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 developments in government climate action and regulation.
Key highlights
- In the spotlight: Developments in government
obligations in relation to climate change
- Federal Court finds Commonwealth does not owe a climate change duty of care to Torres Strait Islanders
- ICJ releases Advisory Opinion on State climate change obligations
- Implementation of Government obligations in Australia
- Sustainable finance reforms updates
- Treasury consults on guidance on voluntary climate-related transition planning
- ACCC authorises collaboration on sustainable finance initiatives
- Consultation paper on sustainable investment product labels released
- EPBC Act is up for review again
- ESG enforcement and litigation
- ACCC launches greenwashing proceedings against Edgewell Personal Care
- Ad Standards dismisses complaint against Sustainable Timber Tasmania
- Modern slavery developments
- FWO launches inquiry into disability support sector
- WorkSafe ACT clarifies 'sexual assault' reporting requirements
- ISSB publishes educational materials on disclosing information about anticipated financial effects
Developments in government obligations in relation to climate change
Recent weeks have seen two key decisions in respect of the Australian Government's obligations in respect of climate change.
Federal Court finds Commonwealth does not owe a climate change duty of care to Torres Strait Islanders
On 15 July 2025, the Federal Court ruled in Pabai Pabai v Commonwealth of Australia (No 2) [2025] FCA 796. The applicants, Mr Pabai Pabai and Mr Guy Paul Kabai, had brought a class action on behalf of all Torres Strait Islanders alleging the Commonwealth had breached its duty of care to protect them from the impacts of climate change. This was a novel argument brought under the tort of negligence. The Court found that the Commonwealth does not owe a duty of care to Torres Strait Islander peoples to protect them and their traditional way of life from climate change when setting national emissions reduction targets and funding adaptation measures.
The Federal Court, comprising a single judge, found that the reasonableness of government conduct in setting targets is a matter of government policy and should not be determined by the courts. Although the courts can assess whether government action and targets are compatible with the 'best available science', the Court found it was inappropriate and impracticable for it to assess the reasonableness of the Commonwealth's actions in setting and communicating the relevant GHG emissions reduction targets, especially as they often involve complex economic, social, and political considerations.
However, the Court did agree with the applicants on many of the factual matters, including that the Commonwealth failed to give genuine consideration to best available science in setting greenhouse gas emission reduction targets in 2015, 2020 and 2021 necessary to meet the aims of the Paris Agreement.
ICJ releases Advisory Opinion on State climate change obligations
One week later the International Court of Justice (ICJ) issued its much-anticipated Advisory Opinion on the Obligations of States in respect of Climate Change (Advisory Opinion). See our article below:
Defining State Obligations in a Warming World: The ICJ's Advisory Opinion on Climate Change
In this non-binding decision the ICJ has recognised for the first time that the Paris Agreement, other climate treaties and customary international law set binding obligations for States to ensure the protection of the climate system and other parts of the environment from anthropogenic greenhouse gas emissions. Breach of these obligations is an internationally wrongful act, entailing State responsibility.
The ICJ made the general observation that a global temperature goal of 1.5°C 'has become the scientifically based consensus target under the Paris Agreement', and considered that a State must set its Nationally Determined Contributions (NDC) such that the NDCs of all States are, taken together, capable of achieving that temperature goal.
The Advisory Opinion sets out in detail the obligations on States centring on the prevention of significant harm to the climate system or environment. These include:
- to adopt measures to mitigate greenhouse gas emissions, and enhance carbon sinks. Compliance with this obligation is to be assessed having regard to the principle of common but differentiated responsibilities and respective capabilities, but will focus on whether the State exercised due diligence in deploying appropriate domestic mitigation measures, including where relevant in relation to regulation of activities carried out by private actors (eg businesses). These measures include putting in place appropriate legislation, administrative procedures and oversight and enforcement mechanisms, and (in the case of States parties to the Paris Agreement) the measures must be capable of achieving the objectives set out in the State's NDC; and
- adaptation obligations, including through impact assessments aimed at minimising the adverse effects of projects, funding and insurance.
While the Advisory Opinion is not legally binding, it is expected to impact State climate law and policy. With Australia being a signatory to international treaties like the Paris Agreement, the ICJ's findings may prompt stronger national environmental commitments and more robust emission regulation - particularly in the lead-up to COP30 and as the Commonwealth prepares to set the Australia's 2035 NDC in the coming months.
