Glossary›Measurement and governance / Governance, board and directors›Directors’ duties and climate disclosure
Glossary term
Cluster E · E3
Tier 1
Directors' duties and climate disclosure
Definition
Directors’ general duties of care and diligence under the Corporations Act apply to the sustainability report as they do to the financial report. Directors make a declaration about the sustainability report, and for an initial period that declaration is modified to a statement that reasonable steps were taken. Personal exposure attaches to the process followed.
Corporations Act 2001
· sections 180, 295A and 1707D ·
Transitioning
On this page
In practice
This is the entry directors actually want, and the useful framing is not “what could go wrong” but “what specifically reduces my exposure”. The answer is more concrete than the general commentary suggests.
The duty is a process duty. Section 180(1) requires a director to exercise care and diligence. The standard is what a reasonable person would do in that position with those responsibilities. It is not a warranty that the numbers are right. A director who cannot personally verify a Scope 3 figure is not in breach for that reason; a director who approved a disclosure without asking how the figure was produced, who prepared it, what was estimated and what the assurer said, is in a materially worse position.
The Australian legal position on climate and directors’ duties has been developed principally through the opinions of Noel Hutley SC and Sebastian Hartford-Davis, first in 2016 and supplemented in 2019 and 2021, which concluded that directors who fail to consider climate risk could be found to have breached their duty of care and diligence, and that the standard expected has risen over time with market expectations. Those opinions are influential rather than binding (they are counsel’s advice, not a judgment) and it is worth saying that plainly, because they are sometimes cited as if they were law. No Australian court has yet determined a director’s liability for climate risk management under section 180. What has changed since those opinions is that the disclosure is now mandatory and statutory, which removes the question of whether disclosure was required and leaves only the question of whether it was done with care.
The modified declaration. For financial years commencing between 1 January 2025 and 31 December 2027 inclusive, the directors’ declaration on the sustainability report is modified: rather than declaring that the report complies with the standards, directors declare that reasonable steps were taken to comply. After that period the declaration reverts to the full compliance form. That three-year window is a genuine transitional easing and it is also a clock, because the evidence practices that support a reasonable-steps declaration are not sufficient for a compliance declaration.
The modified liability settings. Section 1707D restricts who may bring proceedings in relation to certain protected statements made in a sustainability report or the auditor’s report on it. During the protection period, no action other than criminal proceedings or action by ASIC can be brought in relation to protected statements. Two limits on that protection are load-bearing and are the point at which most directors’ understanding goes wrong.
First, it protects statements in the sustainability report. It does not protect the same statement repeated in an investor presentation, a media release, a tender document or on the website. A protected statement reproduced voluntarily elsewhere loses the protection in that other setting.
Second, it does not remove ASIC. ASIC retains full enforcement capability throughout, and criminal liability is unaffected. The protection limits private litigation, not regulatory action.
What actually reduces personal exposure. Six things, in rough order of value.
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What it is
Why it carries weight
1
A record of having asked
Minutes showing the board or committee asked about the basis of preparation, the estimates, the completeness of the boundary and the assurance findings. This is the single highest-value item and it costs nothing.
2
A significant judgement register
One list of every material judgement in the disclosure, who made it, what the alternatives were and who approved it. It converts a diffuse set of decisions into a document a director can point at.
3
A stated basis of preparation approved before the numbers were final
Approving the rules first and the outputs second is the sequence that demonstrates process rather than rationalisation.
4
Reliance that meets the statutory conditions
Section 189 allows reliance on information from an employee, a professional adviser or another director, where the reliance is in good faith and after making an independent assessment having regard to the director’s own knowledge and the complexity of the matter. Reliance is not passive receipt; “independent assessment” is the operative phrase, and it means the director engaged with the material.
5
Skills evidence
A board skills matrix showing climate competence was assessed, and a record of briefings taken. It directly supports AASB S2 paragraph 6(a)(ii) and it independently supports the care and diligence standard.
6
Discipline over statements outside the report
Because section 1707D protection stops at the report boundary, the marketing and investor communications that repeat climate claims are the higher-risk surface. A director asking one question (“does anything we say publicly about climate go beyond what we disclosed, and who checks that”) is addressing the largest unprotected exposure.
What the assurer does with it
The directors’ declaration is not the assurer’s subject matter, but the assurer interacts with it at three points.
They obtain a written representation from management, and they expect the board to have seen it before it is signed. A representation letter signed by a CFO that the board has never read is a governance gap the assurer will note.
They test the governance disclosures the declaration implicitly rests on, in year one, under ASSA 5010 paragraph 10(a)(i).
And they consider whether the sustainability report is materially inconsistent with the financial report and with other information the entity publishes. An inconsistency found there is raised with those charged with governance, and it lands in front of directors before the declaration is signed rather than after.
They accept a declaration supported by a documented reasonable-steps process: an approved basis of preparation, a judgement register, minuted challenge, and a management representation the board has reviewed. They reject a declaration where the board first saw the report at the approval meeting, where no record exists of any question being asked, and where the assurance findings were not presented to the board before signing.
Commonly confused with
The auditor’s or assurer’s conclusion. The assurer’s conclusion says the practitioner found nothing materially misstated using their procedures. The directors’ declaration is a separate statement by the directors about their own steps. A clean assurance conclusion supports the declaration; it does not substitute for it, and a director who treats the conclusion as cover has misread both documents. Also confused with the financial report declaration under section 295A, which is a different declaration about a different report.
Timing and relief
The modified reasonable-steps declaration applies for financial years commencing between 1 January 2025 and 31 December 2027 inclusive, then reverts. The section 1707D protected-statement regime runs for a defined transitional period from the commencement of the regime on 1 January 2025 and its scope narrows within that period: forward-looking climate statements carry protection for a shorter initial window than other protected statements. The precise scope and end dates should be confirmed against ASIC Regulatory Guide 280 for the entity’s own financial year, because the protection is defined by reference to reporting periods rather than calendar dates and the two do not align for entities with non-June year ends.
Sources
1
2
Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth)
Federal Register of Legislation
3
4
Climate change and directors’ duties, legal opinion
Australian Institute of Company Directors
5
Refresher on directors’ duties and climate risk
Governance Institute of Australia
6
ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001
AUASB
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Corporate lawyer with Corporations Act reporting expertise
Next scheduled review
31 December 2027
end of the modified reasonable-steps declaration period
Part of
Cluster E, Measurement and governance / Governance, board and directors
10 terms on what the board must be able to evidence, what personal exposure directors carry, and how the audit and risk committee engages with the assurer. Governance disclosures sit inside the year-one assurance scope.
Related terms
The disclosure requirement the declaration rests on
The statutory statement itself, and what the modified form says
The section 1707D protection, its limits and when it ends
Related questions
Are directors personally liable for climate disclosures?
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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?
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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.
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.
Other terms in this cluster
Directors’ duties and climate disclosure