It is now clear that climate change is one of the greatest threats to the environment of the planet, and overwhelmingly being driven by the release of carbon dioxide from the burning of coal, natural gas, and oil (the ‘fossil fuels’). Its atmospheric temperature increase needs to remain below +1.50 C over the century for the worst of the climate impacts to be constrained.
Although an enormous financial investment is being made around the world to substitute renewable energy sources for each, the expectation is that the full conversion to a carbon emissions-free planet is unlikely to occur before late in the century.
It is expected that 38 billion tonnes of carbon dioxide will be emitted in 2025, but a review in November 2025 established that this figure will remain 26 -30 billion tonnes in 2035 more than the level required to keep the planet below +1.5°C .
Carbon disclosure in Australia
The crisis has immediate implications for business in Australia.
Certain organisations with significant carbon emissions have been required to report their emissions since 2007. Now however, there are two additional items of Federal legislation in force that extend this obligation. They are the :
- “Safeguard mechanism” that came into effect in April 2023 requiring Australia’s 215 top emitters to disclose the reductions they will achieve by 2030; and
- the national mandatory disclosure rules applying from 1 January 2025 that will progressively cover a wider range of facilities with carbon emissions (AASB S2, Sep 2024).
Disclosure of the emissions profile of firms not caught by these laws is largely a voluntary exercise, but they are also facing growing civil pressure to follow suit.
Entities such as the Australian Securities & Investment Commission and the Australian Prudential Regulation Authority have both made statements emphasising the expectation for executives and Board Directors to ‘disclose and address ‘foreseeable and observable’ climate-related risks. A failure to do so appropriately could be considered “greenwashing”.
Guidance on how disclosures should be framed is also available in AASB (S1), a voluntary standard that was released on the same day as that for carbon emissions.
Supply chain emissions profiles
There are circumstances where disclosure of the carbon emissions of an organisation needs to include the carbon embodied in its supply chain (known as their Scope 3 emissions). In some cases, these can be much higher than from the internal processes of the primary reporting entity, but considerable effort may be required to trace these in a credible and standardised manner.
Australian exporters of goods and services may find that they are classified as Scope 3 emitters for compliance with environmental regulations imposed on their overseas customers. The type of their obligation will vary considerably across industry sectors and the location of the overseas importer.
For example, the European Union has legislated a Carbon Border Adjustment Mechanism that comes into effect on 1 January 2026. The level of tax applied will depend on the emissions embodied in each product, and on the difference between the prevailing EU price and any carbon price paid in the production country.
Carbon offsets
International efforts supporting the transition away from a carbon-intensive world are essentially relying on the immediate reduction in the emissions by the highest fossil fuel polluters. But some industry sectors argue that they cannot meet the regulatory deadlines for reducing their carbon emissions and are instead pursuing other avenues.
The two alternatives receiving the highest investments are the “capture and storage” of carbon dioxide (CCS or geo-sequestration); and biosequestration, which involves funding massive vegetation plantings to absorb it.
These programs are very complex in both their design and implementation. They have also been widely criticised over the past two decades for their unreliability, poor performance, and an inability to obtain independent verification of their claims.
But worse, the land diverted for these projects can diminish water resources that are vital for key food production regions, or which harbour high value ecosystems that are water sensitive. The loss in either can have significant socio-economic implications in the immediate and longer terms.
Sadly though, offsets that employ measures which, even if they were to be productive, are cannot make a meaningful contribution to efforts to mitigate the extreme impacts of climate change. They lack the scale to be effective within decades – and at a time when constraining additional carbon dioxide releases has now become critical .
The business case for disclosure
The scale of the energy transition that is required to contain climate change is underpinning a rapidly growing international body of technical standards, laws, and financial instruments influencing how carbon-intensive activities should progressively be minimised.
Australian businesses not only need to understand their greenhouse risk profile, but also publish their plans for reducing it over the next 5 years.
This data is increasingly being sought by large funds who operate across the globe and factor climate risk into their investment strategies. International benchmarks such as the Greenhouse Gas Protocol Corporate Standard and GRI can be helpful in responding to their concerns.
The Middle Way has extensive experience assisting organisations prepare their carbon strategies and disclosures, both domestically and internationally.