Mandatory climate reporting: Lessons for Australian directors from New Zealand’s first year

As Australian organisations prepare for mandatory climate reporting, insights from New Zealand’s first year of reporting reveal both opportunities and challenges.

New Zealand was the first country in the world to pass legislation mandating its largest market participants to undertake climate reporting, and many entities are now entering their second year of reporting.

Throughout their first year of reporting there has been significant analysis from a range of perspectives highlighting opportunities gained and missed, various challenges, and areas where the disclosures could be enhanced.

Being early adopters in mandatory climate-related disclosures has resulted in directors, preparers, assurers and advisors experiencing a steep learning curve. This was true even for those who had been voluntary reporters for a number of years.

Challenges and benefits of climate reporting

In October 2024, Chapter Zero New Zealand and KPMG launched Lessons from the front line, a guide to help entities on their climate reporting journey. The guide is based on real-world experiences from directors, preparers and users involved in the development of climate-related disclosures. Key insights of relevance for directors and regulators include:

• Greenhushing risks: Many organisations chose to ‘say less’ to avoid accusations of greenwashing, raising concerns about ‘greenhushing’ – disclosing less to minimise legal risks.
• Challenges for pioneers: Without templates or best practices, New Zealand directors faced steep learning curves and resource constraints. For some, this meant diverting attention from other strategic climate initiatives.
• Emerging benefits: Reporting has deepened organisational focus on climate, improved governance alignment, and fostered cultural change. The standards’ organisation-wide approach built capability and accelerated progress for early-stage entities.
• Reframing reporting: Directors noted climate reporting should move beyond compliance, acting as a ‘carrot’ to understand and adapt to climate change impacts while building resilience.

“The value is in all the conversations that were had to generate the report – having the same minds and voices in the risk discussions, the strategy discussions, the reporting discussions. Reporting has brought alignment and understanding across some pretty technical areas of both strategy and climate risk.”

Lindis Jones, Director Z Energy and Loyalty NZ, Lessons from the front line

The regulator’s perspective

Earlier this month, the Financial Markets Authority, the regulator responsible for market conduct in New Zealand and for monitoring and enforcing of the climate-related disclosures regime, released insights from its review of 70 climate statements for the reporting periods to 31 March 2024.

Key observations on better practice included:

• Materiality: Undertake robust materiality assessments to ensure all information disclosure is material and relevant (i.e. avoid over-disclosing information that isn’t material).
• Fair presentation: Ensure information fairly reflects the information presented and in a way that does not over-emphasise the positive, is ambiguous, unclear or vague.
• Data and estimates: Disclose all material information in relation to underlying methods and assumptions, and any data and estimation uncertainty.
• Disclosure requirements: Describe how climate-related processes were undertaken, including frequency, and explain how climate-related activities are connected with climate-related processes and other organisational activities. Explain the impacts of any climate-related events in the reporting period and be more specific when describing risks and opportunities (including materiality assessment). Clearly and transparently describe greenhouse gas emissions targets.
• Scenario analysis: Explain the scenario analysis process including disclosing scenario narratives, all material information and the extent to which sector-level information has been used to inform entity-level scenarios. Ensure that scenarios are distinct, plausible and challenging.
• Consistency and coherency. Ensure that disclosures are consistent with other published information and vice versa, such as annual reports.

What lessons are there for Australia from the NZ experience?

Australian organisations commence their first year of reporting from 1 January 2025. These experiences from across the ditch provide useful lessons for Australian directors, particularly as the new requirements have been described by ASIC Chair Joe Longo as “the biggest change to corporate reporting in a generation”.

The core elements of Australia’s corporate reporting regime are detailed in A director’s guide to mandatory climate reporting Version 2, released in September 2024 by AICD, Deloitte, and MinterEllison

Lessons learned – a director’s perspective

The scale and complexity of completing mandatory climate reporting should not be underestimated. Boards needs be fully prepared and fully engaged in the process from the outset.

“Getting your head around it is the difficulty. You need to decide how much you want to change your business strategy out to 2050 and how fast you want to go. You need to know what everyone else in your sector is going to do, but it’s specific to you.

You need to understand your organisation, what you control and what you can’t. You need to understand the level of engagement your customers and staff want. It’s a complex challenge.”

John McMahon, Director NZX, Lessons from the front line

New Zealand directors have highlighted the following lessons:

1. Get your governance structures and processes in place and establish roles and responsibilities.
2. Make sure climate is on the board agenda regularly. Directors should be involved throughout the process as assumptions are tested and decisions reviewed.
3. Understand what resourcing is required, what your organisation’s capability and capacity is, and identify any gaps. Boards should do this to understand what is at stake and what resources are needed.
4. Establish what is material to your business and what value is at risk including material risks and opportunities.
5. Understand what you will be required to sign off in your disclosure and ensure you are sufficiently involved or informed to do so.

Comparing the regimes

While the New Zealand and Australian regimes are similar, the Australian Sustainability Reporting Standard (AASB S2) is broader than New Zealand’s mandatory climate-related disclosures (CRD) regime, with approximately fifty more disclosures required.

The New Zealand CRD regime is based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, and legislated before the International Financial Reporting Standards (IFRS) S1 and S2 had been issued. The Australian regime is based on IFRS S2 (climate-related disclosures).

New Zealand directors do not have the benefit of Australia’s modified liability regime, which allows for a period of regulator-only enforcement over certain disclosures (one-year for all future-related disclosures and an additional two years for scope 3, scenario analysis and transition planning disclosures) to encourage more fulsome reporting. In New Zealand, organisations and their directors currently have the same degree of liability as they do in relation to financial statements.

Additionally, the Australian regime will apply to a significantly wider group of entities than the New Zealand regime, including both listed and unlisted public and large private companies. Figure 1 sets out the tiered implementation for Australian entities.

Figure 1: Tiered implementation for Australian entities