Welcome to the October edition of Herbert Smith Freehills Kramer’s Australian ESG bulletin, ‘Keeping Up with ESG’.
Our monthly ESG bulletin provides a targeted snapshot of key developments we see as reflecting the “must know” trends in the Australian market and, where relevant, the international market. In this edition, we spotlight the Australian Government's incoming national framework for AI standards including its current consultation on AI infrastructure.
Key highlights
- In the Spotlight: Setting the standard on Australia’s AI infrastructure
- ASIC releases latest Corporate Plan and guidance for business, and further observations of sustainability reports lodged for 31 December 2025
- New guidance on spotting early signs of modern slavery risk
- New Zealand Parliament bars climate-related tort claims against businesses
- Commonwealth releases Australia's Maritime Emissions Reduction Action Plan
- Australia’s first right to disconnect ruling clarifies the limits of after-hours workplace pressure
- Albanese Government proposes to establish Fair Work Court
- European Commission finalises revised European Sustainability Reporting Standards
In the Spotlight: Setting the standard on Australia’s AI infrastructure
The Australian Government is developing a national framework for AI standards in Australia. As part of this process, it has released the Getting it right: Building AI infrastructure that works for Australia consultation paper on Australia's AI infrastructure (Consultation Paper).
Notably, the Consultation Paper flags that the Commonwealth intends to develop consistent mandatory minimum standards for the development of data centres, which states and territories can build upon. Key regulatory areas of interest include energy, water and community engagement, which the Australian Government proposes to address through a tiered approach based on the electricity network connection capacity of data centre facilities. The three tiers proposed are:
- Tier 1: Up to 30 MW (excluded from the AI standards);
- Tier 2: 30-100 MW; and
- Tier 3: 100 MW or greater.
The proposed AI standards are intended to complement, rather than duplicate, state and territory planning and approval processes. Developers will therefore need to continue to consider both national and state or territory legislative overlays for data centre projects.
While the Commonwealth intends to set baseline national standards around the energy mix required to power data centres, it has indicated that the standards will account for state-owned generation, including in jurisdictions outside the NEM where existing arrangements may not yet satisfy the standards. This is particularly relevant to the Queensland and Northern Territory governments, which each retain state-owned energy transmission, distribution and generation assets, including coal and gas assets that may form part of the energy mix for powering data centres. How the dynamic between state- and territory-owned energy networks will interact with the Australian Government's ambition for data centres to meet their energy needs through new renewable electricity capacity remains to be determined.
At a high level, the key positions of each jurisdiction include the following:
- Victoria released its Sustainable Data Centre Action Plan on 22 September 2026 – which sets an expectation for data centres to offset its energy demands through new renewable energy generation and storage, cover its own connection costs, use non-drinking water for cooling and a 150-metre buffer from residential buildings and new data centres. Legislation or planning scheme amendment would be necessary to formalise some of these policy positions, with consultation on some next steps indicated for 2027.
- New South Wales released its NSW Data Centre Policy Framework and NSW Data Centre Guidelines on 17 August 2026 – which set principles for data centre development. This includes applying world-class environmental and efficiency standards, imposing no net cost to consumers and communities, and funding additional supply of water and energy (such as through PPAs and offsetting any potable drinking water used where recycled water is not available).
- Queensland has announced that its proposed planning framework would shift data centre planning approvals from local councils to the State, alongside a social impact assessment and a community benefit agreement to be entered into with the relevant local council before submitting a development application.
- Western Australia does not have a dedicated policy or regulations, but there has been a push from industry and local government for guidelines.
- South Australia released its Data Centre Strategy on 23 June 2026 – which includes plans to introduce a Data Centre and AI Infrastructure Act aimed at managing energy use, streamlining development and securing water sustainability.
- Tasmania released its draft Statement of Expectations for Data Centres and Artificial Intelligence Infrastructure on 7 September 2026 – which includes expectations that data centres bring on and partner with new renewable energy generation, data centres pay their fair share of network costs and all connection costs, and water security is not compromised for other water users.
