How climate reporting is reshaping CEO and Board accountability

Australia’s move to mandatory sustainability reporting is changing the job of Boards and CEOs. Leaders must quickly build a knowledge base in climate literacy, strengthen governance and data controls, and work through evolving liability and ASIC expectations, because the information they approve will be scrutinised and relied upon. For the first three years, directors will sign a standalone “reasonable steps” declaration, where only a few forward‑looking items (such as scenario analysis and Scope 3 emissions) have reduced‑liability protection, while most disclosures do not. With limited assurance being phased in, Boards will need to apply strong scrutiny to governance, data quality and reporting controls. Beyond compliance, sustainability now shapes capital decisions, competitiveness, and resilience, making inaction increasingly risky for regulators, stakeholders, and investors.

This article outlines what changes for Boards and CEOs, their accountability under mandatory reporting, and the practical questions that help ensure credible, assurance‑ready disclosures, drawing on insights from BDO’s February 2026 Sustainability webinar.

Sustainability governance starts in the boardroom

Boards aren’t just endorsing sustainability - they are accountable for it. As regulatory expectations harden and stakeholder scrutiny intensifies, Boards must ensure sustainability is embedded in governance and that approved disclosures are grounded in credible data, clear methodologies and informed judgement. Boards are no longer just receiving updates; they’re expected to actively challenge management, applying the same level of rigour they bring to financial reporting.

Many Boards see a skills gap in climate and ESG that needs to be addressed. This means targeted learning to improve climate literacy and, where useful, bringing in directors with sustainability expertise. This learning needs to be intentional, and should translate into regular training, clear ESG responsibilities, and simple, useful sustainability metrics in Board and performance reporting. This helps the Board to move from reviewing to constructively challenging.

The Board defines the expectations, and the CEO makes it happen. Delivering sustainability day‑to‑day across data, controls and decision‑making relies on strong executive leadership, which is why the CEO’s role now carries greater weight than ever.

The CEO’s role in driving sustainability alignment

CEOs now sit at the point where climate science, business strategy and financial outcomes meet. When CEOs treat sustainability as a core leadership responsibility, they signal to teams, customers and investors what the organisation stands for and how it will compete in a changing market. Trust, resilience and long‑term value are at stake. They depend on the quality of the information provided, the choices made about risks and opportunities, and the confidence the Board has when it signs the report. The CEO’s job is to ensure the organisation can deliver assurance‑ready information that directors can sign off on.

Good leaders will:

• Embed the issue in strategy. Integrate climate risks and opportunities into core strategy and planning - not as a side project, but as inputs to capital, product and market decisions.
• Set up reliable systems and controls. Give your people the skills, tools and time to capture accurate data, underpinned by strong governance and assurance processes.
• Tell the story with clarity. Provide the Board with clear, timely insight on performance, risk and prospects so disclosures are clear and robust.
• Coordinate cross‑functional delivery. Bring finance, risk, operations, procurement and people together so disclosures are complete, consistent and credible across the business.
• Lead the alignment. Don’t delegate ESG downward - model the behaviours, remove obstacles and provide resources so accountability sits across the whole organisation.

In practice, this is execution with empathy: bringing teams together, aligning data and governance, and translating climate risks and opportunities into plans, budgets and KPIs the business can deliver - so what reaches the Board is quality, coherent and assurance‑ready.

Regulatory expectations for directors

Regulatory expectations raise the stakes for both the Board and the CEO. Board members are expected to understand the organisation’s sustainability obligations and how climate risks could affect cash flows, financing and the cost of capital – both now, and in the future.

That responsibility doesn’t stop at receiving reports. Boards must oversee systems that identify and track material climate‑related financial risks, insist on strong controls and procedures for sustainability information, and actively challenge the methodologies, assumptions and completeness of disclosures.

CEOs, in turn, carry the execution risk - ensuring the information given to directors is clear, reliable and assurance-ready. While Boards can rely on experts, directors must still make their own independent assessment of the advice and data provided. That means the strength of the CEO’s processes, controls and decisions directly affects the exposure of both the CEO and the Board.

What Boards should be asking management

The questions Boards ask management are central to building confidence in sustainability disclosures. These could include:

Governance

• How have our governance processes been updated to embed sustainability?
• How frequently will the Board receive sustainability updates?

Strategy

• How were the business model and value chain defined for reporting purposes?
• What assumptions support the identification of risks and opportunities?
• Why were specific risks chosen for disclosure?

Scenario analysis

• What methodologies were used?
• What narratives underpin high‑ and low‑warming scenarios?
• What strategic implications have emerged?

Emissions measurement

• What is our confidence level in the emissions data?
• What are our key uncertainties and how will they be reduced?
• How will ongoing improvements be incorporated into reporting?

These questions aren’t a checklist - they’re how Boards build confidence in the disclosures. The aim is to understand why each conclusion was reached: the reasoning, assumptions and evidence behind management’s position. When Boards can see this clearly, they’re able to stand behind the disclosures.

This is also where the Board’s strategic role comes in. If forward‑looking analysis highlights risks or opportunities, directors need to understand what that means for the organisation’s risk appetite, capital decisions and long‑term plans, not just to satisfy a compliance requirement. Sustainability, done well, helps to shape strategy.

Ultimately, many Boards are still making the shift from oversight to challenge. These questions help directors do that by testing completeness, probing judgement and ensuring the organisation’s position is credible.

The leadership moment for Boards and CEOs

Sustainability is now a leadership responsibility, not just a governance task. Boards must move beyond reviewing information to actively test assumptions, challenge completeness and ensure sustainability is embedded in planning, decision‑making and risk management. CEOs must lead organisation‑wide delivery so the information going to the Boards is clear, reliable and assurance-ready.

Early movers will set market expectations rather than react to them. Sustainability governance is no longer optional - it's central to modern corporate leadership.

How BDO can help

For Boards ready to move from awareness to action, BDO’s Sustainability Activation Checklist provides a clear structure for prioritising next steps. It helps directors bridge mandatory reporting with broader ESG strategy - aligning governance, risk, data and performance so sustainability becomes part of day‑to‑day decision‑making rather than a one‑off compliance exercise.

BDO's sustainability reporting team supports organisations across:

• Carbon accounting
• Mandatory and voluntary sustainability reporting
• Sustainability strategy and ESG activation
• Sustainability assurance.

To discuss support for your Board or executive team, contact BDO’s sustainability reporting specialists.