Regulators are also sharpening their focus on misleading environmental and sustainability claims. The ACCC has increased enforcement on greenwashing, and ASIC continues to pursue enforcement action against misleading ESG disclosures in financial products. APRA has also reinforced its expectations for climate risk management in governance and disclosure, while the Clean Energy Regulator is continuing to monitor compliance with carbon credit and offset schemes. Together, these actions signal that sustainability claims and climate-related representations will face heightened regulatory scrutiny across multiple fronts.

Also at the national level, the Commonwealth Government has announced that its 2035 emissions reduction target will be a 62-70% reduction in greenhouse gas emissions from 2005 levels, following advice from the Climate Change Authority in its 2035 Emissions Reduction Targets Report. This target builds on the legislated 43% reduction by 2030 and sets the trajectory towards net zero by 2050. The accompanying Net Zero Plan released in September 2025 outlines sectoral decarbonisation pathways and includes several major funding commitments. 

State and Territory initiatives are also evolving. For example, in New South Wales, the Environment Protection Authority consulted on proposed climate change-related conditions to be included in environmental licences for certain activities and the Courts are applying heightened scrutiny to climate impacts in planning approvals for new or expanded facilities (see for example the decision of the NSW Court of Appeal in DAMSHEG v MACH Energy, which will now be considered by the High Court following an appeal by MACH Energy).

Together, these developments demonstrate an ongoing shift in Australia’s regulatory landscape, embedding climate considerations into core business strategy and compliance. Companies that act early to align with these requirements will be better positioned to manage risk, avoid regulatory pitfalls, and capture emerging opportunities in a low-carbon economy. 

Developments in the broader economy will also need to be monitored, as the shift away from fossil fuels has the potential to redefine local industries. On 12 December 2025 the NSW Net Zero Commission released a “spotlight report” in respect of the emissions profile of the coal mining industry and its role in the NSW economy. The report’s key findings include:

• In order for NSW emissions targets to remain achievable, on-site abatement at existing mines is essential, particularly to reduce fugitive emissions. Additional regulatory measures will be required to achieve measurable on-site abatement.
   
• Continued extensions or expansions to coal mining in NSW are not consistent with the emissions reduction targets in the Climate Change Act or the Paris Agreement temperature goals it gives effect to.
   
• NSW Government will need to prioritise its consideration of policies that systematically prepare for the decline of coal extraction and provide for a just and orderly transition for coal-producing communities and impacted regional economies.

If these recommendations are adopted they foreshadow a possibly radical restructuring of the industry in NSW. The issues for the State of NSW are material given coal mining’s direct and indirect contribution to employment and Gross State Product but perhaps most significantly its direct and indirect contribution to the Gross Regional Product of numerous regions across NSW.

International developments

International consideration of the legal challenges posed by climate change mitigation and adaptation efforts continued to develop during 2025, with the International Court of Justice delivering an advisory opinion on states’ obligations regarding climate change, reinforcing the expectation that developed countries demonstrate leadership in emissions reduction and adaptation. 

International engagement is also extending into domestic litigation. For example, the UN Special Rapporteur on the human right to a clean, healthy and sustainable environment has recently sought to join as amicus curae in proceedings in Australia concerning the North West Shelf project, signalling that global human rights and climate governance bodies are actively monitoring Australian decisions. Similarly, the recent World Heritage listing of Murujuga underscores the intersection of cultural heritage and climate considerations in project approvals with Australia’s international environmental obligations.

Moving into 2026, Australia will play a leading role in shaping international discourse on global mitigation and adaptation, as it assumes the role of President of Negotiations at COP31 in Türkiye, with the Pacific nations to also host a ‘pre-COP’. Australian companies, particularly those operating globally, will need to continue to monitor these developments, and consider how international norms and scrutiny will influence investor expectations, litigation exposure and strategic positioning. 

Technological advancements and AI 

Technological advancements and AI have significant potential to assist businesses in creating efficiencies and streamlining, including in estimating its greenhouse gas emissions. A number of products are now available in the market to offer tech solutions to carbon footprint accounting, while other tech providers are offering products which enable customers of their technology to estimate their scope 3 emissions based on usage of that product.

Technological advancements may also be a potential solution by which a reporting entity may be able to decrease its emissions. However, the increased use of technology comes at a hidden environmental cost, particularly with energy intensive developments such as generative AI. As businesses continue to increase reliance on technology, ongoing monitoring of scope 3 emissions from data usage, cloud storage and IT infrastructure will become increasingly important. 

Increasing complexity and interrelationships

Climate and environmental issues are becoming increasingly interrelated to the financial aspects of a business, including through mandatory climate related reporting, ethical investors, activist shareholders and a changing consumer base. While this poses new challenges, it also bring new opportunities and could open the door for businesses that are able to adapt and meet the demands of a changing market.

Similarly, as scientific knowledge improves, we have seen an increased recognition of the interdependencies within our environment and the way in which environmental and climate issues intersect. This increases the complexity involved in seeking to address any one issue, but also provides new opportunities to recognise the impact of environmental improvements or initiatives on multiple fronts. This includes, for example, the first methodology established under the new Nature Repair Market, which is compatible with the existing carbon credit scheme, enabling eligible projects to be recognised in both the biodiversity and carbon markets. 

While Australian businesses are only just now grappling with the new mandatory climate-related reporting regime (discussed above), new topics are already on the horizon. Nature-related disclosures are emerging as a key focus internationally, with the International Sustainability Standards Board (ISSB) taking on responsibility from the Taskforce on Nature-related Financial Disclosures for developing standards for nature-related reporting (as it previously did from the Taskforce on Climate-related Financial Disclosures in relation to climate reporting). This shift signals that businesses will no doubt in the future need to also consider biodiversity and ecosystem impacts alongside climate risks in their governance and reporting processes. 

Conclusion 

2025 has been a big year of change for many businesses and 2026 will bring new challenges with it. Navigating this change through increasing uncertainty and complexity will pose different challenges for each business. However, the impacts of our changing climate will not be short-lived, so investing in meeting these challenges early will only better serve an entity into the future.