As FY25 closes, the sustainability landscape for Australian businesses has fundamentally shifted. Sustainability is no longer a fringe initiative—it’s now core to business strategy, financial planning, and operational resilience. Whether driven by regulatory reform, investor pressure, or shifting expectations from stakeholders, the past year made one thing clear: ESG performance is business performance.
In this wrap-up, we break down the critical trends that shaped FY25, the headwinds and tailwinds to watch in FY26, the biggest risks and opportunities emerging—and what leaders must act on now to stay ahead.
FY25 in Review: 5 Defining Sustainability Shifts
1. Mandatory Climate Disclosure Became Law
Australia formally adopted mandatory climate-related financial disclosures, aligning closely with the ISSB’s IFRS S2 framework. The integration of Task Force on Climate-related Financial Disclosures (TCFD) principles into reporting expectations brought climate risk firmly into the financial mainstream.
Executives across mining, energy, and finance were forced to respond—building governance capacity, investing in Scope 3 accounting, and testing their boards’ readiness for scenario-based risk analysis. Notably, several ASX-listed firms undertook pre-assurance simulations to meet the anticipated requirements.
2. Nature and Biodiversity Entered the Boardroom
Nature-positive strategies moved from NGO forums to risk registers. With momentum from the Taskforce on Nature-related Financial Disclosures (TNFD), sectors such as infrastructure, property and civil construction began mapping nature-related impacts and dependencies.
Organisations with significant land use or upstream environmental exposure started scenario testing for ecosystem decline, as the market began recognising that biodiversity loss is not just a CSR issue—it’s a systemic financial risk.
3. Data, AI and ESG Tech Moved From Nice-to-Have to Necessity
AI-powered ESG platforms transformed how companies measure, manage and communicate their performance. Leaders in industrial and logistics sectors deployed smart tools for automated emissions tracking and real-time ESG risk monitoring.
Data gaps, particularly in Scope 3 and supply chains, became a strategic liability. Those who invested in predictive analytics and scenario planning now hold a first-mover advantage in both performance and disclosure accuracy.
4. Investors Raised the Bar—and Cut Ties
The ESG capital market matured fast. Funds tightened requirements for transition plans, interim net-zero targets, and board-level ESG oversight. Those without credible, verifiable decarbonisation strategies saw access to capital diminish.
In particular, institutional investors withdrew from companies whose sustainability reporting lacked substance, had inconsistent metrics, or carried clear greenwashing risks. This wasn’t just about emissions—it extended to social governance, nature risk, and modern slavery due diligence.
5. Sustainability Became a Whole-of-Business Concern
Where once ESG sat in isolated sustainability teams, in FY25 we saw it embedded across procurement, risk, legal, finance, and investor relations. Boards began treating ESG reporting like financial statements—with equal scrutiny and accountability.
Cross-functional upskilling became essential. And in industries like mining and civil construction, companies with operational sustainability champions were significantly more agile in responding to new disclosure obligations.
FY26 Outlook: 5 Trends Set to Shape the Year Ahead
1. Nature Risk Reporting Will Be Normalised
The federal government is expected to expand disclosure requirements to include nature-related risks. TNFD-aligned reporting—once voluntary—will become critical for companies with land-intensive operations or high biodiversity exposure.
Expect pilot programs in mining, agriculture and infrastructure to quickly become industry benchmarks.
2. Supply Chain Resilience Becomes a Climate Priority
FY26 will see a pivot toward climate adaptation. As extreme weather disrupts logistics, supply chains will be evaluated not just for cost efficiency, but for climate resilience.
Circular procurement, upstream emissions transparency, and supplier ESG screening will become board-level discussions.
3. Transition Finance Gains Traction
Transition-linked loans, sustainability-linked bonds, and ESG performance incentives will become common financial instruments. But lenders and investors will demand rigour: superficial targets won’t pass due diligence.
Finance teams must align their capital strategy with ESG maturity—or face a higher cost of capital.
4. Litigation Risk Expands
Climate-related lawsuits, greenwashing claims, and fiduciary duty breaches are on the rise. Directors and executives must treat ESG risks with the same legal seriousness as financial misstatements.
Embedding robust governance, assurance, and defensible decision-making into sustainability reporting is no longer optional.
5. Culture, Not Just Compliance, Will Drive ESG Value
Organisations that build authentic, measurable ESG cultures—grounded in purpose, not PR—will outperform. This includes transparent employee engagement, Indigenous partnerships, and demonstrable impact storytelling.
In an era of high stakeholder scepticism, culture is fast becoming ESG’s competitive edge.
Emerging Risks & Opportunities: Where to Watch
Key Emerging Risks:
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Rising scrutiny of Scope 3 emissions
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Exposure to biodiversity and water-related risks
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ESG-related litigation and director liability
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Increasing backlash and legal action related to greenwashing
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Investor capital shifting away from organisations with weak transition strategies
Strategic Opportunities:
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Lead the market by building transparent, traceable supply chains
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Stand out with a TNFD-aligned, nature-positive strategy
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Protect enterprise value with verified, audit-ready disclosures
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Build trust and credibility through measurable sustainability outcomes
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Access lower-cost capital with robust, science-aligned transition plans
FY26 ESG Timeline: What to Tackle and When
Q1 – Kick-off FY26:
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Conduct a climate and nature risk gap analysis
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Brief the Board and Executive Leadership Team on regulatory readiness
Q2 – Mid-Year Preparation:
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Develop a transition plan with clear, measurable interim targets
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Align sustainability, finance, and risk functions for integrated planning
Q3 – Test and Refine:
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Perform internal assurance and validation on ESG data
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Build a robust audit trail for upcoming climate disclosures
Q4 – Finalise Strategy and Disclosures:
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Finalise the FY26 ESG strategy
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Ensure disclosures align with ISSB and TNFD frameworks
Key Takeaways for FY26
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Sustainability is now a board accountability, not just a team initiative. Governance and disclosure must align.
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Climate and nature risks are financially material. Map and manage them early, before regulation mandates it.
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Data quality is strategy. Without auditable data, ESG claims won’t hold in a regulated environment.
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Culture drives credibility. Transparent, purpose-led organisations attract capital, talent and trust.
“FY25 was the tipping point. What we’re seeing now is a maturity leap—clients aren’t asking whether to act, but how fast they can align their data, governance and disclosures,” says Rebecah Ettridge, Managing Director of Naturaliste Solutions.
Let’s Start FY26 With Confidence
Naturaliste Solutions works with boards, executives and sustainability teams to build pragmatic, auditable ESG strategies. Whether you’re preparing for mandatory disclosures or embedding climate and nature risk into your governance structures, we help you stay ahead—without greenwash or guesswork.
Ready to get FY26 right? Let’s talk.