Treasury seeks feedback on improving the efficiency of climate-related financial disclosures
Treasury seeks feedback on improving the efficiency of climate-related financial disclosures
The Federal Treasury has published a Consultation Paper Improving the efficiency of climate-related financial disclosures, with comments due by 2 October 2026.
What is this Consultation Paper about?
The Government is seeking feedback from reporting entities, investors, assurance practitioners and other stakeholders on potential reforms to Australia’s mandatory climate-related financial disclosure framework to improve its efficiency and reduce compliance costs, while maintaining the quality, consistency and international comparability of sustainability reporting.
Why is the Consultation Paper being issued now?
The Government has now observed the first year of mandatory climate-related disclosures by Group 1 entities and has received early feedback indicating that some aspects of the regime may impose significant implementation costs and practical challenges.
What issues does the Consultation Paper address?
In the 2026-27 Federal Budget, the Government announced its intention to examine ways to reduce the regulatory burden across three areas:
- Proposal 1: Adjusting assurance settings
- Proposal 2: Improving consistency in the application of existing reporting requirements, and
- Proposal 3: Setting clearer boundaries on information requests across value chains.
These proposed measures are in addition to reforms announced by the Government to increase the reporting thresholds for large proprietary companies, doubling the revenue and assets tests as follows:
- $100 million revenue (from $50 million), and
- $50 million in assets (from $25 million).
The number of employees remains the same at 100. Increasing the thresholds for large proprietary companies reduces the compliance burden for financial reporting by large proprietary companies, and sustainability reporting by Group 3 listed and unlisted entities.
Proposal 1: Adjusting assurance settings
The Government considers assurance to be a key element of the climate reporting framework because it enhances confidence in climate-related disclosures and supports the integrity and comparability of information provided to investors. The phased approach currently adopted by the Government provides reporting entities and assurance providers time to build capability and experience, with transition from limited assurance to reasonable assurance by 1 July 2030.
Following the first year of reporting by Group 1 entities, the Government is seeking feedback about:
- The costs and benefits of the current assurance settings, including their impact on preparers, assurance providers and users of sustainability reports, and
- Whether alternative assurance pathways could achieve the objectives of sustainability reporting while reducing compliance costs and better reflecting current market maturity.
The Government is proposing three alternative options for assurance settings:
Option 1a: Maintain limited assurance on an ongoing basis for all climate-related financial disclosures:
This will require changes to the Corporations Act 2001 and to ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports, to remove references to ‘reasonable assurance’ and update the assurance phase-in timelines.
Rationale for removing reasonable assurance and retaining limited assurance
- Maintains independent assurance with reduced compliance costs associated with preparing for, and transitioning to, reasonable assurance
- Better aligns compliance expectations with current market capability and data maturity
- Encourages reporting entities to maintain effective internal records to support limited assurance
- Will align Australia with other jurisdictions, as few jurisdictions currently plan to progress to reasonable assurance
- Entities can choose to voluntarily obtain reasonable assurance to meet other market demands, such as supply chain requirements
- Obtaining reasonable assurance may be challenging and not justify the compliance costs, for example, in areas such as the availability of primary data, evolving practice on materiality and the uncertainty of forward-looking climate outlooks.
Option 1b: Delay the transition to reasonable assurance until 2035
The long-term objective of progressing to reasonable assurance remains, but full implementation is deferred until 2035 (from 2030), providing reporting entities, assurance providers and data service providers more time to develop reporting systems.
Rationale for allowing extra time to transition to reasonable assurance
- Enables capacity building across the market and an extension of time to deepen the maturity of sustainability data before a reasonable assurance mandate is introduced
- The growth in industry experience and reporting technologies will make the processes for collecting and verifying data more efficient and less costly
- Preserves the long-term policy objective of strengthening disclosure reliability while recognising implementation constraints in the early years of the climate reporting regime
- Encourages continuous improvement across the market to work towards reasonable assurance
- Deferring reasonable assurance supports international interoperability as it aligns Australian rules with other jurisdictions, such as the European Union, which has delayed assurance requirements for climate reporting.
However, the Consultation Paper notes that one risk of delaying reasonable assurance is that reporting entities don’t utilise the extra time to improve their processes, resulting in fewer potential cost savings.
Option 1c: Only require reasonable assurance for mature sustainability reporting metrics
This option proposes a two-tier assurance model that aligns assurance requirements with the maturity of underlying sustainability metrics. An example of this would be requiring reasonable assurance for Scope 1 and Scope 2 emissions disclosures, while continuing to use limited assurance for Scope 3 emissions disclosures. Reasonable assurance would apply only where data availability and maturity meet a ‘defined baseline standard’.
Rationale for this mixed approach
- Acknowledges that some climate disclosures require more effort and are more costly for preparers. For example, Scope 3 emissions rely on third-party data estimations and projections and providing reasonable assurance about this is more costly
- Reasonable assurance for mature Scope 1 and 2 data is easier to obtain because data is often derived from a reporting entity’s own systems.
