Environmental, Social, and Governance (ESG) reporting is no longer optional for Australian businesses. With new mandatory climate-related financial disclosures coming into effect, SMEs must now align their sustainability reporting with both national and international standards. Done well, ESG reporting not only ensures compliance but also drives stakeholder trust, risk management, and long-term growth.
Key Takeaways
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SMEs in Australia face mandatory climate-related reporting obligations under the Treasury Laws Amendment Bill 2024.
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ESG reporting frameworks like GRI, SASB, and ISSB support compliance and improve transparency.
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Strong ESG reporting helps SMEs manage risks, attract investment, and build resilient supply chains.
Introduction to ESG Reporting
ESG reporting allows businesses to disclose their economic, environmental, and social impacts in a structured and transparent way. ESG reporting in Australia has evolved from earlier concepts of corporate social responsibility, which emphasized business responsibilities beyond profit and considered broader social and environmental impacts. In Australia, ESG reporting is evolving quickly due to stronger sustainability reporting requirements.
The Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide recognized frameworks that align with international sustainability standards. Locally, the Australian Accounting Standards Board (AASB) issues sustainability standards to ensure compliance across industries. Compliance with Australian standards, including recent updates and alignment with international standards such as IFRS, is increasingly important for regulatory and reporting consistency.
With the Treasury Laws Amendment Bill 2024, certain Australian companies must now include climate-related financial disclosures in their reports. This shift means SMEs must build reporting systems that capture climate-related risks and opportunities while also ensuring alignment with Australian sustainability reporting standards.
ESG Reporting Framework
The foundation of ESG reporting in Australia lies in recognized frameworks and standards.
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The AASB issues sustainability standards that guide local companies.
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The International Sustainability Standards Board (ISSB) integrates SASB standards to create a unified global framework.
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Frameworks such as GRI and SASB help SMEs measure, benchmark, and communicate sustainability performance.
For SMEs, adopting these reporting frameworks ensures consistency, comparability, and compliance with both national and international expectations, as ESG information is reported in accordance with these frameworks to ensure transparency and comparability.
Climate-Related Disclosures
The Treasury Laws Amendment Bill 2024 makes climate-related disclosures mandatory for many Australian companies. These reporting obligations apply to certain entities, including listed entities and financial institutions, based on size and consolidated revenue thresholds. SMEs that fall under reporting obligations must disclose:
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Physical climate-related risks, such as extreme weather and resource shortages.
Reporting requirements are phased in for different groups of entities, with implementation dates based on financial years and consolidated revenue.
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Transition risks, including regulatory changes and shifts in market expectations.
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Climate-related opportunities, like new technologies and low-carbon supply chains.
Financial institutions must also report on financed emissions as part of their climate-related disclosures.
The Australian Securities and Investments Commission (ASIC) oversees compliance, ensuring transparent disclosures. Scenario analysis is strongly encouraged, helping businesses anticipate risks and opportunities under different climate pathways, including those aligned with pre-industrial levels of global warming.
ESG Report Requirements
Australian ESG reports must meet sustainability reporting requirements and contain clear climate statements. A sustainability report is a key component of ESG reporting and must comply with legal and regulatory requirements, including those set out under the Corporations Act and ASIC regulations. These reports should include:
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Climate-related financial risks and opportunities tied to materiality assessment.
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Greenhouse gas emissions, energy consumption, and data from the National Greenhouse and Energy Reporting (NGER) system.
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Governance issues, human rights, and modern slavery reporting obligations.
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Assurance statements, supported by the Auditing and Assurance Standards Board.
SMEs should provide either limited assurance or reasonable assurance on their ESG reports to demonstrate accuracy and credibility.
Annual Reporting
Under the Corporations Act 2001, the annual financial report must now include ESG information, integrating sustainability disclosures with financial data as part of mandatory reporting requirements.
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Annual reports provide a comprehensive overview of the company's financial performance, strategic initiatives, and stakeholder value creation, and must now also address sustainability efforts.
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Directors’ reports should include a clear declaration on sustainability strategies and risk management, and a directors declaration is required to confirm compliance with sustainability reporting standards.
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The auditor's report is presented alongside the annual financial report and directors report during the annual general meeting, ensuring regulatory compliance.
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Group entities must consolidate ESG disclosures across subsidiaries, using consolidated gross assets and consolidated revenue to determine reporting obligations and control relationships under relevant legislation, ensuring full accountability.
This integration means ESG data now sits alongside financial performance in the financial report, reinforcing its importance to stakeholders.
Reporting Timeline and Audit
The ESG reporting timeline is tied to a company’s financial year. Reports must be submitted to ASIC, making them publicly accessible.
The audit process plays a central role. Independent assurance by qualified auditors ensures ESG information is reliable. This assurance strengthens confidence among investors, regulators, and community organisations.
Materiality Assessment
A materiality assessment is a foundational element of sustainability reporting for Australian companies. This process involves systematically identifying and prioritizing the environmental, social, and governance (ESG) issues that are most significant to both the business and its stakeholders. By focusing on what truly matters, companies can ensure their sustainability reports are relevant, targeted, and aligned with stakeholder expectations.
Guidance from the Australian Accounting Standards Board (AASB) and the International Sustainability Standards Board (ISSB) helps businesses conduct robust materiality assessments as part of their sustainability reporting requirements. Through this process, companies can pinpoint climate related risks—such as physical climate related risks from extreme weather events or transition risks linked to regulatory changes—and uncover related risks and opportunities that could impact their operations or financial performance.
