In recent years, audit reporting has shifted beyond its traditional boundaries. Financial accuracy is no longer the sole focus. Today’s stakeholders—investors, regulators, and the public—demand insights into environmental responsibility, social impact, and governance practices. This shift reflects global trends in corporate transparency, presenting opportunities and challenges for auditors and accountants to adapt to these evolving expectations.
Australia has emerged as a global leader in sustainability readiness, ranking first in Capgemini’s A World in Balance 2024. Key findings include:
- A six-fold increase in corporate executives concerned about public trust in sustainability.
- 70% of businesses credit regulatory mandates as drivers of their accelerated sustainability efforts.
- Significant improvements in sustainability metrics over the past two years:
- Companies sharing sustainability data rose from 47% to 75%.
- Employee training on sustainable practices increased from 55% to 78%.
- Implementation of water stewardship programs surged to 79%, among the highest rates globally.
From January 1, 2025, Australia’s Corporations Act mandates emissions-related financial disclosures for large entities meeting at least two of the following criteria:
- $500 million+ consolidated revenue,
- $1 billion+ consolidated gross assets, or
- 500+ employees.
These disclosures encompass greenhouse gas emissions across Scope 1 (direct), Scope 2 (indirect from energy), and Scope 3 (value chain). Businesses must also share energy consumption and sustainability data, with assurance requirements escalating through 2030.
Key ESG Metrics for Australian Firms
As ESG reporting gains prominence, Australian firms are focusing on comprehensive metrics:
- Environmental: Greenhouse gas emissions, energy usage, water stewardship, and waste management.
- Social: Diversity and inclusion, workforce training, community engagement, and addressing modern slavery in supply chains.
- Governance: Board diversity, executive accountability, anti-corruption measures, and compliance with regulatory frameworks.
For example, the Australian energy company AGL has been reporting on its emissions reduction plans, committing to transition away from coal-fired power generation by 2035. Similarly, Woolworths Group has implemented a comprehensive supply chain audit to address modern slavery risks, ensuring alignment with social sustainability standards.
Future Regulations and Phases
By 2027, medium and smaller-sized entities with $50 million+ revenue will be subject to phased ESG reporting requirements. Smaller businesses must also take stock of their ESG credentials, as clients or suppliers may increasingly demand transparency regarding their environmental and social practices. This highlights the growing importance of ESG considerations across the entire supply chain, not just among large entities. Assurance levels will increase to reasonable assurance for all disclosures by 2030.
Implications for Auditors and Accountants
- Increased Accountability: Professionals must navigate complex ESG data, particularly Scope 3 emissions, requiring expertise in supply chains.
- Combatting Greenwashing: Cases like Vanguard’s $12.9 million fine for misleading ESG claims highlight the importance of compliance and accuracy.
- Leveraging Digital Tools: Advanced infrastructure for data collection offers opportunities to enhance integrity and analytics.
- Strategic Roles: Accountants now play a pivotal role in linking ESG reporting with value creation and profitability.
Australia’s Global Leadership
While many nations advance in sustainability reporting, Australia’s proactive measures and regulatory clarity provide a competitive edge. Consumers and shareholders increasingly demand greater accountability, with 72% of Australians expecting businesses to lead in reducing emissions (Ref: Capgemini’s ‘A Word in Balance’ Report)
Australian companies are setting benchmarks by:
- Implementing advanced analytics to track emissions and resource use. For instance, Fortescue Metals Group has adopted hydrogen technology to reduce carbon emissions from its mining operations.
- Investing in workforce training to embed sustainability in operations. BHP, for example, has introduced comprehensive training programs to educate employees on sustainable mining practices.
- Partnering with supply chain stakeholders to minimise environmental impact. Coles has partnered with local producers to implement regenerative farming techniques, reducing environmental degradation and promoting biodiversity.
These actions reflect a commitment to innovation and proactive leadership, positioning Australian firms as global sustainability leaders.
Expanding the Role of Audit
The integration of ESG factors into audit practices is reshaping the profession. ESG elements are now critical to financial reporting, linking operational risks with long-term sustainability. To address challenges like fragmented data and varying standards, a phased approach to assurance is recommended—starting with agreed-upon procedures and evolving toward higher assurance levels as systems improve.
Digital transformation supports these efforts by integrating ESG metrics with financial systems, enabling accurate, efficient data collection. For instance, NAB has invested in digital tools to monitor ESG risks in its lending portfolio, ensuring alignment with sustainability objectives. This foundation enhances audit reliability and facilitates informed decision-making.
Regulatory Landscape and Global Frameworks
Australian regulators, including ASIC, APRA, and the ASX, have heightened scrutiny of greenwashing, requiring robust verification of ESG claims. Global frameworks such as ISSB, SASB, and GRI drive consistency, offering companies a roadmap to align practices with international standards. Auditors must stay informed on these frameworks to ensure compliance and effective integration with financial reporting.
New Responsibilities for Professionals
The evolving ESG landscape presents new responsibilities for auditors and accountants:
- Capturing accurate data for ESG reporting remains a challenge. Professionals must determine appropriate levels of assurance.
- Frameworks must develop incrementally to match resource availability and expertise.
- Digital IDs and integrated data systems offer efficient solutions for internal and external reporting.
Auditors can also provide strategic insights into ESG’s impact on financial performance, using a materiality lens that incorporates stakeholder expectations alongside financial thresholds.
For accountants, ESG offers opportunities to add value by:
- Identifying reporting gaps and tailoring industry-specific solutions.
- Advising on data systems and governance strategies.
- Ensuring sustainability claims align with actual practices to avoid reputational risks. The recent example of Rio Tinto’s Juukan Gorge destruction highlights the reputational damage that can result from failing to align practices with social governance expectations.
Preparing for the Future
A strategic approach is essential for transitioning to comprehensive ESG auditing and reporting. Key steps include:
- Engaging Clients: Help clients understand and meet evolving ESG obligations.
- Building Expertise: Develop skills in ESG frameworks and data assurance.
- Staying Updated: Monitor regulatory changes and global standards.
- Customising Solutions: Address client-specific needs, such as tracking energy usage.
- Innovating Services: Offer advisory solutions on ESG systems and governance.
Opportunities for the Profession
The evolving focus on sustainability is reshaping the audit and accounting landscape, presenting professionals with an opportunity to lead in a rapidly changing world. With ESG factors becoming integral to financial reporting, auditors and accountants can expand their roles from compliance enforcers to strategic advisors, helping businesses navigate complex data and integrate sustainability into core operations.
As businesses increasingly prioritise transparency, auditors can enhance trust by offering assurance on ESG claims, combating greenwashing, and aligning reporting with global standards. By building expertise in emerging frameworks and leveraging technology for accurate data integration, the profession can address challenges like fragmented information and varying assurance levels.
Ultimately, this moment calls for a reimagining of the profession’s role—not just as custodians of financial accuracy but as leaders in fostering long-term resilience, ethical practices, and stakeholder trust.
At National Audits Group, we bring a wealth of expertise in navigating the evolving demands of audit reporting. Our team is equipped with deep knowledge of Australian and global regulatory frameworks, ensuring compliance while helping clients uncover opportunities for value creation. Partner with us to stay ahead in a changing world—where sustainability and transparency are key to building trust and achieving long-term success.