- Australian Capital Territory announced its intentions on 26 August 2026 to develop a Data Centre Framework by early 2027 and support for national requirements for new renewable generation. Under this framework, ACT proposes to limit future data centre development to locations already permitted under the ACT planning system, which exclude residential neighbourhoods and are restricted to designated commercial, industrial, transport and services, and certain non-urban zones. Water security will also be a focus of the framework.
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Northern Territory has expressed its intention to permit data centres to use whatever power is available, noting its supply of gas. Its Digital Futures Strategy 2026-2028 identifies data centre development as an investment opportunity for the Territory.
ASIC releases latest Corporate Plan, guidance for business, and further observations of sustainability reports lodged for 31 December 2025
a. ASIC has released its Corporate Plan, outlining its priorities for the year ahead
ASIC has released its Corporate Plan outlining its priorities for the year ahead. ASIC’s key focus this year is on protecting consumers and small businesses, supporting responsible innovation, reducing unnecessary regulatory burden, and strengthening confidence in Australia’s financial system.
As part of its strategic priority to strengthen professional conduct and improve access to reliable financial and business information, ASIC intends to focus on the implementation of the mandatory climate reporting framework. Specifically, ASIC will review the reports of listed and unlisted Group 1 entities and share its observations with the market. The Corporate Plan further notes that ASIC will continue its pragmatic and proportionate approach to sustainability reporting; assist implementation through guidance, education and relief; and engage with large audit firms on their audit methodologies.
With sustainability reporting remaining a key focus for ASIC, early preparation by Group 2 and 3 entities will be critical to producing high-quality disclosures that withstand regulatory scrutiny and meet stakeholder expectations.
b. ASIC releases further educational material for companies to understand sustainability reporting requirements
ASIC has released a series of sustainability reporting videos, completing the package of educational materials to help companies understand foundational concepts underpinning the sustainability reporting requirements. The videos cover:
- the Corporations Act and climate-related disclosure requirements;
- an introduction to climate change;
- climate-related physical risks;
- climate-related transition risks;
- climate-related opportunities;
- emissions accounting;
- scenario analysis; and
- governance and risk management.
ASIC has recommended that Group 2 and 3 entities begin building their capability and preparing for sustainability reporting early. These regulator-developed resources provide a useful starting point for those entities to upskill as they adapt to the requirements of the new regime.
c. ASIC releases further observations of sustainability reports lodged for 31 December 2025
Following on from ASIC’s media release in May this year outlining its early observations on sustainability reports (which we previously covered here), ASIC has released a report with further observations on the sustainability reports lodged for 31 December 2025.
ASIC reviewed a sample of 40 reports (20 from listed companies, 20 from unlisted companies), prioritising higher-emission/higher-risk sectors such as mining, utilities, manufacturing, banking and insurance. Overall, ASIC observed that the quality, quantity and consistency of climate disclosures has improved compared to prior voluntary reporting, with most entities complying with basic statutory requirements and engaging in good faith with AASB S2. However, disclosures on current matters (e.g. governance and risk management) were generally clearer than forward-looking, judgement-based disclosures (e.g. strategy, metrics and targets), where there is room for improvement.
ASIC flagged eight key action items for reporting entities – some of which overlap with its early observations on sustainability reports – including explaining how information in the sustainability report connects with relevant disclosures in a company’s financial report, and considering whether quantitative disclosure of financial effects can be provided where possible. ASIC’s full review can be accessed here.
New guidance on spotting early signs of modern slavery risk
The Australian Anti-Slavery Commissioner, together with the Migrant Justice Institute and Walk Free, has released new guidance titled 'Off the Books: Practical Guidance for Business' (Guidance), which highlights wage underpayment as an early indicator of labour exploitation, including modern slavery. The Guidance translates findings from a survey of temporary migrant workers in Australia into practical steps for Australian businesses. The Guidance suggests that businesses should view underpayment as a trigger for thorough due diligence both in their own operations and in their supply chains. The Guidance highlights how underpayments occur in practice, including through the misclassification of employees on Australian Business Numbers and sham contracting, insecure casual employment, underpaid night or weekend work, and misleading payslips or cash payments. The Guidance also provides practical tools for businesses, including due diligence tips, to better identify exploitation and remediate underpayment issues before they escalate into more serious modern slavery risks.
