2024 was a landmark year for global sustainability regulation and reporting. Yet, I noticed these changes also brought significant uncertainty as jurisdictions worldwide began implementing their sustainability reporting regimes. The hope for 2025 was that it would bring greater clarity and accelerate progress. Instead, shifting policies, political changes and ongoing debates have made the reporting landscape even less certain than before. What are businesses in Australia to make of this?
Let’s look at each of the major shifts in turn, and how businesses can respond. Australian organisations trading overseas must take particular note. The ripple effects from international regulations can be significant.
United States: A policy reversal
Throughout 2024, the U.S. gradually pulled back from climate disclosure commitments. The Securities and Exchange Commission dropped Scope 3 emissions from its climate disclosure rules, and by year-end, President Trump’s re-election triggered further shifts. The U.S. has stated they intend to withdraw from the Paris Agreement, scale back diversity, equity and inclusion (DEI) initiatives, and we saw six major banks withdraw from the Net Zero Banking Alliance.
Europe: Delayed implementation and streamlining efforts
In Europe, the first wave of companies are now captured by the Corporate Sustainability Reporting Directive (CSRD), with the first round of reporting due in 2025. While the CSRD aims to enhance transparency and consistency, implementation has been mixed across territories. Several EU countries missed the July 2024 adoption deadline, and businesses continue to debate the regulatory burden. In response, the European Commission is preparing a February 2025 omnibus package to streamline reporting requirements.
Australia: A critical crossroads
Locally, we are in the midst of ‘one of the largest changes’ in corporate sustainability reporting history, as mandatory reporting began on 1 January 2025. However, with a federal election looming, uncertainty remains. The federal opposition has vowed to repeal the newly enacted climate reporting laws and increase the flow of lending towards carbon-intensive industries. Regardless of who is in power by winter, there is ongoing debate including over matters such as the inclusion of Scope 3 emissions, with the Business Council advocating for their exclusion.
What this means for businesses
While the specifics may fluctuate, the overall trajectory is clear: sustainability reporting is not going away. Investors, industry groups and regulatory bodies continue to demand transparency and accountability. There’s evidence for this.
The majority of investors (75%) in PwC’s recent Global Investor Survey agree that they would likely invest more in companies taking certain climate-related actions. They see this as a way to manage risks. With 55% of global GDP, or US$58tn, highly or moderately dependent on nature, regular sustainability assessments can help identify and mitigate risks. In turn, this prevents costly disruptions, ensures business continuity and market value.
Industry groups in Australia have signalled their support, from the Australian Industry Group, to the Australian Institute of Company Directors and Australian Council of Superannuation Investors. Meanwhile, regulatory bodies such as the Australian Prudential Regulation Authority continue to push institutions to disclose their exposure to climate-related risks.
Let’s not forget about consumers. Our annual global, regional and Australia-specific Voice of the Consumer surveys repeatedly show that consumers care about sustainability and the ethical practices of companies — and are willing to pay more for it.
So, what can companies do? Stay the course, if you are already on it. For those yet to begin, act now. Rather than viewing sustainability reporting as a burden, as some do, why not consider the benefits it will bring. Ask yourself, how can our business use climate reporting to:
Spur innovation and open up new market opportunities?
Help build trust and attract new customers?
Attract favourable finance?
This is all possible while contributing positively to the environment and society.
As outlined in Hidden Opportunities: Creating value through climate action, my colleagues and I highlighted five ways sustainability reporting can drive value for businesses. We also suggested five practical steps to fully realise the benefits of reporting, from having the CFO take ownership, to performing a data gap analysis — without delay. These are no-regrets moves — regardless of how climate reporting shifts — that will help with business reinvention and position your business for longer-term success.
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