The Advisory Opinion forms part of a broader wave of worldwide legal developments in relation to climate change and follows the recent Inter-American Court of Human Rights Advisory Opinion 32 of 2025 on State climate change obligations. For more information on that, see our note below.
Implementation of Government obligations in Australia
The question arises of what regulatory mechanisms countries should implement to meet their obligations. One way to do this could be through regulation of high-emitting businesses under environmental law. At present, climate-specific regulation is not expected to form part of Australia's upcoming federal environmental law reform, and key aspects of environmental regulation are implemented by domestic States and Territories.
- For example, on 29 July 2025, the NSW EPA opened consultation on proposed changes to the conditions to be placed on the EPA environmental protection licences of the highest emitting EPA licensees. These licensees make up about 50% of NSW's Scope 1 (direct) emissions. From 2026, it is proposed that these licensees would be required to submit annual climate change emissions reporting; create climate change mitigation and adaption plans; and report annually on progress against the plan. The EPA will also develop targeted mitigation requirements for different industry sectors. In the longer-term, the EPA will progressively place greenhouse gas emission limits on new and existing licences for key industry sectors.
- In Victoria, the EPA's recent Statement of Regulatory Intent on Climate Change 2025-2027 also foreshadowed increased focus on licensees that are major emitters and energy users including as part of their 'general environmental duty', as well as focus on major industries that face increased pollution and waste risks due to climate change, and the circular economy.
Meanwhile, some have concerns around the economic impacts of policies seeking to achieve net-zero. On 28 July 2025, the Hon. Barnaby Joyce MP introduced a private member's bill, the Repeal Net Zero Bill 2025 (Cth) proposing to repeal legislation underpinning Australia's net zero transition on the basis of perceived damage to industry, cost of living and the broader economy. The bill is succinctly drafted to repeal the Climate Change Act 2022, Future Made in Australia (Guarantee of Origin) Act 2024 and Net Zero Economy Authority Act 2024.
Sustainable finance reforms updates
Treasury consults on voluntary guidance on climate-related transition planning
Between 15 August and 24 September 2025, Treasury is consulting on its development of new guidance on best practices for transition planning. The final guidance will endorse a recommended transition plan disclosure framework for organisations operating in Australia.
Transition planning is the ongoing strategic process of organisations responding to climate-related risks and opportunities, including setting climate ambitions and targets, and developing implementation approaches with supporting governance and reporting arrangements.
Under the mandatory climate-related disclosures regime currently being phased in, organisations are required to create and publish transition plans, including information about assumptions and dependencies relevant to the development of that plan.
The guidance is voluntary but is being designed to support best practice disclosures compatible with IFRS S2, to which AASB S2 is closely aligned. Treasury's consultation paper recommends that organisations align their transition plans with the structure of IFRS Transition Plan Taskforce Disclosure Framework materials, to assist in establishing a consistent and internationally aligned approach to preparing and disclosing transition plans. The IFRS Transition Plan Taskforce released transition planning guidance in June. For more information on the IFRS guidance, see our June edition.
Treasury's draft guidance recommends that effective transition plans set out the organisation's implementation strategy, engagement strategy, metrics and targets used to drive and monitor progress, and how the transition plan is being embedded in governance structures.
Publication of the final paper is expected at the end of 2025.
To read more on the latest in climate reporting, see our note below.
Full steam ahead for Australian climate reporting as ASIC releases its final guidance
ACCC authorises collaboration on sustainable finance initiatives
The ACCC has authorised collaboration between the Australian Sustainable Finance Institute (ASFI) and industry participants to advance sustainable finance initiatives for the next 5 years. The relevant parties will therefore be afforded legal protection for collaborative conduct (subject to conditions) that might otherwise breach competition laws.
The authorisation is designed to support sustainable agricultural practices and national emissions reduction goals by:
- facilitating the exchange of information to better incorporate natural capital data into financial decision-making;
- helping the development of sustainable farming practices;
- enabling the creation of co-designed investment structures and financial products that drive costs savings and process efficiencies; and
- creating opportunities to develop and propose regulatory reforms.
The authorisation follows ACCC's consultation during April 2025 on the draft determination (see discussion in our May edition).