New Zealand Parliament bars climate-related tort claims against businesses
The New Zealand Parliament has passed legislation to provide that no person (including the Crown) can be found liable in tort for emissions-related climate change effects.
The Climate Change Response (Tort Liability) Amendment Act 2026 (NZ) provides that a person has “no tort liability for the emissions-related climate change effects" if the person carries out an activity which causes or contributes to emissions, and the emissions cause or contribute to emissions-related climate change effects.
A person is protected by the statutory bar regardless of the extent to which:
- other legislation applied or could have applied;
- the person complied with the other legislation; or
- the person was subject to enforcement action for non-compliance with other legislation.
The legislation was enacted specifically in response to proceedings brought by Mr Smith (an elder of Ngāpuhi and Ngāti Kahu, and a climate change spokesperson for the Iwi Chairs Forum, a national forum of tribal leaders) against six corporate entities alleged by Mr Smith to have contributed materially to the climate crisis and to have damaged, and to continue to damage, his whenua (land and environment) and moana (sea), including places of customary, cultural, historical, nutritional and spiritual significance to him and his whānau (extended family): see Smith v Fonterra Co-operative Group Ltd [2024] NZSC 5; 1 NZLR 134 (Smith).
In Smith, the New Zealand Supreme Court reinstated Mr Smith’s claim, which had been struck out by the Court of Appeal on the basis that it was doomed to fail. The Supreme Court considered that “the application of orthodox, long-settled principles governing strike out means this claim should be allowed to proceed to trial, rather than being struck out pre-emptively”, but noted this “is not a commentary on whether or not [Mr Smith’s claim] will ultimately succeed”.
The Explanatory Note (EN) provides that the New Zealand Government was “concerned that [Mr Smith’s] litigation could lead to a finding that causing or contributing to the emission of greenhouse gases could result in tort liability”. If that were to occur, according to the EN, that would “create a parallel and contradictory regime to the one provided in the [Climate Change Response Act 2002 (NZ)]”. The Minister of Justice’s disclosure statement provided that the amendment “does not impact on the rule of law” as it “merely” limits the right “to go to court to argue for a development in the common law that does not yet exist” and “prevents the courts making a future change in the common law”.
The amendment reflects a legislative judgment that tort law is not an appropriate mechanism for responding to greenhouse gas emissions, with the EN citing the need for careful consideration of the social, economic, and distributional implications of different climate policy choices.
Commonwealth releases Australia's Maritime Emissions Reduction Action Plan
The Commonwealth Government recently released the Maritime Emissions Reduction National Action Plan (MERNAP), Australia's first national plan for reducing maritime emissions.
The International Maritime Organisation's 2023 Strategy on Reduction of Greenhouse Gas Emissions from Ships estimates that shipping accounts for approximately 3% of total global greenhouse gas emissions. As an island, Australia is heavily reliant on shipping for international trade. Australia transports 99% (by volume) of its exports by sea and is the fifth-largest user of shipping services. However, maritime emissions are particularly difficult to decarbonise due to the industry's reliance on heavy fuel oil and the lack of affordable and sustainable alternatives. MERNAP organises its action items under five themes across international and domestic priorities:
a) International actions
- Energy - Green fuels (including hydrogen, ammonia, methanol and biofuels) are critical to decarbonising the maritime industry. Australia is well-positioned as a potential producer and exporter of green fuels, with 36% of global trade by sea comprising the carriage of energy products.
- Ports - Port infrastructure is instrumental to the adoption of low carbon fuels. Upgrades to storage and bunkering facilities for low carbon fuels, power infrastructure for berthing vessels, and decarbonising harbour-service vessels will be integral to facilitating the transition to low-emissions shipping and green fuel exports.
