At a glance
The pressure to be transparent about climate and sustainability is not coming — it is here.
Investors, regulators and consumers are demanding proof that companies are not just talking the talk but actually managing their environmental impact.
In 2023, the International Sustainability Standards Board (ISSB) bolstered sustainability reporting with IFRS S1, which set out general disclosure rules, and climate-related risk reporting in IFRS S2.
At the time, research conducted by Harvard Business Review and a joint study from McKinsey and NielsenIQ increased the call for evidence-based and reliable information. As a result, the ISSB expanded its lens, adding nature, biodiversity and human capital to its proposed future topics for standard setting.
Sustainability reporting is evolving at speed. What started as an ISSB carbon emissions checklist has become a more structured, comprehensive view of a company’s environmental and social footprint.
Why has sustainability reporting shifted?
According to Mathew Nelson, EY Oceania chief sustainability officer, the sustainability reporting push is aimed at getting to a single version of the truth.
“The main driver … is to try and get better consistency in reporting,” he explains. “This enables investors to make better decisions about where they put their capital, based on these emerging risks and opportunities.”
Dennis Lee CPA, partner and head of business consulting at RSM Singapore, adds that expanding reporting requirements reflects a growing awareness of the financial risks tied to “unsatisfactory biodiversity and human capital practices”.
“There are interconnectivities involved as biodiversity impacts supply chain resilience,” Lee says. “Similarly, good workforce practices foster a better working environment, which contribute to improved corporate performance.”
He notes that higher quality disclosures allow investors to make more discerning and balanced assessments of the business in question.
Are these changes a challenge or opportunity?
New reporting options can feel overwhelming, but should ultimately position businesses for long-term success.
“There is no bigger risk to our economies and our ongoing financial success than climate change,” Nelson says. “It is so pervasive … across all geographies, all industry sectors, all parts of the economy. And it will hit all at the same time.”
Given the widespread economic risks of climate change, Nelson sees the new standards as a necessary step towards long-term stability despite the short-term challenges they may bring.
“The long-term gain is that we get good consistency and an aggregation of standards,” he adds. “But that will result in some pain in the short-term because we’re having to report new information in different ways.”
One clear advantage, Nelson points out, is that Australian businesses are now developing a much deeper understanding of their climate-related risks and opportunities — a shift that ultimately benefits everyone.
Lee agrees, noting that the new requirements are prompting stronger leadership engagement. “The board and C-suite are becoming increasingly sensitive to the importance of sustainability and climate reporting,” he says.
In the ASEAN region, Lee regards the evolving landscape as a valuable opportunity to build maturity. “The adoption of internationally recognised reporting regimes should be viewed as a chance to level up.”
The sustainability reporting push is also being backed by the working groups and associations tied to industry. The International Federation of Accountants, for example, recently released an online tool to help SMEs measure and improve their sustainability practices.
Who needs to report and when?
Most Australian businesses began mandatory sustainability reporting on 1 July 2025. Large companies — known as Group 1 — were the first.
“These organisations often already report under existing frameworks like the National Greenhouse and Energy Reporting scheme or the Task Force on Climate-Related Financial Disclosures, so they’re not starting from scratch,” Nelson says.
Group 2 — mid-sized companies — will follow in about a year, with more businesses expected to be included over time.
Smaller companies will not report directly at first, but they may be asked by larger companies for data so they can report Scope 3 emissions which are “required, but outside the operational control of the entity and cover their entire value chain, including suppliers and downstream customers,” notes Nelson.
Tips to navigate ESG disclosures
Here are five key tips to prepare for new sustainability reporting.
1. Focus on progress over perfection
The most effective way to build sustainable frameworks is by “setting realistic expectations and delivering quick wins,” Lee suggests. He cautions against overly complex or bureaucratic approaches that chase perfection at the expense of practicality.
2. Get leadership buy-in
Securing support of the board and executives is critical. Lee says, “The speed and intensity of such initiatives ultimately depend on the ‘tone from the top’.” Boards and executives need to be clearly aligned on the value of setting strong governance frameworks to guide their climate and sustainability efforts, he adds.
3. Tell the full story
Tailoring sustainability reports to specific stakeholder groups can be helpful, but Nelson cautions that focusing too narrowly may lead to an incomplete or misleading picture. He stresses the importance of nuance in communication: “It’s about making sure we’re telling both the good stories and the challenging ones.”
4. Engage stakeholders across business
Sustainability reporting is not just a task for one team or person. “The businesses that engage across the organisation, all the way from the board to the people on the ground and bringing people along for the journey, will deliver a better outcome.”
5. Start now
While many businesses are already familiar with climate reporting for greenhouse emissions or voluntary disclosures, Nelson advises that companies need to begin sharing the types of new information that will need to be disclosed to “help teams get comfortable with the reporting requirements that will be needed in the next six to 12 months”.