Are directors personally liable for climate disclosures?

Directors carry their ordinary care and diligence duties in relation to the sustainability report, and they sign a declaration about it. A temporary and partial protection applies to some forward-looking content, but it is narrower than it is usually described and it is closing. This is the one answer that should be read together with your own legal advice.

What is the modified liability period and what does it protect?

For financial years commencing between 1 January 2025 and 31 December 2027, statements in your sustainability report about Scope 3 emissions, scenario analysis and transition plans can only be actioned by ASIC or in criminal proceedings. Broader forward-looking climate statements had the same protection only for financial years commencing during 2025. Both windows are closed-ended and neither renews.

Glossary›Regulation, capture and thresholds / Regulation, capture and timing›Directors’ declaration (sustainability report)

Glossary term

Cluster B · B12

Tier 1 · differentiator

Directors' declaration (sustainability report)

Q: What does the board have to sign?

The directors' declaration in the sustainability report. For financial years commencing between 1 January 2025 and 31 December 2027, directors declare they have taken reasonable steps to ensure the report complies with the Corporations Act. From financial years commencing 1 January 2028, they declare their opinion that it does comply.

Definition

The directors’ declaration is the board’s formal statement about the sustainability report, forming part of the report lodged with ASIC. For financial years commencing between 1 January 2025 and 31 December 2027 inclusive it is modified: directors declare they have taken reasonable steps to ensure the report complies. After that it becomes a declaration that the report does comply.

Corporations Act 2001 (Cth) s 296A

· transitional declaration for financial years commencing 1 January 2025 to 31 December 2027 inclusive ·

Transitioning

On this page

In practice
What the assurer does with it
Commonly confused with
Timing and relief
Sources
Related terms
Related questions

Cluster

B · Regulation, capture and thresholds / Regulation, capture and timing, 26 terms

In practice

The declaration is short, it is signed by directors personally, and the change in its wording at the end of 2027 is the largest single step-up in director exposure in the whole regime.

The transitional wording. During the transitional period, directors declare that, in their opinion, reasonable steps have been taken to ensure the sustainability report (other than the declaration itself) is in accordance with the Corporations Act, including compliance with the sustainability standards. It is a declaration about process. The question it asks is whether the board did enough, not whether the report is right.

The permanent wording. For financial years commencing on or after 1 January 2028, the declaration becomes an opinion that the sustainability report is in accordance with the Act, including compliance with the standards. That is a declaration about outcome, and it is the same form of words directors already give on the financial report.

ASIC’s stated reason for the transition is that the sophistication of an entity’s controls, policies, procedures and systems for sustainability reporting is expected to develop over time, as is directors’ own understanding and capability. That is a concession about maturity, and it comes with an implication: the reasonable steps expected of a board in its third reporting year are not the reasonable steps expected in its first.

What “reasonable steps” looks like in a board file. Nothing in the Act defines it, and no checklist makes it safe. In practice a board that could evidence the following is in a materially stronger position than one that could not:

A documented process for preparing the report, with named owners for each disclosure
Board or committee minutes showing the report was considered, questioned and approved, not noted
A record of the significant judgements made and who approved them
Evidence that the board understood the basis of preparation and the methodology behind the emissions figures
Engagement with the assurance provider’s findings, and a record of what was done about them
Some evidence of director capability-building on climate matters during the period

The recurring weakness in a first-year file is a board that received the report as a finished document a week before lodgement. A declaration about reasonable steps is hard to support when the only board record is an approval resolution.

Timing against the liability window. Note that the declaration transition and the modified liability windows are on different clocks and do not line up. The declaration is modified through financial years commencing to 31 December 2027. The general forward-looking liability protection covers only financial years commencing in calendar 2025. A Group 2 board therefore signs a modified declaration in a year in which most of its forward-looking statements carry no private-litigation protection. Do not treat the two measures as one package.

What the assurer does with it

The declaration is part of the sustainability report, so it is inside the lodgement and the assurer reads it, but the assurer does not conclude on the directors’ opinion. What they do is test the consistency between the declaration and everything else in the file. If directors declare reasonable steps were taken and the engagement record shows the board saw the report once, at the end, that inconsistency is visible to the assurer even where it does not produce a modification. More concretely, the assurer will ask for the board minute approving the sustainability report, and will check that the declaration is dated no earlier than the assurance conclusion, that it names the correct reporting period and entity, and that it uses the currently applicable form of words. A declaration in the post-2028 form during a transitional year, or the reverse, is a real and recurring error in first-year files. They will also ask for the management representation letter, which covers overlapping ground and is signed by management rather than the board, and will expect the two to be consistent.

Commonly confused with

The directors’ declaration on the financial report, which is a separate declaration about a separate report under a separate section, signed at the same time. Both are needed; one does not cover the other. Also confused with the directors’ report, which is narrative and not a declaration. And confused with the section 1707D liability protections, which are about who may sue over the report’s contents, not about what the board declares.

Timing and relief

The modified declaration applies to financial years commencing 1 January 2025 to 31 December 2027 inclusive. From financial years commencing on or after 1 January 2028 the full compliance declaration applies. Every captured entity gets the modified form for the transitional years it falls within, but a Group 3 entity whose first reporting period commences 1 July 2027 gets it for one year only, then moves to the full declaration in its second report.