View all The Australian Sustainability Reporting Standard (ASRS) aren’t just a regulatory shift – it’s a wake-up call for boards, legal teams, and sustainability leaders. With new mandatory climate-related disclosures now in force, organisations must move beyond box-ticking and start treating climate-related financial risks as core business resilience topics.
So, what are the common legal pitfalls and how can these be overcome? Earlier this month I joined Clayton Utz Partners, Claire Smith and Emily Tranter, to unpack what this means in practice. Our conversation focused on what organisations are actually facing – where the pressure points are, what’s working, and how to build reporting processes that are not only compliant but credible, resilient, and strategically valuable.
Here are the key insights we shared with attendees, drawn from our work with clients across all sectors of the economy who we are helping navigate this transition.
Governance: Strengthening accountability and verification
Boards have long grappled with their directors’ duties in relation to climate-related financial risks. The new regime has now crystallised those duties – directors must exercise care and diligence to ensure sustainability reports present a true and fair view of the entity’s financial performance, position, and prospects, and are not misleading or deceptive.
Organisations should embed climate risk governance into existing structures, documenting the steps taken to identify and report on climate-related risks and opportunities. To ensure a smooth assurance process, the best practice we are seeing is having a verification pack that clearly cross-references accountable data owners to support the disclosure. While these processes may be familiar to in-house teams used to engaging with ASIC, a disciplined approach is essential – especially in the early years of reporting, as ASIC feedback is received.
In addition, ensure those overseeing sustainability reporting have the right competencies, and seek specialist training where needed to upskill.
Cross-functional collaboration: Embedding climate into core decision-making
Establishing a qualified cross-functional team early – with clear responsibilities and accountabilities – is critical to integrating climate considerations into corporate governance and decision-making. Organisations doing this well aren’t building new structures from scratch; they’re embedding climate into existing governance and risk frameworks.
Strong collaboration between the General Counsel, CFO, and Chief Climate Risk or Sustainability Officer is key. A gap assessment can help identify where climate risks and opportunities are already being managed – and where they’re being missed. Legal teams play a pivotal role in ensuring governance, verification, and evidence processes are robust, particularly in the early stages of reporting, to meet regulatory requirements and build business resilience.
Materiality: Aligning financial and sustainability thresholds
Align your sustainability reporting with your existing financial materiality approach and enterprise risk management system. Review this with your auditor, who already understands your business and value chain.
Start with the Australian standard and assess materiality and time horizon decisions through the lens of the “primary users” of your financial reports – typically the primary users are your major investors. Materiality is a key legal risk issue that shapes the rest of your sustainability reporting. So, make sure to get legal advice early and agree on your approach with a cross-functional working group.
Proportionality: Tailoring efforts to organisational scale
ASIC’s expectations vary depending on your organisation’s size, sophistication, and whether you’ve previously disclosed climate-related risks or have climate scenario data. If you’re unsure what proportionality means for your business, seek legal advice.
Greenwashing risks: Scrutinising forward-looking statements
Forward-looking statements require careful scrutiny, especially those related to Scope 3 emissions and transition plans. They’re particularly vulnerable to greenwashing claims, and ASIC is closely monitoring for misleading or deceptive conduct.
At the same time, ASIC is making allowances for companies to work on getting reporting right in the first three years of ASRS with certain statements being given protected status, where only ASIC can pursue companies who mistakenly misreport. A statement in a sustainability report is only considered a “protected statement” if it’s made specifically to comply with the Australian Sustainability Reporting Standards and included in the Sustainability Report. Make sure you can support any claims made in other documents, such as investor presentations and marketing materials, with evidence.
Assumptions and methodologies: Embracing uncertainty transparently
One of the biggest challenges for financial and legal professionals new to climate reporting is the inherent uncertainty and reliance on assumptions in climate-related data. It’s important to get comfortable with this uncertainty, clearly identify the unknowns, and communicate them transparently, both internally and externally.