- Shipping - Australia is engaging with neighbouring nations to establish “green corridors”, designated maritime routes on which the carriage of low carbon fuels and technologies is prioritised. Singapore, the Republic of Korea and Australia have formalised cooperation through green corridor Memoranda of Understanding.
b) Domestic actions
- Domestic commercial vessels (DCV) - Australia's DCV sector comprises more than 30,000 vessels operating across industries. The diversity of purposes served by these vessels (such as tourism, offshore oil and gas, and commercial fishing) complicates decarbonisation. MERNAP identifies a range of clean energy pathways, including hybrid-electric propulsion mechanisms and low carbon fuels such as hydrogen and ammonia for larger vessels engaged in coastal shipping and port services.
- Skills and training - The transition to green fuel alternatives and new technologies in the maritime industry will require a workforce with specialised skills. The Government has committed funding for a Maritime Skills and Training Initiative, alongside $2.5 million to address broader training barriers and Australia's maritime skills shortage.
MERNAP forms part of the Government's broader strategy to achieve net zero emissions by 2050. The Commonwealth Government has committed:
- A $1.1 billion Cleaner Fuels Program and $250 million from the Future Made in Australia Innovation Fund to develop low carbon liquid fuels (LCLFs). Consultation on a market measure to drive demand closes 15 September 2026;
- The Hydrogen Headstart program, which will deliver up to $2.25 billion to large-scale renewable hydrogen projects;
- $20 million for Australia-Singapore Low Emissions Technology initiatives for maritime and port operations; and
- $4 million to develop a green fuel bunkering strategy.
Australia’s first right to disconnect ruling clarifies the limits of after-hours workplace pressure
Australia's right to disconnect laws have now been tested in court for the first time. The South Australian Employment Court recently handed down two decisions involving hairdressing apprentices and their employer, Tanika McGuire, trading as Eco Hair Room. In both Kalleske v McGuire [2026] SAET 106 (Kalleske) and Elliot v McGuire [2026] SAET 107 (Elliot), Deputy President Lieschke found that the employer had not breached the right to disconnect clause in the Hair and Beauty Industry Award 2020 (Award), notwithstanding conduct he described as placing real pressure on the apprentices.
The right to disconnect clause in the Award gives effect to the protections introduced into the Fair Work Act 2009 (Cth) in August 2024 under s 333M, which prohibit employers from directly or indirectly preventing employees from exercising the right to disconnect. For more information on the right to disconnect, see our blog post dated 21 February 2024.
In both cases, Deputy President Lieschke drew a careful distinction between an employer communicating in an unwelcome manner and an employer actually preventing an employee from exercising the right to disconnect. The central question was not whether the apprentices felt pressure, but whether the employer’s conduct objectively amounted to preventing them from disconnecting.
In Kalleske, the Deputy President found that, despite a consistent pattern of out-of-hours contact, the applicant had been able to exercise the right without facing consequences that would constitute prevention. The same conclusion was reached in Elliot, where the apprentice had at times chosen not to respond and had resisted a request to monitor the work phone over a long weekend, without the employer imposing any consequence or repeating the request. In each case, he concluded that the employer's conduct had discouraged the apprentice from disconnecting but had not prevented her from doing so. Both right to disconnect claims therefore failed.
All other alleged serious contraventions of the Award were proven in both matters, including failures relating to overtime, rostering, rest and meal breaks, superannuation, and reimbursement of training costs, with penalty hearings yet to be scheduled.
The rulings represent the first judicial guidance on where the line falls under Australia’s right to disconnect laws. They suggest that social pressure and employer disapproval, without further consequence, will not be enough to establish a breach.
In November 2025, the Fair Work Commission put its own review of the right to disconnect provisions on hold, citing a lack of decided cases. Separately, the Government's independent Closing Loopholes review, conducted by Ms Susan Booth, similarly recommended in its final report that a further dedicated review of the right to disconnect be conducted in two to three years, taking into account any Fair Work Commission decisions establishing the boundaries of reasonable after-hours contact. Kalleske and Elliot are the first such decisions to emerge and will be an important reference point for employers, employees, and practitioners navigating the provisions.