A thorough materiality assessment not only supports compliance with reporting requirements but also informs scenario analysis and the development of climate related financial disclosures. By understanding which ESG issues are most material, Australian companies can craft sustainability reports that address the most pressing risks and opportunities, strengthen governance, and demonstrate leadership in sustainability standards.
Challenges of ESG Reporting
For SMEs, ESG reporting can be daunting:
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Collecting accurate sustainability data across supply chains is resource-intensive.
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Understanding multiple reporting standards can be confusing.
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Costs of assurance and reporting systems can strain smaller budgets.
Yet the long-term benefits outweigh these challenges. SMEs that embrace ESG early will find it easier to secure financing, attract top talent, and align with customer expectations.
Best Practices for ESG Reporting
To make ESG reporting more effective, SMEs should:
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Use a materiality-based approach, focusing on the most relevant ESG issues.
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Apply frameworks like GRI and SASB to maintain credibility and comparability.
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Be clear, concise, and transparent in communication.
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Invest in independent assurance to enhance stakeholder confidence.
Embedding ESG into operations—not just compliance—creates long-term resilience.
ESG Reporting and Sustainability
ESG reporting is a cornerstone of broader sustainability. It enables SMEs to align with the United Nations Sustainable Development Goals (SDGs) while managing risks.
By disclosing impacts on climate, society, and governance, SMEs can:
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Improve their sustainability performance.
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Embed sustainable practices across supply chains.
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Support long-term resilience in business models.
ESG Reporting and Risk Management
Risk management is where ESG reporting delivers significant value.
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Scenario analysis helps SMEs evaluate climate-related risks and opportunities.
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Transparent reporting supports sound decision-making for directors and investors.
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Integrating ESG into risk management protects long-term financial stability.
ESG Reporting and Transparency
Transparency is critical for building trust with stakeholders, from investors to local communities.
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Full ESG disclosure demonstrates accountability.
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Transparency reassures stakeholders that the company is managing climate-related risks responsibly.
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Honest sustainability reporting fosters credibility and supports stakeholder engagement.
Stakeholder Engagement
Stakeholder engagement is essential for meaningful sustainability reporting and strong ESG performance. By actively involving stakeholders—such as investors, customers, employees, and community organisations—Australian companies can better understand the ESG issues that matter most to those who influence or are affected by their business.
Frameworks like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide practical guidance for effective stakeholder engagement within sustainability reporting. Through open dialogue and regular feedback, companies can identify key climate related risks, gather insights on greenhouse gas emissions, and ensure their sustainability reports reflect the concerns and expectations of their stakeholders.
Engaging stakeholders also plays a critical role in shaping the company’s climate statement and overall strategy for managing risks and opportunities. By incorporating stakeholder perspectives, companies can enhance the transparency and usefulness of their sustainability reports, build trust, and demonstrate a genuine commitment to addressing ESG factors. Ultimately, strong stakeholder engagement supports better decision-making, more resilient business strategies, and improved ESG performance across the board.
Conclusion
For Australian SMEs, mandatory climate reporting is no longer a distant requirement—it’s here. By adopting best practices, using trusted frameworks, and committing to transparency, SMEs can turn ESG reporting from a compliance task into a strategic advantage.
Now is the time to act. Integrating ESG into your annual financial reports, risk management systems, and corporate strategy will not only satisfy regulators but also unlock new growth opportunities.
FAQs
1. What is ESG reporting in Australia?
ESG reporting in Australia refers to the disclosure of environmental, social, and governance factors in line with national sustainability reporting requirements.
2. Are SMEs required to provide climate-related disclosures?
Yes, SMEs that meet reporting obligations under the Treasury Laws Amendment Bill 2024 must disclose climate-related financial information.
3. Which frameworks should Australian companies use?
Companies often rely on the GRI, SASB, and ISSB frameworks to meet both local and international expectations.
4. What are physical climate-related risks?
These are risks tied to weather events, sea-level rise, and other physical impacts of climate change.
5. How do transition risks affect SMEs?
Transition risks include regulatory changes, new compliance costs, and shifting consumer demand toward low-carbon solutions.
6. Do ESG reports need to be audited?
Yes, assurance through limited or reasonable assurance is required under the Auditing and Assurance Standards Board.
7. What is the role of ASIC in ESG reporting?
The Australian Securities and Investments Commission oversees compliance and ensures transparency in disclosures.
8. How does ESG reporting support risk management?
By identifying risks and opportunities, ESG reporting strengthens long-term financial and operational resilience.
9. Is ESG reporting connected to the UN Sustainable Development Goals?
Yes, ESG disclosures support alignment with SDGs, helping companies demonstrate global sustainability impact.
10. How can SMEs reduce the cost of ESG reporting?
By focusing on material issues, using digital reporting systems, and leveraging established frameworks, SMEs can reduce complexity and cost.
About ESG The Score
ESG the Score makes it easy for small and medium-sized businesses to respond to ESG reporting and compliance challenges without losing focus on growth. Many SMEs are under pressure from upstream supply chain audits, regulatory changes, and client expectations, yet lack the time and resources to manage sustainability effectively. Our affordable solutions — from ESG reporting toolkits to stakeholder engagement guides and policy bundles — are built specifically for businesses like yours. We simplify the complex so you can take control, demonstrate transparency, and stay competitive in today’s sustainability-driven marketplace. With ESG the Score, compliance becomes straightforward and achievable.
You may also want to read our ESG Reporting Toolkits for Canada, United States, India, United Kingdom, Australia, Brazil, Singapore, Malaysia, Germany and Turkiye.