global shifts poses a significant risk for Australian businesses. Those that do not adapt may find themselves falling behind, vulnerable to international competition, or even at risk of losing valuable export markets.

Why Directors must act now

The introduction of mandatory climate disclosures marks a turning point for corporate governance in Australia. Directors now have a legal responsibility to ensure their companies assess and disclose climate-related risks, with potential liabilities for non-compliance.

Failure to act could result in:

• Increased regulatory scrutiny and penalties
• Higher capital costs due to ESG risk exposure
• Reputational damage and loss of investor confidence

ESG is about business resilience, not just compliance

While climate reporting requirements may evolve over time due to regulatory revisions and market forces, sustainability should not be seen as just a compliance burden. Instead, ESG should be viewed as a strategy for building a resilient and diversified business. Companies that embed sustainability into their operations are better positioned to withstand economic shocks, adapt to market changes, and drive long-term profitability.

Moreover, Australia’s economic complexity has been in decline, leaving the nation vulnerable to external pressures. By adopting ESG principles, companies can contribute to reversing this trend, fostering innovation, diversifying industry capabilities, and strengthening the nation’s global competitiveness.

Bridging the gap: A practical path forward

For companies unsure where to start, structured tools such as C6 ESG’s Carbon Pulse and Carbon Map can help organisations navigate the transition:

• Carbon Pulse provides a quick assessment of a company’s ESG position, helping leadership teams understand their reporting obligations and available resources.
• Carbon Map offers a structured framework to build internal ESG capabilities, align with compliance requirements, and leverage sustainability for business advantage.

The time for action is now

Australian businesses can no longer afford to delay their ESG strategies and climate disclosure preparations. The regulatory landscape is changing rapidly, and companies that fail to adapt will face increasing risks. By taking proactive steps today, businesses can not only achieve compliance but also unlock new growth opportunities and strengthen their resilience in a changing world.

Directors must take the lead – ensuring ESG is embedded into corporate strategy and leveraging the right tools to make the transition seamless. The future of business in Australia depends on it.