Albanese Government proposes to establish Fair Work Court
The Albanese Government has announced its intention to establish a new federal Fair Work Court, stating that it would deliver faster and lower-cost outcomes for workplace disputes. As noted in our August 2026 edition, Prime Minister Anthony Albanese made the announcement at Labor’s triennial national conference in Adelaide on 23 July 2026, joined by Workplace Relations Minister Amanda Rishworth and Attorney-General Michelle Rowland. While the announcement signals a likely shift in the workplace relations landscape, key features of the Court, including its jurisdiction, processes, and interaction with existing institutions, have not yet been settled.
The Government’s core proposition is that a specialist court, with judges focused on workplace relations, could reduce delays and legal costs that can make even straightforward matters difficult to pursue. In a joint media release, Albanese, Rishworth and Rowland noted that some workers and businesses can spend more than two years seeking a resolution, and that in some cases the cost of litigation can exceed the value of the claim. The proposed model would operate alongside the Fair Work Commission, with the intention of creating clearer pathways for matters that are currently referred to generalist courts.
The announcement also comes against the backdrop of significant workload pressure within the Fair Work Commission. In a February 2026 address to the Victorian Bar Association, Fair Work Commission President Justice Adam Hatcher stated that, by the end of the 2025-2026 financial year, the Commission’s total workload was likely to have increased by more than 70 per cent over the preceding three years. He attributed much of the increase to the growing use of AI tools, which can make it easier and faster for parties to prepare and lodge claims.
Recent reforms and operational changes indicate the system is already adapting. The Workplace Relations Legislation Amendment (Building Cooperative Workplaces No. 1) Bill 2026 (Cth), passed in early July, was framed as a response to workload and system pressures. Separately, on 29 May, the Fair Work Commission’s General Manager issued a statement outlining a series of process reforms in response to rising workload and resourcing pressures, including trials of Early Dispute Resolution and a new staff conference model for general protections dismissal disputes.
If established, the Fair Work Court would be the first specialist federal industrial court since the Howard Government abolished the Industrial Relations Court of Australia in 1997. The proposal also resembles Labor's 2019 election commitment to establish a low-cost small claims jurisdiction alongside the Fair Work Commission, which ultimately did not eventuate.
The Government has indicated it will consult on the design of the court during 2026, and has since established a Joint Fair Work Court Taskforce, created by the secretaries of the Attorney-General’s and Employment and Workplace Relations departments, to support that process. The Taskforce is responsible for developing the legislative framework and managing implementation arrangements, with roles advertised on a 12-month secondment basis. Workers, employers and legal experts will be invited to provide feedback, including on how the proposed court will interact with the existing Fair Work Commission and how it will improve access to justice for workers and employers navigating disputes. Further details about the consultation process are expected to be released in due course.
European Commission finalises revised European Sustainability Reporting Standards
On 21 September 2026, the European Commission adopted the revised European Sustainability Reporting Standards (ESRS) and the Voluntary Sustainability Reporting Standard, which have now been published in the Official Journal of the European Union. The finalised ESRS largely adopts the European Financial Reporting Advisory Group’s revised version of the standards submitted in December 2025 which reduced datapoints in the ESRS by more than 60 per cent and simplified reporting on materiality assessments and data collection from company supply chains. The ESRS revisions formed part of the European Commission's broader Omnibus I Initiative aimed to simplify sustainability reporting requirements for companies covered by the EU's mandatory Corporate Sustainability Reporting Directive (CSRD) (for information regarding the Omnibus I Initiative, see our ESG Notes here).
The revised ESRS will come into force as of 10 November 2026 and will apply to companies captured by the CSRD from financial years beginning on or after 1 January 2027. For entities not subject to the mandatory ESRS reporting threshold, including undertakings subject to value chain information requests with less than 1,000 employees, the Voluntary Sustainability Reporting Standard will also be applicable for financial years beginning on or after 1 January 2027 and will support proportionate and practical sustainability reporting.
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.
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