Keeping Up with ESG in Australia – May 2025

Our monthly ESG bulletin provides a targeted snapshot of key developments we see as reflecting the “must know” trends in the Australian market. In this edition, we spotlight recent developments in sustainability reporting in Australia and internationally.

Key highlights

1. In the spotlight: Sustainability reporting developments
   1. Australia: Further guidance released on Australia’s mandatory climate reporting regime
   2. Australia and International: ISSB publishes Exposure Draft proposing amendments to IFRS S2, prompting release of Exposure Draft for the same changes to AASB S2
   3. International: ISSB research projects on nature and human capital enter next phase
   4. USA: SEC votes to end its defence of its climate disclosure rule
   5. EU: “Stop-the-clock" directive on future sustainability reporting and due diligence requirements in effect
2. Gender equity developments
   1. New legislation mandating gender equality targets from 1 April 2026
   2. Second WGEA Gender Pay Gap Report released
   3. Work, Health and Safety Model Code of Practice – Sexual and gender-based harassment
   4. What does this mean for businesses?
3. ACCC issues draft determination proposing to authorise collaboration on sustainable finance initiatives
4. Judicial review challenge to EPBC Act amendments
5. Greenwashing updates
   1. Parents for Climate and Energy Australia settles dispute regarding “Go Neutral” product
   2. Federal Court approves $8.25 million penalty against Clorox for Greenwashing in ACCC Case
   3. Ad Standards issues two decisions on complaints under the new Environmental Claims Code

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In the spotlight: Sustainability reporting developments

Australia: Further guidance released on Australia’s mandatory climate reporting regime

We are now well into, or near approaching, the first reporting year for ‘Group 1’ climate reporting entities. The rubber has hit the road in terms of preparation for the regime, including in relation to decisions about the structure of the sustainability report and broader annual report.

Both ASIC and the Australian Accounting Standards Board (AASB) have recently released guidance to assist reporting entities. The ASIC guidance may be particularly helpful in helping entities make determinations about the sustainability report, including what information will be included in the body of the sustainability report versus incorporated by cross-reference.

ASIC’s Regulatory Guide 280: Sustainability Reporting (RG 280) was published on 31 March and provides guidance in relation to:

• reporting thresholds;
• the required content (including scenario analysis and scope 3 greenhouse gas emissions); and
• disclosures of sustainability-related financial information in other reports.

Of particular note is RG280’s commentary on the modified liability regime, cross-referencing to reports outside the sustainability report, and the labelling and disclosure of additional (voluntary) sustainability information in the sustainability report.

For further information on RG280 and our tips to guide companies on ‘better practice’ for their sustainability report, see our briefing below.

Separately, the AASB has published an overview of the Australian Sustainability Reporting Standards and FAQs to help companies navigate climate-related financial disclosures on a new ‘AASB S2 Knowledge Hub’ webpage. The overview provides a summary of the background of the Standards, what entities they apply to, how to use them, and what disclosures are required under them. Though it does not contain new information, it may be a helpful reference point for reporting entities looking for a high-level overview of the Standards when pulling together their sustainability report. The FAQs are similarly high-level and provide answers to foundational questions such as whether the Standards are mandatory and who is monitoring compliance in relation to them.

Australia and International: ISSB publishes Exposure Draft proposing amendments to IFRS S2, prompting release of Exposure Draft for the same changes to AASB S2

On 28 April, the ISSB published an Exposure Draft proposing amendments to IFRS S2 (ISSB Exposure Draft). These amendments respond to market feedback and are intended to ease the application of certain requirements related to the disclosure of greenhouse gas (GHG) emissions. The proposed amendments include:

• relief from measuring and disclosing Scope 3 Category 15 GHG emissions associated with derivatives, facilitated emissions or insurance-associated emissions;
• relief from the use of the Global Industry Classification Standard, in some circumstances, in disclosing disaggregated financed emissions information;
• clarification on the jurisdictional relief to use a measurement method other than the Greenhouse Gas Protocol for measuring GHG emissions (i.e., the relief only applies to the part of the entity to which the jurisdictional requirement applies, not the entity (or consolidated entity) as a whole); and
• permission to use jurisdiction-required Global Warming Potential values that are not from the latest Intergovernmental Panel on Climate Change.

The ISSB has said that it aims to have these amendments finalised by the end of 2025, and that in the meantime companies currently applying IFRS S1 and S2 as issued in June 2023 can continue to do so.

Following the release of the ISSB Exposure Draft, on 29 April the AASB published an Exposure Draft (AASB Exposure Draft), inviting comments on the proposals in the ISSB Exposure Draft in terms of their implementation in AASB S2.