Consultation paper on sustainable investment product labels released
On 18 July 2025, the Treasury opened consultation on sustainable investment product labels. The consultation paper underscores the need for greater transparency and consistency concerning sustainability related disclosure requirements for businesses.
The paper highlights that Australian investors often face confusion when comparing the sustainability features of different products, due to the lack of standardised practices and terminology in sustainable investing. To address this issue, the paper contemplates several potential policy reforms, including:
- establishing a government-approved standardised disclosure and labelling system for investment products marketed as sustainable, grounded in a credible, science-based taxonomy to combat greenwashing; and
- aligning the Australian framework with international standards (eg those in the European Union and UK) where appropriate to facilitate consistency across markets.
The paper invites submissions on 13 key questions concerning sustainable investment product labels, which will inform the detailed design proposal expected in late 2025. The framework is targeted for implementation in 2027.
EPBC Act is up for review again
Federal Minister for the Environment and Water, Senator Murray Watt has announced plans to introduce legislation to reform the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) by the end of 2026, following ongoing and refreshed concerns that the legislation as it currently stands is affecting productivity, delaying the approval of renewable projects key to Australia's energy transition, and failing to achieve environmental protection objectives. Drawing on decades of experience, our environment and planning partners have put forward ten recommendations or 'simpler fixes' to improve the EPBC Act's functionality and support efficient approvals for clean energy projects.
The EPBC Act is up for review again. A few tweaks could make it much better
ESG enforcement and litigation
Recent months have seen a complaint made in relation to forced labour and further regulatory intervention in relation to misleading environmental claims.
For more insights on practical tips for ensuring compliance and effective communication in environmental statements and sustainability reporting, see our latest Third Wheel Podcast episode below.
The Third Wheel podcast (ESG in Australia) Episode 49: Structuring your Sustainability Report
ACCC launches greenwashing proceedings against Edgewell Personal Care
The Australian Competition & Consumer Commission (ACCC) has launched Federal Court proceedings against Edgewell Personal Care Australia Pty Ltd and its US-based parent company, Edgewell Personal Care Company (Edgewell), for allegedly false and misleading claims that its Hawaiian Tropic and Banana Boat branded sunscreens are 'reef friendly' made between August 2020 and December 2024. Edgewell denies the claims are misleading on the basis that their sunscreens do not contain oxybenzone or octinoxate, which are chemicals known to cause damage to reefs. However, the ACCC claims that other ingredients were used which are also harmful to reefs.
The ACCC's media release on the proceedings indicates that the ACCC is continuing to monitor the extent to which companies are able to substantiate environmental claims, for example via reputable third-party certification or reliable scientific reports.
Ad Standards dismisses complaint against Sustainable Timber Tasmania
In its recent decision, Ad Standards dismissed a complaint alleging that Sustainable Timber Tasmania's (STT) television advertisement was misleading and breached Ad Standards' Environmental Claims Code (the Code). The ad contained a voiceover stating that "...our mission is to care for our forest. To learn. Protect. Produce. To maintain the balance so our forests have a future".
In reaching the decision, the Ad Standards Community Panel determined that the advertisement involved an environmental claim under the Code. The Panel determined that the combination of forest images focusing on greenery and growth together with the references to "protecting", "maintain the balance" and the word "sustainable" in the company's name, which collectively conveyed an overall impression that STT had a neutral or positive impact on the environment.
Nevertheless, the Panel deemed that the claim was unlikely to mislead or deceive the target consumer (adults living in Tasmania) on the basis that they would likely understand that the advertiser was promoting the actions it was taking to mitigate the negative effects of timber production. Whilst the Panel considered that the ad did not substantiate or justify the use of the word "sustainable", STT's website provided sufficient support for the claim that the business has a neutral impact on the environment.
Federal Court dismisses Doctors for the Environment Australia challenge to environment plan approval
On 22 August 2025, the Federal Court handed down its decision in respect of Doctors for the Environment Australia's (DEA) challenge to the National Offshore Petroleum Safety and Environmental Management Authority's (NOPSEMA) acceptance of Woodside's Scarborough Offshore Facility and Trunkline (Operations) Environment Plan (EP). DEA's core complaint was that:
- Because Scope 3 GHG emissions are an indirect environmental impact of the project, the regulatory regime required that the EP specify an acceptable level of scope 3 GHG emissions for the activity which the EP failed to do; and
- The proposed adaptive measurement control measures lacked specificity and certainty, and therefore did not demonstrate that the environmental impact of GHG emissions would be reduced to as low as reasonably practicable and an acceptable level; and
- Therefore, it was not open to NOPSEMA to be reasonably satisfied that the EP met the regulatory acceptance criteria.
