Introduction

In 2025, carbon reporting will transition from a voluntary ESG initiative to a mandatory legal requirement in Australia. Amendments to the Corporations Act 2001 (Cth) and the introduction of new Australian Sustainability Reporting Standards mean that thousands of Australian companies will be required to disclose climate-related financial risks and greenhouse gas emissions for the first time.

For Australian Certified Practising Accountants (CPAs), this marks a fundamental shift in professional responsibilities. Climate disclosure is no longer just about sustainability—it is now about compliance, assurance, and the integrity of financial reporting. Accountants must understand not only the technical standards but also the regulatory, ethical, and strategic implications for their clients.

This article explores the reporting framework, assurance requirements, challenges in data collection, and practical steps for CPAs, while pointing to professional development resources to strengthen practice readiness.

Who Must Report? The Phased Implementation Timeline

Australia has adopted a phased-in approach to mandatory climate-related disclosures, beginning 1 January 2025. Reporting entities are classified into three groups:

• Group 1 (2025 onwards):

• Consolidated revenue of $500 million or more

• Consolidated gross assets of $1 billion or more

• 500 or more employees

• Group 2 (2026 onwards):

• Consolidated revenue of $200 million or more

• Consolidated gross assets of $500 million or more

• 250 or more employees

• Group 3 (2027 onwards):

• Consolidated revenue of $50 million or more

• Consolidated gross assets of $25 million or more

• 100 or more employees

Entities exempt from Chapter 2M of the Corporations Act (such as many ACNC-registered charities) are generally excluded unless they fall within other regulatory capture. For more details, see the Treasury’s Climate-Related Financial Disclosure Policy.

If you’re advising clients on whether they fall into Groups 1–3, the 2025 Package: Financial Reporting and Data Analytics is designed to help accountants interpret thresholds, strengthen compliance systems, and use analytics to detect reporting gaps.

What Must Be Disclosed?

Mandatory climate reporting in Australia is governed by AASB S1 and AASB S2:

• AASB S1 – General Requirements for Disclosure of Sustainability-related Financial Information: Establishes overarching disclosure principles, requiring that sustainability-related risks and opportunities material to investors be reported with the same rigour as financial data.

• AASB S2 – Climate-Related Financial Disclosures: Specifically requires reporting on governance, strategy, risk management, and metrics/targets related to climate risks.

Together, they align with the International Sustainability Standards Board (ISSB) frameworks to support comparability across markets.

Reports must address:

• Governance – the board and management structures overseeing climate risk.

• Strategy – resilience assessments, including scenario analysis (e.g., 1.5°C vs 2°C outcomes).

• Risk management – processes for identifying and mitigating transition and physical risks.

• Metrics and targets – including Scope 1 (direct), Scope 2 (indirect from purchased energy), and eventually Scope 3 (supply chain) emissions.

Scope 3 disclosure will be one of the most technical challenges. Common estimation methodologies include:

• Spend-based approach – estimating emissions based on dollars spent in supply categories.

• Supplier-specific data collection – using questionnaires or third-party emissions factors.

• Hybrid models – combining spend-based estimates with supplier-reported data.

For CPAs seeking structured training in ESG disclosures, the Micro-Credential: Fundamentals of ESG provides an essential foundation in climate frameworks, sustainability metrics, and their integration into statutory reporting.

Assurance and Liability

Perhaps the most significant challenge for accountants is the assurance requirement:

• Limited assurance will apply during the early years (2025–2029). 

• By 2030, the requirement shifts to reasonable assurance, equivalent in rigour to financial audits.

This shift will require auditors to adapt standards such as ASA 300 (Planning an Audit) and ASA 315 (Identifying and Assessing the Risks of Material Misstatement) for ESG-related data. Assurance methodologies must evolve to cover emissions verification, scenario assumptions, and internal control testing over sustainability data.

Legal liability is also increasing:

• For the first three years, directors and preparers benefit from a “reasonable steps” defence.

• From 2028 onwards, full liability applies for misstatements or omissions, subject to ASIC enforcement and shareholder actions.

The Australian Securities and Investments Commission (ASIC) has already signalled climate disclosures as a priority area. See ASIC Regulatory Guide 247 for parallels on disclosure quality.

Why Accountants Are Central to Compliance

Unlike voluntary sustainability reports of the past, these new disclosures are embedded in the financial reporting ecosystem. That places accountants at the core of:

• Data governance: Ensuring emissions and climate data meet the same reliability thresholds as financial data.

• Board communication: Translating complex climate metrics into insights boards can understand.

• Stakeholder trust: Investors and regulators expect clear, auditable disclosures.

• Advisory opportunities: CPAs can expand services to include scenario modelling, transition planning, and carbon pricing strategies.
  

Practical Steps for CPAs

1. Classify Your Clients: Determine if they fall into Group 1, 2, or 3 and map reporting obligations.

2. Build Internal Systems: Implement emissions data collection aligned to the GHG Protocol.

3. Integrate Into Reporting: Ensure disclosures sit within annual reports, not as standalone sustainability brochures.

4. Assurance Readiness: Develop workpapers and audit methodologies for limited assurance now, anticipating reasonable assurance later.

5. Educate Boards: Use ratio analysis, sensitivity analysis, and scenario planning to communicate risk.

6. Stay Current: Monitor updates from AASB, ASIC, and the ISSB.

For continuous development, the Unlimited CPD Pass gives CPAs unlimited access to courses in ESG, financial reporting, and governance—ensuring knowledge stays current as obligations expand.

Conclusion

Carbon reporting in Australia is not just a compliance requirement—it is a strategic turning point. The rollout of AASB S1 and S2, combined with evolving assurance standards and ASIC enforcement, means CPAs will be on the front line of ensuring transparency, accountability, and investor trust.

Those who adapt early will do more than satisfy regulators—they will become trusted advisors in ESG strategy, transition planning, and sustainable finance. With the right technical knowledge and CPD investment, Australian accountants can lead the profession through one of the most significant reporting transformations of the decade.

With resources from LearnFormula, CPAs in Australia can stay ahead of one of the most significant reporting shifts of the decade.