In its request for comments, the AASB highlights that IFRS S2 was used as a baseline for creating AASB S2, so the proposed amendments to IFRS S2 are relevant to AASB S2. The quick turnaround in the AASB putting forward a proposal to amend AASB S2 in line with potential amendments in IFRS S2 indicates an intention to ensure that the two standards develop in step with each other, subject to any jurisidiction-specific adjustments for the Australian context. Consultation on the AASB Exposure Draft will be open until 2 June 2025.

International: ISSB research projects on nature and human capital enter next phase

On 9 April, the ISSB convened to review the findings from Phase 1 of its research projects on risks and opportunities associated with biodiversity, ecosystems and ecosystem services and human capital. The ISSB also received a summary of the design and approach for the next phase of the research projects as outlined in its Staff Paper. The objective of the next phase is to synthesise Phase 1 findings to inform the ISSB on the necessity and feasibility of standard setting for improved sustainability-related financial disclosures.

The ISSB was not asked to make any decisions during the meeting, with staff intending to share their findings periodically in the coming months.

USA: SEC votes to end its defence of its climate disclosure rule

On 27 March, the US Securities and Exchange Commission (SEC) formally voted to end its defence of legal challenges brought against its Enhancement and Standardisation of Climate-Related Disclosures for Investors rule (the Rule). The Acting Chair of the SEC supported the decision, describing the Rule as “costly and unnecessarily intrusive”. The SEC has not yet revised or rescinded the Rule, but it remains subject to a stay.

For further information on the Rule and the legal challenge it faced, see our March note.

EU: “Stop-the-clock" directive on future sustainability reporting and due diligence requirements in force

The EU Council and the EU Parliament have approved the European Commission’s “stop-the-clock” directive (the Directive), delaying the implementation of CSRD and CS3D for the majority of EU-incorporated entities subject to the regimes. The Directive was proposed as part of the Sustainability Omnibus Package released in late February.

The Directive came into effect on 16 April, and will delay:

• CSRD reporting for wave 2 and 3 companies by two years (to 2028 and 2029 respectively); and
• CS3D reporting by one year (to 2028) for EU-incorporated companies with an average of more than 5000 employees and a net worldwide turnover of over €1,5 million; and non-EU-incorporated companies which generated a net turnover of over €1,500 million in the EU.

Member States will have until 31 December 2025 to transpose the text into their national laws. For more information on the Sustainability Omnibus Package and the Directive, see our notes below.

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Gender equity developments

The past month has seen some significant developments in the gender equality space, including new gender equality legislation, the release of the second gender pay gap report by the Workplace Gender Equality Agency (WGEA) and a new Model Code of Practice on sexual and gender-based harassment.

New legislation mandating gender equality targets from 1 April 2026

The new Workplace Gender Equality Amendment (Setting Gender Equality Targets) Act 2025 (Cth)  recently passed Parliament, and mandates that employers with 500 or more workers set gender equality targets, with compliance tied to eligibility for Government contracts. Employers must select at least three targets from a specified list and commit to achieving or, at a minimum, improving on them within three years, unless they have a ‘reasonable excuse’ for non-compliance. Progress will be publicly available on the WGEA website.

This legislation aims to enhance transparency and accountability in gender equality efforts among large employers, and to accelerate action on gender equality. Private sector employers will be expected to report to WGEA on their chosen targets from 1 April 2026, and Commonwealth public sector employers will be expected to do the same from 1 September 2026. This means that captured employers have 12 months to understand the new requirements and choose their targets.

Second WGEA Gender Pay Gap Report released

The WGEA Gender Pay Gap Report  from the second year of public pay gap reporting reveals that only around 21% of private sector employers have an average gender pay gap within the target range of -5% to +5%, but 56% have managed to reduce their gap from last year. The 2023-2024 data covers 7800 individual employers and 1700 corporate groups with over five million workers. The Report highlights that 72% of employers have a gender pay gap favouring men, with men’s total earnings surpassing women’s by an average of $28,425 annually. Despite this, there has been a slight improvement, with a 0.2 percentage point reduction in the median gender pay gap from the previous year.

Work, Health and Safety Model Code of Practice – Sexual and gender-based harassment

A new Code of Practice (Code) on identifying and eliminating gender-based harassment has been made under the Commonwealth jurisdiction’s work health and safety (WHS) laws, incorporating minor targeted departures from the model version. These changes reflect the requirement for duty holders to apply the hierarchy of controls when managing psychosocial hazards, as mandated by the Commonwealth Work Health and Safety Regulations 2011. The Code, regulated by Comcare and made by Federal Employment and Workplace Relations Minister Murray Watt, is to be used alongside the Commonwealth WHS Code on Managing psychosocial hazards at work.

This new Code highlights psychosocial hazards such as high job demands, violence, poor organisational justice, and job insecurity, which may increase the risk of sexual and gender-based harassment. It provides practical guidance for ‘persons conducting a business or undertaking’ on identifying, assessing, and controlling these risks, as well as responding to and investigating related incidents.