Although DEA did succeed in establishing standing to present its case, the Court rejected DEA's argument. The Court found the regulatory regime does not require an EP to prescriptively define the acceptable levels for identified environmental impacts where that is not possible or reasonable, particularly where there are inherent uncertainties in the relationship between the activity, predicted impacts (ie generation of Scope 3 GHG emissions) and any consequential impacts. Instead, there is flexibility for a titleholder to conduct an evaluation that is appropriate to the nature and scale of identified impacts and risks in the context of the activity, which then becomes a matter for NOPSEMA to assess.
The Court's decision supports a view that there is no one-size-fits-all approach to the assessment of Scope 3 GHG emission impacts in EPs. While it remains open for NOPSEMA to consider Scope 3 GHG emissions as environmental impacts for assessment, there is latitude in terms of how this is done in any particular EP. The decision is Doctors for the Environment (Australia) Incorporated v National Offshore Petroleum Safety and Environmental Management Authority (No 2) [2025] FCA 989.
Modern slavery developments
On 22 July 2025, the Australian Government launched a public consultation on proposed reforms to the Modern Slavery Act 2018 (Cth), following its December 2024 response to the statutory review of the Act's operation after its first three years since commencement.
The consultation paper outlines a suite of potential changes, including:
- amending the mandatory reporting criteria;
- expanding the existing powers of the regulator to penalise entities for non-compliance;
- changes to joint reporting procedures;
- inclusion of a new criterion that would require reporting entities to report on the implementation of grievance mechanisms which identify and address modern slavery risk within their operations and broader supply chain;
- inclusion of a new criterion that would require reporting entities to disclose the internal actions, processes, and procedures that have been adopted to remediate and mitigate identified modern slavery incidents; and
- changes to the timing of notice requirements for voluntary disclosure of modern slavery statements.
The consultation period closes on 1 September 2025.
Further abroad, the UK government published a new international reporting template in relation to modern slavery, forced labour and child labour. The optional template covers the disclosure obligations for organisations in the UK, Australia and Canada, and aims to reduce the reporting burden for entities falling in scope of these requirements by supporting the creation of one statement for all three jurisdictions. While the template promotes proportionate, risk-based reporting and good practice, entities must still consult the relevant domestic legislation and guidance to ensure alignment with each jurisdiction's legal and administrative requirements.
For more information on the modern slavery consultation and the international reporting template, see our notes below.
Australian Government seeks comments on changes to the Modern Slavery Act
Corporate reporting – new modern slavery reporting template
FWO launches inquiry into disability support sector
The Fair Work Ombudsman (FWO) has launched a multi-year inquiry into the disability support services sector to address serious concerns about widespread non-compliance with workplace laws. The inquiry will begin with an 18-month consultation period, engaging with a broad range of stakeholders including workers, managers, directors, digital platform providers and clients.
It comes off the back of a significant number of enquiries, anonymous reports, and non-compliance matters since 2020. These interactions have revealed systemic issues, including underpayment and poor working conditions. The inquiry aims to uncover the root causes of non-compliance, particularly in relation to minimum entitlements like wages and conditions. It also touches on key focus areas of the FWO, including migrant workers, predominantly female workforces, and high levels of casualised work. The inquiry will also explore how digital platforms and business models contribute to compliance challenges.
For businesses operating in the disability support sector, this inquiry signals increased scrutiny and a push toward cultural and operational reform. It encourages proactive compliance and collaboration with regulators. Businesses in similar sectors – such as aged care, community services, and more generally gig-influenced industries – should seek to review internal practices and attempt to proactively address potential compliance issues.
WorkSafe ACT clarifies 'sexual assault' reporting requirements
WorkSafe ACT has issued updated guidance to clarify the obligations of Persons Conducting a Business or Undertaking (PCBUs) under the ACT Work Health and Safety Act 2011 regarding the notification of sexual assault incidents. Since June 2023, sexual assault has been formally recognised as a notifiable incident under section 35 of the Act. This means that PCBUs must immediately notify WorkSafe ACT if they become aware of an actual or suspected work-related sexual assault. The clarification comes in response to feedback from PCBUs expressing confusion about what constitutes a notifiable incident, particularly in relation to the threshold of behaviour that qualifies as sexual assault.
