The new financial year has started with pace and purpose. July 2025 has delivered a wave of sustainability updates across regulation, disclosure, and market expectations—putting more pressure on Australian business leaders to move from ESG ambition to ESG execution.
Here’s our curated ESG snapshot for July 2025—what’s changed, what’s trending, where risk is building, and what actions leaders must start prioritising.
Key Updates: What’s Changed in July 2025
1. Australia Finalises Climate Disclosure Legislation
The Treasury has now passed mandatory climate disclosure laws, with Phase 1 of implementation beginning 1 January 2026. This applies to large listed and financial entities, aligned with ISSB’s IFRS S2 and based on the TCFD framework. legislation cements Australia’s alignment with global best practice through the adoption of ISSB’s IFRS S2. What’s notable is that directors will be required to sign off on climate-related risks with the same scrutiny as financial risks, reinforcing the importance of ESG governance at the highest level.
Scope 3 emissions, while initially voluntary, are being flagged by Treasury and ASIC as a likely focus area in future phases, particularly for businesses with extensive value chains. Companies should not treat the first reporting year as a grace period—regulators have made it clear that expectations are high from day one.
For details, see ASIC’s updated RG 280 and legislative commentary from Allens.
2. TNFD Adoption Surges in Australian Markets
Australia now leads the Asia-Pacific in voluntary adoption of the Taskforce on Nature-related Financial Disclosures (TNFD). As of July 2025, 23 ASX-listed companies—including major players in mining, property, finance, and telco—have publicly committed to TNFD-aligned disclosures. These companies span high-impact sectors like mining, agriculture, property and financial services—highlighting that biodiversity and ecosystem risks are no longer fringe issues.
The momentum is also being driven by growing investor pressure to disclose water risk, deforestation exposure, and land-use impacts, particularly across upstream suppliers and asset portfolios. TNFD’s new sector-specific guidance is expected to accelerate adoption and reduce internal resistance by offering practical implementation pathways.
Climate Action Week highlighted the sector-specific guidance now available to support practical implementation in high-impact industries.
3. ASX Governance Council Expands ESG Oversight Expectations
The 5th Edition of the ASX Corporate Governance Principles and Recommendations takes effect from 1 July 2025. It now formalises what the market has already demanded: ESG risks must be managed by boards, not just delegated to sustainability teams. It introduces a principle-based expectation that companies disclose how climate, nature, and social risks are embedded in enterprise risk management systems.
Boards must also be able to demonstrate ESG competence, which is expected to lead to a spike in director training, ESG scenario briefings, and board-level oversight frameworks. The guidance reinforces that ESG is not a reporting exercise—it’s a governance and fiduciary accountability issue.
This aligns with a broader shift in investor and regulatory expectations that ESG must be governed at the highest levels of an organisation.
4. Carbon Markets Regain Traction Amid Integrity Reforms
The Australian Carbon Credit Unit (ACCU) scheme is undergoing substantial reform following the government’s acceptance of all 2023 Independent Review recommendations (DCCEEW). Australia’s carbon market has rebounded with credibility, thanks to reforms in project verification, additionality criteria, and monitoring under the ACCU scheme. With trading volumes now exceeding 30 million units per quarter, carbon pricing is quickly becoming a core cost and investment consideration for emissions-intensive industries (CER).
However, capacity constraints are real. Industry voices—especially in mining and energy—warn that without increased project development and ACCU supply, companies may face a cost cliff or forced shutdowns. Meanwhile, legal action against misleading offset claims is signalling to businesses that carbon neutrality must be evidence-backed, not marketing-led.
Offset use has also come under legal scrutiny. In May 2025, EnergyAustralia settled a greenwashing claim after misleading “carbon neutral” claims—highlighting that offsets are no longer a reputational shield.
What’s Trending: Strategic Shifts to Watch
1. ESG Pre-Assurance is the New Risk Management
Internal audit functions and sustainability teams are collaborating to simulate assurance over ESG disclosures, especially for climate scenario analysis, Scope 1 and 2 data accuracy, and nature-related risk mapping. This trend reflects growing recognition that once disclosures are mandatory, the margin for error shrinks—and external assurance will become standard.
Pre-assurance also provides a reputational buffer. Companies that can demonstrate assurance readiness are better positioned to instil investor confidence, reduce audit costs, and defend against greenwashing allegations. CFOs are increasingly viewing this as a core financial control, not an ESG add-on.
2. Biodiversity is the Next Scope 3
Much like Scope 3 emissions forced companies to look beyond their own operations, biodiversity is doing the same—requiring them to account for ecosystem dependencies and impacts across their entire value chain. Organisations in sectors like construction, manufacturing, and agribusiness are now working with ecologists and geospatial analysts to assess risks related to water stress, habitat degradation, and land-use change.
This trend is shifting the ESG narrative from just “doing no harm” to actively managing nature-related transition and physical risks. Expect to see nature-based materiality assessments embedded into mainstream risk processes over the coming quarters.
3. Carbon Offset Strategies Under Intense Scrutiny
Offset strategies that once served as shortcuts to net zero are now under the microscope. Regulators, investors, and civil society are demanding greater transparency on how carbon credits are sourced, verified, and applied. The EnergyAustralia case underscored the risk of misleading neutrality claims, even when companies believed they were in technical compliance.
Moving forward, credible emissions reduction will be prioritised over offset reliance. Companies are being advised to treat offsets as a last resort, and only after genuine operational and value chain abatement efforts have been exhausted. Transition finance linked to real reductions will hold more weight than offset-heavy strategies.
A recent analysis in The Times calls for deeper scrutiny and clearer reporting on how carbon credits are sourced and applied.
Emerging Risks & Strategic Opportunities
Emerging Risks:
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Director liability for ESG misstatements or omissions
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Supply chain and project delays due to biodiversity risk or nature dependencies
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Investor divestment due to weak governance or incomplete transition planning
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Legal action for greenwashing or unsubstantiated net-zero claims
Opportunities:
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Establish credibility through ESG pre-assurance and audit-traceable systems
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Be first-movers in TNFD adoption and nature integration
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Strengthen investor trust via robust, standards-aligned disclosures
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Align nature and climate governance for long-term resilience
What Business Should Prioritise Now
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Run a climate and nature governance gap analysis aligned with ISSB and TNFD frameworks
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Establish internal assurance protocols for GHG data and risk scenarios ahead of FY26
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Engage directors and C-suites with scenario-based risk education and reporting strategy
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Review offset and transition finance use—ensuring claims are defensible and outcome-based
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Start nature-related materiality assessments across supply chains and operational assets
Closing Thought
Regulation is real. Investor expectations are sharpening. And the cost of ESG inaction is rising. The July 2025 landscape demands proactive leadership—not just to meet compliance but to build resilience, credibility, and stakeholder trust.
At Naturaliste Solutions, we partner with clients to turn disclosure into strategy—and risk into resilience.
Need support mapping your ESG readiness for FY26? Get in touch.