Proposal 2: Improving consistency in the application of existing reporting requirements
Although ASIC, Government and standard setters have published a range of guidance materials to support reporting entities navigating the new mandatory reporting regime (refer to Appendix A to the Consultation Paper), there may be scope to further clarify aspects of the reporting requirements because feedback so far suggests that entities are unsure how some aspects of the legislation, disclosure and assurance standards requirements apply in practice.
The Consultation Paper is seeking feedback on areas where additional guidance is needed to assist implementation, such as:
- Proportionality mechanisms: How to practically apply these in AASB S2 Climate-related Disclosures, including:
- ‘reasonable and supportable information … without undue cost or effort’
- ‘commensurate with the skills, capabilities and resources that are available to the entity’
- No material climate-related risks or opportunities: How Group 3 entities apply this statement in section 296B of the Corporations Act 2001
- Assurance guidance: When a reporting entity has applied the above proportionality mechanisms or made a statement of ‘no material climate-related risks or opportunities’
- Workshops and educational seminars: Whether running workshops and seminars could help to improve the understanding of reporting entities and their value chain partners about the flexibility built into the regime.
Alternative option considered
As an alternative to the additional guidance and resources proposed above, the Government also considered whether these implementation uncertainties could be addressed by amending the Corporations Act 2001 and/or AASB S2, but concluded that most issues arise from applying principles-based requirements across a wide range of entities and circumstances.
While amendments could increase certainty for reporting entities, they would likely reduce flexibility, create unintended consequences, risk becoming outdated as reporting practices evolve, and potentially reduce international alignment.
The Government’s preferred approach is therefore to provide targeted educational resources as a more immediate, practical and proportionate response.
Proposal 3: Setting clearer boundaries on information requests across value chains
Although Scope 3 emissions disclosures are not yet mandatory for first-year reporters, overseas experience suggests that clearer limits on value-chain information requests may improve efficiency.
The Government is therefore seeking feedback on ways to make information requests to suppliers and other value chain participants more consistent and predictable, while still allowing reporting entities to gather the information needed to identify and disclose material climate-related risks, opportunities and emissions.
Potential approaches include:
- Targeted guidance: To help entities decide the boundaries of the types of information required for Scope 3 reporting, including how to exercise judgement in this context
- Additional resources: To help entities efficiently define the boundaries of their value chain and ensure data requests don’t create disproportionate costs or compliance impacts across value chains, particularly for SMEs
- Domestic emissions factors: Government to play a role in either developing or collecting existing reputable emissions factors to assist the market with more accurate secondary data (reducing the need for entities to collect primary data themselves for metrics such as Scope 3 emissions).
Treasury is looking for practical ways to help companies obtain the climate-related information they need, without creating unnecessary work or costs for the businesses that provide it.
Option 3a: Provide additional guidance on what constitutes a reasonable request for information from a reporting entity’s value chain
This option would provide additional guidance and examples to help reporting entities and businesses in their value chains understand what climate-related information can reasonably be requested and provided.
Guidance developed by the regulator and standard setters could clarify:
- The proportionality mechanism of what constitutes ‘reasonable and supportable information …available without undue cost or effort’ within value chains, and
- How this interacts with data requests to Australian SMEs that may be resource-constrained.
The aim is to reduce unnecessary or unreasonable information requests while still allowing reporting entities to obtain the information needed to meet their climate reporting obligations.
Rationale for this proposal
- Improved consistency in how entities develop value chain information requests
- Reduces the likelihood of unnecessary or duplicative information requests
- Can be actioned relatively quickly.
Option 3b: Reducing supply chain administrative burdens through improving domestic emissions factors
The Government is also seeking feedback on whether making more Australian emissions factors publicly available could make climate reporting easier and reduce the need for companies to request detailed emissions information from suppliers. Reliable secondary emissions factors could help large companies estimate Scope 3 emissions using standard data, rather than collecting information directly from smaller businesses.
This could be particularly helpful in industries such as transport, agriculture, manufacturing and construction, where many SMEs may lack the resources or expertise to calculate detailed emissions data.
A central source of emissions factors could reduce compliance costs for both reporting entities and their suppliers while still supporting climate reporting requirements.
Rationale for this proposal
- Increases the availability of reliable inputs for calculating emissions
- Lowers compliance costs for entities operating in difficult to trace industries.
Alternative option considered
The Government considered creating a standard form or template for information requests to suppliers. This could make it clearer for businesses in the supply chain to identify what information they may be asked to provide and give reporting entities a consistent way to collect data.
However, the Government is concerned that a standardised approach could encourage companies to request information even when it is not needed (for example, because AASB S2 allows the use of estimates and other secondary data). It could also increase the reporting burden on some suppliers if they are asked to provide more information than necessary.
The Government's preferred approach is to provide better guidance on reasonable information requests and improve access to secondary data sources to help reduce compliance costs while maintaining flexibility.
Have your say
Comments on the Consultation Paper are due by 2 October 2026.
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