It is now clear that not only is climate change one of the greatest threats to the environment of the planet, but its adverse impacts are also increasing in their frequency, severity, and distribution.
The threat is largely being driven by the release of carbon dioxide from the burning of coal, natural gas, and oil (the ‘fossil fuels’). 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 world is unlikely to occur before late in the century.
The United Nations position is that these emissions need to be reduced by 42% by 2030, if the Paris Agreement goal of limiting global warming to 1.5°C by 2100 is to be achievable. The 37 billion tonnes of carbon dioxide emitted in 2024 from the burning of fossil fuels would therefore need to drop to 21 billion tonnes annually by 2030.
A review of the emission -reduction commitments made in February 2025 by the UN Member countries who have ratified the Paris Agreement on Climate Change (2015), indicates that this is unachievable and imply a devastating temperature rise of 2.6°C–3.1°C this century (UNEP, 2024).
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 came into effect on 1 January 2025. This imposes a carbon tax on imports of electricity, cement, aluminium, fertilizer, and iron and steel products into the EU.
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. (The price of one tonne of carbon dioxide in the Australian voluntary market reached $42.50 in November 2024; the EU CBAM levy is expected to reach AUD 150).
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 underground storage” of carbon dioxide (CCUS 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 unlikely to 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 is critical now.
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.