The Australian government's Safeguard Mechanism requires more significant greenhouse gas emitters to reduce emissions by 4.9% each year from July 01, 2023, or face substantial penalties.

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While this legislation currently applies to the top 215 emitters, it has implications for most businesses in Australia. Smaller businesses in the supply chains of more significant emitters will be required to demonstrate carbon reduction, and businesses seeking business from more significant emitters or government agencies may require 'Green' credentials in the form of carbon emissions reductions.

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The even more demanding MCR requirements apply from January 01, 2025.

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Excellium Grade Premium Diesel can deliver up to a 5% reduction in diesel consumption and emissions.

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Scope 1, 2 and 3 emissions

 

In 2025, businesses of all sizes and types are increasingly accountable for their:

 

• Scope 1 - or direct emissions from sources that the business owns or controls directly. 

• Scope 2 - or indirect emissions the business causes from needs within the business. 

• Scope 3 - emissions that occur in the value chain or operation of the business.

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These three types of emissions

 

All three are critical to businesses addressed in the Safeguard Mechanism and MCR reporting. All three are essential to businesses providing services to the top 215 emitters. Smaller businesses' Scope 1 emissions are the Scope 3 emissions of the businesses they service. Smaller businesses now require their larger clients to reduce their Scope 1 emissions.

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Board liabiliity 

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‘Until recently, ESG issues have been viewed as non-financial risks that have been addressed by undertaking corporate social responsibility measures in order to mitigate any ethical, sustainability and environmental impacts of the organisation. There is a growing body of stakeholders, including investors and regulators, who evaluate ESG issues as material financial, commercial, legal and reputational risks. This evolving understanding of ESG is driving responsibility for ESG into the boardroom and increasingly requires that directors build ESG considerations into their organisation’s strategy and risk framework.

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There is growing recognition among directors that making decisions with regard to ESG issues makes good business sense and leads to long-term value creation. By thoughtfully considering the impact their organisation is having on the environment and on the community, and proactively taking steps to ensure they are maintaining trust, brand and reputation through sound governance, directors protect their organisations’ social licence and long-term commercial success.

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This guide is designed to assist directors grappling with the complex issues posed by ESG oversight. It steps through applicable directors’ duties, highlights some of the global trends underlying the meteoric rise of ESG and outlines why these trends are making ESG a boardroom priority. It also outlines the Board’s role in setting ESG strategy, understanding the risks and ensuring the appropriate governance and oversight is in place’.

 

Corrs Chambers Westgarth (Australia)