The guidance:
- defines a notifiable sexual assault incident as any workplace-related event that exposes a worker or other person to sexual assault. It includes non-consensual sexual acts and other indecent acts that a reasonable person would consider sexual in nature. Importantly, the guidance emphasises that perpetrators can include anyone in the workplace – employers, co-workers, clients, patients, students, or customers – highlighting the broad scope of potential incidents that fall under this duty; and
- reinforces a clear onus on employers to not only prevent sexual assault in the workplace but also to act swiftly and transparently when such incidents occur. Governance responsibilities continue to include ensuring that staff are trained to recognise and report sexual assault, that reporting mechanisms are accessible and effective, and that leadership is accountable for timely notification to WorkSafe ACT.
PCBUs in other states have also raised concerns in relation to a lack of clarity in relation to reporting psychosocial incidents. The State and Territory Ministers last year agreed to amend safety laws to provide greater clarity. Businesses should monitor these changes and ensure their processes and systems for reporting comply with these requirements.
ISSB publishes educational materials on disclosing information about anticipated financial effects
In educational materials published on 18 August, the ISSB has provided guidance on how companies using the ISSB Standards for their climate disclosures should disclose the anticipated financial effects of sustainability-related risks and opportunities, and when they can rely on various proportionality mechanisms and carve-outs, as set out below.
What does 'all reasonable and supportable information available at the reporting date without undue cost or effort' mean?
When preparing disclosures on anticipated financial effects, a company is required to use all reasonable and supportable information available at the reporting date without undue cost or effort.
All reasonable and supportable information includes information about past events, current conditions and forecasts of future conditions. To fulfill this requirement, the ISSB set out that companies:
- need only to use information that is available to them at the reporting date including historical, current or forward-looking information (such as forecasts of future conditions);
- cannot disregard information that is known or publicly available; and
- need to have an appropriate basis for using the information.
In addition, the ISSB stated that what constitutes 'undue cost or effort':
- depends on the company's specific circumstances; and
- requires a balanced consideration of the costs and efforts for the company, and the benefits of the resulting information for investors (ie the greater the usefulness of information about a sustainability-related risk or opportunity is to investors, the greater the effort expected of a company in obtaining that information).
Information the company used in preparing its financial statements, operating its business model, setting its strategy, and managing its risks and opportunities is presumed to be available to a company without undue cost or effort. It is worth noting that in the Australian context this proportionality mechanism is unlikely to be meaningful for larger entities, which we understand are likely to be considered to have the necessary resources available to them for fulsome compliance.
Taking an approach commensurate with the skills, capabilities and resources available to the company
When preparing disclosures on anticipated financial effects, a company is required to use an approach commensurate with the skills, capabilities and resources available to the company.
The ISSB commented that a company cannot avoid providing quantitative information for anticipated financial effects because it does not have the skills or capabilities to do so, if it has the resources available to obtain or develop those skills or capabilities.
It also noted that it is not always necessary for a company to be well resourced or to be capable of undertaking sophisticated analysis to provide quantitative information.
When is the information not 'separately identifiable'?
Companies do not need to provide quantitative information on anticipated financial effects if the effects are not separately identifiable.
The educational materials include the following example: Company A has observed a trend of decreasing demand for its products which it believes is partially driven by adverse economic and market conditions and partially driven by changing consumer demands related to climate considerations. In this case, Company A cannot isolate the decrease in demand due to the effects of climate-related risk from the effects of other causes. Notwithstanding that the effects of the climate-related risk are inseparable, the company provides quantitative information about the combined effects of decreasing demand.
The ISSB noted that a company can rely on the 'not separately identifiable' exception even where it is well-resourced and has been applying the ISSB Standards for many years.
What about the level of measurement uncertainty?
The educational materials note that, some cases, the level of measurement uncertainty can be so high that quantitative information would not be useful. In this case, companies do not need to provide such quantitative information about anticipated financial effects. The materials relate the concept of 'usefulness' to the conceptual foundations in IFRS S1 (in Australia, these are included in AASB S1 and AASB S2), which provide that information is useful if it is relevant and faithfully represents what it purports to represent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