What does this mean for businesses?

Gender equality remains an important topic for the government and businesses alike, particularly in a time of rapid change in other jurisdictions to diversity, equity and inclusion initiatives. Businesses should review and make changes, if appropriate, to their gender equality and sexual harassment policies and procedures to ensure they are fully compliant with all of their existing legal obligations. In particular, employers who are captured by the new Workplace Gender Equality Amendment (Setting Gender Equality Targets) Act will need to give thought to what targets are suitable for their organisation, especially those who have, or seek to have, Government contracts in place, and potentially align the selection of targets to their existing obligations under law, for example, the positive duty to eliminate sexual harassment.

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ACCC issues draft determination proposing to authorise collaboration on sustainable finance initiatives

On 17 April, the ACCC released a draft determination proposing to grant authorisation (with conditions) to allow the Australian Sustainable Finance Institute (ASFI), its members and industry participants to collaborate on sustainable finance initiatives for a period of five years.

While sustainability collaborations are usually aimed at achieving altruistic outcomes, they can also raise competition law risks where they involve businesses that are competitors. The applicants sought authorisation from the ACCC to (subject to a competition law protocol):

• discuss and exchange information for the purpose of developing methods and approaches to improve the integration of natural capital data into financial decision-making by Australian financial institutions;
• in groups of up to 20 participants, discuss, exchange information and make limited agreements in relation to co-designed investment structures or products to increase the allocation of private capital in investable opportunities that contribute to the energy transition, or which have other environmental and/or social objectives; and
• discuss or exchange information for the purpose of developing potential solutions to existing financial regulations constraining sustainable finance and investment in Australia.

The ACCC considered that the collaboration is likely to result in a net public benefit, which is required for authorisation to be granted under the Competition and Consumer Act 2010 (Cth). In reaching this position, the ACCC recognised that one likely benefit was the improved preservation of Australia’s environment due to:

• an increased likelihood of developing consistent metrics and best practices in valuing natural capital and incorporating nature into financial risk assessment;
• an increased likelihood of capital investment into sustainable finance products; and
• enabling ASFI to propose more widely supported reform proposals to address constraints on sustainable finance which, if adopted, would result in changes to policy settings that promote sustainable finance and investment in Australia.

The draft determination shows that there is scope for competing financial institutions to collaborate on issues related to sustainability and the energy transition. However, this scope has limitations, and businesses should consider the tangible public benefits of proposed collaborations and engage early with the ACCC before proceeding. Businesses are also encouraged to refer to the ACCC’s guide on sustainability collaborations published in December 2024.

Submissions on the draft determination closed on 2 May, and the final determination is expected in June or July.

For more information on the ACCC’s sustainability collaborations guide see our January note.

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Judicial review challenge to EPBC Act amendments

On 26 March, the Parliament passed amendments to Australia’s principal environmental legislation, the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), to prevent Ministerial reconsideration that may overturn a controlled action decision under very specific circumstances. Although the amendments do not specifically reference salmon farming in Macquarie Harbour, the amendments were enacted against a backdrop of discussion of that industry, in circumstances where the Minister had already been requested by an environmental group to reconsider the decision that salmon farming in Macquarie Harbour is not a controlled action.

The EPBC Act allows an action to be lawfully taken if the Minister for Environment decides that it is not a controlled action, that is, not an action that has, will have or is likely to have a significant impact on matters of national environmental significance. The Minister can also reconsider past controlled action decisions in specific circumstances, such as when new substantial information comes to light about the impacts of the action. Reconsideration can usually occur even if the project is in operation.

Following the amendments however, the EPBC Act prevents reconsideration of projects under very specific circumstances: where the Minister originally decided the project to be "not a controlled action";  where the action has been operating for five years or more; and where the Minister's original decision required that the action be taken in a particular manner, being a management arrangement made, approved or administered by the state or territory government.

The amendments have sparked a recent judicial review challenge in the Federal Court of Australia by the Bob Brown Foundation, an environmental conservation group that had earlier requested the Minister to reconsider salmon-farming approvals in the Macquarie Harbour. The group lodged an application to review the amending legislation in late April this year seeking to argue that salmon-farming in Macquarie Harbour does not meet the very specific circumstances to which the exclusion of Ministerial reconsideration applies. The organisation is arguing that the Minister must therefore complete the reconsideration process.  

Bob Brown Foundation Inc. V Minister for the Environment (Commonwealth) (TAD15/2025) is listed for a case management hearing late May 2025.

