Australia’s landmark climate legislation: What you need to know

On September 9th, 2024, Australia’s House of Representatives passed the Treasury Laws Amendment bill, marking a transformative shift in the country’s climate policy landscape. This legislation introduces mandatory climate-related reporting requirements for large and medium-sized companies and establishes the Net Zero Economy Authority, setting a new standard for environmental accountability and economic transition.

Mandatory climate-related reporting requirements

The new law, which follows the Senate’s approval in August, will require companies to disclose their climate-related risks, opportunities, and greenhouse gas emissions across their value chains.

Initially set to commence in July 2024, the reporting requirements have been slightly delayed to January 2025, giving businesses time to adapt. This legislation aligns closely with the International Sustainability Standards Board’s (ISSB) standards and will be enforced by the Australian Accounting Standards Board (AASB) and the Australian Auditing and Assurance Board (AUASB), who are finalising the relevant standards and assurance guidelines.

The initial reporting obligations apply to all public companies and large proprietary companies meeting specific thresholds: those with over 500 employees, revenues exceeding $500 million, or assets greater than $1 billion. Medium-sized companies (with 250+ employees and $200 million+ revenue) will start reporting in July 2026, while smaller companies will follow a year later.

A phased approach to Scope 3 reporting – covering indirect value chain emissions – will be introduced, with companies receiving an additional year to report and three years of protection from litigation regarding these disclosures.

Establishment of the Net Zero Economy Authority

In addition to the reporting requirements, the legislation also saw the establishment of the Net Zero Economy Authority. This new body will guide Australia’s economic transformation towards net zero emissions by 2050, focusing on reskilling workers for the energy transition, coordinating with industry and investors, and supporting communities in adopting clean energy technologies.

Introduced in May 2023, the Authority will play a critical role in achieving Australia’s climate targets: reducing greenhouse gas emissions by 43% by 2030 and reaching net zero by 2050. MP Patrick Gorman, Assistant Minister for the Public Service, emphasised the Authority’s importance in supporting workers and regions, stating that it is “good for workers, good for regions, and helps Australia reach net zero by 2050.”

Investor reactions

Investor groups have warmly welcomed the new legislation. The Australian Council of Superannuation Investors (ACSI) expressed their support, highlighting how the mandatory disclosures will provide clearer insights into companies’ climate risks and opportunities, thus enhancing investment processes and risk assessment.

So, what does this mean for Australian business?

Australia’s new climate legislation represents a significant advancement in climate governance, aligning with global standards and fostering a more sustainable business environment.

As companies begin to prepare for these requirements, they will not only contribute to global climate goals but also gain valuable insights into their environmental impact and opportunities for growth in the evolving green economy.

Stay tuned for further updates on how these changes will shape the future of corporate sustainability and economic transformation in Australia.