Employers warned that emissions volatility from geopolitical shocks poses disclosure and assurance risks for boards
Australian boards are being urged to overhaul climate governance and controls as the Middle East conflict exposes gaps in how companies manage and report rising emissions, according to a new legal insight Mallesons.
In a new insight, the law firm warns that conflict‑driven disruptions to fuel markets and shipping routes are already pushing up greenhouse gas emissions, particularly Scope 3, at the very moment Australia's mandatory climate reporting regime is taking effect.
Under that regime, large entities must lodge Sustainability Reports with ASIC disclosing climate risks, emissions, and transition plans.
"Mandatory climate reporting means unplanned emissions increases are no longer just operational issues – they are disclosure, assurance and liability issues," Mallesons said in its insights.
The risk is not only in compliance, the law firm emphasised.
"It is misalignment – between what organisations have publicly said about their transition plans and what their emissions data now shows," it said. "For companies reporting on emissions and transition progress, the challenge is explaining this volatility clearly and consistently."
Addressing emerging risks
To address these risks, organisations are being urged to strengthen their governance and compliance.
"Brief the board on incoming climate disclosure requirements; clarify accountabilities; and strengthen controls, audit trails, and verification over climate data," Mallesons said.
"Run a targeted gap analysis against the standards and address weaknesses before first reporting. Keep an eye on regulatory review expectations (including ASIC scrutiny from 2026)."
Mallesons also urges directors to sharpen their oversight of how conflict‑related disruption is feeding into reported numbers.
Among the questions boards should be asking, the firm suggests, are: "Are recent disruptions already affecting our Scope 3 emissions profile?" and "Do we have clear internal triggers for when emissions variability needs to be disclosed, explained or reassessed?"
Directors are further encouraged to press management on which parts of their supply chain are most exposed to fuel‑intensive routes or unstable energy markets and how robust the emissions data they receive from logistics providers and key suppliers is.
"The organisations best placed for the period ahead will be those that plan for instability, treat emissions volatility as a business risk, stress-test transition plans against geopolitical shock, and invest early in renewable and lower carbon energy pathways," it said.