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Greenwashing updates

Meanwhile, in the greenwashing space:

• the report on the Senate inquiry into greenwashing was granted another extension to 5 August 2025; and
• unsurprisingly, the ACCC announced greenwashing as a continued  enforcement and compliance priority for 2025-2026. It will maintain its focus on consumer, fair trading and competition concerns in relation to environmental claims and sustainability, with a particular focus on greenwashing. This focus reflects a similar emphasis demonstrated by ASIC, APRA and Ad Standards that ESG-related claims need to be carefully made and closely regulated.
• There have been a number of developments and decisions in cases before the Federal Court and Ad Standards, as explained below.

Parents for Climate and Energy Australia settles dispute regarding “Go Neutral” product

A settlement was reached shortly before a trial was scheduled to commence in the Federal Court case between activist organisation ‘Parents for Climate’ and Energy Australia. This action was commenced in August 2023, when Parents for Climate alleged that Energy Australia had engaged in ‘greenwashing’ in the marketing of its ‘Go Neutral’ product, which relied upon carbon offsets. Energy Australia had already stopped offering its ‘Go Neutral’ products to new residential customers and is phasing the product out for existing residential customers during 2025.

As part of the settlement, Energy Australia issued a press release which stated that it considers that there are a number of limitations and concerns around the use of offsets. The press release is a voluntary statement made as part of a settlement and therefore differs from findings made by a Court as part of a judgment.

Federal Court approves $8.25 million penalty against Clorox for Greenwashing in ACCC Case

In our February 2025 edition of Keeping Up with ESG in Australia, we highlighted that Clorox and the ACCC had reached agreement on an $8.25 million penalty in relation to misleading and deceptive conduct by Clorox in the labelling of their Glad ‘Kitchen Tidy’ garbage bags as being ‘made using 50% Ocean Plastic’, when  the bags were manufactured from plastic actually collected within 50km of coastlines from various communities.

In April 2025, the Federal Court approved the agreed $8.25 million penalty, finding that it was appropriate in all the circumstances. In reaching this decision, Justice Neskovcin observed that:

• there was a need for general deterrence in this case given the information asymmetry between consumers and suppliers, and the likelihood that environmental claims will continue to be an attractive tool for businesses seeking to differentiate their products and achieve a competitive advantage, and to consumers seeking to make a positive contribution to environmental protection;
• the damage caused was the loss of consumers’ confidence in environmental claims and the competitive advantage which businesses who make false environmental claims may obtain over businesses making genuine environmental claims; and
• even though Clorox genuinely believed that the products would contribute to the reduction of plastic waste in the ocean, it was considered significant that senior management were involved in the marketing decisions of the product.

This judgment underscores the need for environmental claims to be accurate and sufficiently substantiated, and also highlights the potential impact of greenwashing on consumers and businesses.

Ad Standards issues two decisions on complaints under the new Environmental Claims Code

With the new AANA Environmental Claims Code now in force, Ad Standards has released two decisions from its Community Panel relating to complaints made under the new code.

• Ad Standards upheld a complaint by activist group Comms Declare against an ad published by the Australian Gas Network on LinkedIn which suggested that gas cooktops involved less emissions than electric cooktops. The Community Panel held that this ad was misleading as although it referred to the source for emissions calculations, the documents linked did not include the exact figures used in the ad or otherwise explain how those figures were calculated, such that it was not possible for an ordinary consumer to easily locate the method of calculation and evaluate the claim.
   
• Ad Standards dismissed a complaint against an advertisement of the Minerals Council of Australia. The complaint alleged that the ad contained misinformation about nuclear energy. A majority of the community panel considered that the ad involved an ‘environmental claim’ under the new, enhanced Environmental Claims Code, as the ad implied that nuclear energy was ‘harmless’, and therefore involved a claim that it would have a neutral or positive impact on the environment, or would be less harmful than other alternatives. However, a majority of the panel considered that the MCA had provided links to sufficient evidence to support the broad claim of nuclear energy being less harmful to the environment than some other energy alternatives.

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For clients with a presence in the United Kingdom, South African Development Community or Asia, we also publish trackers of ESG publications and developments for these regions at ESG Notes.

ESG thought leadership

To read more of our ESG thought leadership, please see:

Our 2024 Unlocking ESG Investment in Australia Report

Latest recordings of Third Wheel Podcast Series: ESG in Australia

ESG Notes and Climate Change Notes

ESG, Sustainability and Responsible Business

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Written with assistance of Elise Plunket (Head Office Advisory Team), Paige Mortimer and Xiao-Xiao Kingham (Environment, Planning & Communities), Rae Huang and Courtney Van Vorsselen (Employment, Industrial Relations and Safety), James Ward, Nicole Chen and Laeticia Garrett (Project Finance), Alexander Humphreys (Disputes).

 

Key ESG contacts

Please contact your usual ESG contact or the below.

Timothy Stutt, Heidi Asten, Melanie Debenham, Mark Smyth, Jon Evans, Olga Klimczak, Isabella Kelly, Paige Mortimer and Anna Vandervliet