ASIC provides guidance on directors’ duties in relation to sustainability reporting

On 31 March 2025, the Australian Securities and Investments Commission (ASIC) published regulatory guidance to assist entities preparing mandatory sustainability reports containing climate-related financial information under Chapter 2M of the Corporations Act 2001. Regulatory Guide 280 Sustainability reporting (RG 280) provides guidance for directors in relation to their duties in respect of climate-related risks and opportunities and sustainability reporting obligations, including the directors’ declaration on the sustainability report.

Directors’ duties 

Directors have a duty to exercise their powers with the care and diligence that a reasonable person would exercise in the circumstances. ‘Directors’ refers to directors of companies, directors of responsible entities, directors of retail corporate collective investment vehicles (CCIVs) and directors of registrable superannuation entity (RSE) licensees. 

Directors of reporting entities should: 

  • Have an understanding about the reporting entity’s sustainability reporting obligations;
  • Have an understanding about climate-related risks or opportunities that could reasonably be expected to affect the reporting entity’s prospects, including its access to cash flows, its access to finance and cost of capital over the short, medium and long term: see paragraph 2 of AASB S2;
  • Require the establishing of systems that identify, assess and monitor any material financial risks and opportunities relating to climate (including any changes);
  • Require the establishing of controls, policies and procedures for overseeing, managing and preparing the sustainability report. This may include identifying relevant business units and employees responsible for providing key inputs. It may also include identifying how climate- related financial information (including any climate-related data) is obtained and used to inform the disclosures in the sustainability report;
  • Require the establishing of controls, policies and procedures for keeping sustainability records; and
  • Apply a critical lens to the disclosures proposed in the sustainability report, such as questioning the appropriateness or completeness of methodologies, inputs and assumptions used to support disclosures, the extent that there may be any material omissions having regard to their knowledge of the reporting entity’s business, whether the disclosures have been properly characterised, and whether additional information should be disclosed. 

Extract of Regulatory Guide 280.55

Providing climate-related disclosures in the mandatory sustainability report does not absolve a listed company from having to also discuss its climate-related risks and opportunities in the Operating and Financial Review (section 299A). Section 299A requires disclosure in the OFR that members would reasonably require to make an informed assessment of the entity’s business strategies and prospects for future financial years, and if material, this includes risks and opportunities relating to climate.

Relying on experts

In carrying out their responsibilities outlined above, directors may rely on the special knowledge or expertise of others in relation to sustainability reporting, such as from experts, advisers and other suitably qualified persons (both internal and external). However, this does not absolve the directors from making an independent assessment of the information or advice provided. They must still use their own skills and judgement in this endeavour.

Directors’ declarations

Mandatory sustainability reports required under section 296A of the Corporations Act 2001 comprise the climate statements for the year, related notes, and a directors’ declaration about the climate statements and notes.

The directors required to make the directors’ declaration are the directors of the entity that is required to prepare the sustainability report. This would be: 

  • For a company - the directors of the company 
  • For a RSE - the directors of the RSE licensee 
  • For a registered scheme - the directors of the responsible entity 
  • For a retail CCIV - the directors of the retail CCIV.

Modified declarations - 1 January 2025 to 31 December 2027 

Section 1707C of the Corporations Act 2001 amends the s296A requirement for the directors to make a declaration about the climate statements and notes in the first three years of the mandatory sustainability reporting regime. 

Directors’ declarations for financial years beginning from 1 January 2025 until 31 December 2027 (inclusive) are modified so that directors only have to declare that they have taken reasonable steps to ensure that the sustainability report (other than the directors’ declaration) is in accordance with the Corporations Act 2001 and AASB S2.

RG 280 clarifies that the modified declaration reflects that the sophistication and maturity of an entity’s controls, policies, procedures and systems for sustainability reporting are expected to develop over time, and that directors are expected to develop their understanding, experience and capabilities in relation to sustainability reporting over time.

1 January 2028 onwards 

For financial years beginning on or after 1 January 2028, section 296A(6) requires directors to provide the declaration required by section 296A(6). That is, whether in the directors’ opinion, the sustainability report (other than the directors’ declaration) is in accordance with the Corporations Act 2001, including: 

  • Section 296C (compliance with sustainability standards) 
  • Section 296D (the specific climate statement disclosures).

Modified liability settings 

RG 280 also provides guidance on the modified liability provisions contained in section 1707D of the Corporations Act 2001, which prevent legal action against directors (other than for criminal action or action by ASIC) for certain protected statements made in the sustainability report during the first three years of the sustainability reporting regime. Watch out for our article in next month’s edition of Sustainability News for more on this. 

More information 

Our previous article provides more information about ASIC's regulatory guidance for sustainability reporting, and our website contains additional resources for sustainability reporting and measuring your carbon footprint. 

Need help? 

In addition to the financial report, directors now have a duty to understand their entity’s climate-related risks or opportunities and ensure it has appropriate systems, controls, policies and procedures in place to support the production of the first sustainability report in accordance with AASB S2 Climate-related Disclosures. Our sustainability reporting, sustainability strategy, and carbon accounting experts are always available to assist with your sustainability reporting journey. Contact us for help.