Sustainability Impact December/January 2026 – What you need to know
The latest edition of Sustainability Impact looks at ASIC’s support for smaller companies ahead of their mandatory sustainability reporting requirements, changes in the new Global Risks Report, the aim of Australia’s new National AI Plan, and more.
Support for sustainability reporting
Mandatory sustainability reporting kicked off for large Australian corporations from 1 January last year, and attention will soon turn to the smaller end of town.
To help prepare smaller companies to meet their upcoming reporting requirements, ASIC has released its first set of educational modules, which provide practical guidance on climate-related disclosures, governance and assurance processes that align with global standards such as the ISSB framework.
The initiative aims to bridge knowledge gaps and ensure that businesses of all sizes can comply with Australia’s new sustainability reporting regime, which comes into effect this year.
Why does it matter?
Mandatory sustainability reporting marked a significant shift for large entities at the beginning of 2025, but smaller companies often lack the resources required for this kind of complex requirement.
ASIC’s educational modules aim to provide accessible tools to build capability while avoiding compliance risks. Improving the quality of reporting also represents a win-win for companies of all sizes by enabling them to better measure and understand their own sustainability performance while enhancing the transparency and comparability that strengthen investor confidence.
Outlook for the energy transition
What lies ahead for Australia’s rapidly changing energy system? Two major draft reports, released in the past two months, provide an outlook.
AEMO’s Draft 2026 Integrated System Plan (ISP) retains the Optimal Development Path outlined in its 2024 edition. It concludes that “renewable energy connected with transmission and distribution, firmed with storage and backed up by gas is the least-cost way to supply electricity to homes and businesses through to 2050, as coal plants retire and while meeting government policies”.
However, the report notes a key change in the coal exit timeline. While the 2024 ISP anticipated the entire coal fleet to be retired by 2038, the latest Draft ISP projects some coal-fired plants to remain operational until 2049, which reflects the Queensland Government’s staged retirement strategy.
The second draft report, GenCost 2025-26: Consultation draft, is a collaboration between CSIRO and AEMO and provides an annual update on electricity generation, storage and hydrogen technology costs. It states that solar PV and onshore wind remain the cheapest technologies, while battery costs are down 11–16 per cent and pumped hydro costs are revised down by up to 55 per cent.
The report estimates that meeting the 82 per cent renewables target by 2030 will cost about $91/MWh (including transmission). Meanwhile, it finds that a mix of solar, onshore wind, storage and flexible gas/hydrogen provide the least-cost share of generation, while nuclear, offshore wind, and carbon capture and storage lead to higher average electricity costs.
Why does it matter?
Insights from these reports assist governments and regulators to design climate policies that underpin Australia's ability to meet its climate commitments and energy security goals. They also provide roadmaps and forecasts that the corporate sector can use to develop the outlook and impact for industry and business, while outlining the capital requirements for the energy transition.
While the delay in the coal-exit timeline largely reflects Queensland's staged retirement strategy, Origin Energy and the NSW government recently agreed to a two-year extension to the closure of the 2880-megawatt Eraring Power Station near Newcastle to support the state’s energy supply during the transition. Australia’s energy transition roadmap remains a careful balancing act between cost-effective decarbonisation, replacing ageing infrastructure, and maintaining energy security.
Along with both draft reports, this highlights the urgency and support required for Australia to meet its 82 per cent renewables target by 2030 across renewable generation, firming and transmission build-out.
Domestic gas reservation scheme aims to ease shortfall
Following a recommendation by the Australian Government’s Gas Market Review, the Federal Government has announced it will develop a domestic gas reservation scheme requiring the country’s exporters to allocate between 15 and 25 per cent of their gas for the local market.
While Western Australia has long had a gas reservation scheme, the recent announcement brings a similar policy to the east coast with the aim of securing more affordable gas for Australians, shielding businesses from international gas price spikes and enhancing industry’s position when negotiating gas contracts.
The Gas Market Review published key principles for the scheme, which will be developed in consultation with industry, international partners and communities. The stated preference is for a system where exporters must meet domestic supply obligations before exports are approved. A key design principle is that existing domestic and international gas contracts should be respected. The scheme is planned to begin in 2027 and is intended to increase domestic gas supply as existing contracts expire.
Why does it matter?
Gas prices are the key consideration with data from the Australian Institute noting that allowance of unrestricted gas exports from the east coast of Australia has seen domestic wholesale gas prices more than triple and electricity prices double.
Gas remains critical for sectors where electrification is not currently feasible, such as manufacturing, food processing and chemicals. Meanwhile, the ACCC’s latest gas inquiry report predicts a tight gas supply for the east coast. It shows that while there is likely to be sufficient supply for the east coast overall, southern states may need to rely on gas stores and gas supplied from Queensland to meet demand. This potential tightening of supply is a critical driver of calls for a gas reservation scheme.
Global report highlights evolving risk landscape
The global outlook continues to be shaped by uncertainty, but what are the most pressing threats?
The World Economic Forum’s Global Risks Report 2026, released several days prior to the WEC’s annual meeting in Davos, includes the Global Risks Perception Survey, which features insights from more than 1,300 experts on the evolving risk landscape in the short-to-medium (to 2028) and long term (to 2036). The report also explores their implications and shows a shift in the top 10 risks from the previous report, published in 2025.
Key movements in top 10 risks include a shift in short‑term focus from environmental risks towards geopolitical risks, such as geoeconomic confrontation and armed conflict. Over the long term (10-year outlook), however, environmental issues remain dominant, representing five of the top 10 risks.
Like last year, “Adverse outcomes of AI technologies” sees the largest rise over time, moving from 30th place in the short-to-medium outlook to fifth place in the long term outlook.
While misinformation, disinformation and cyber insecurity remain persistent risks, societal risks also rank prominently, with four of the top 10 short‑term risks relating to societal challenges such as polarisation, inequality and the erosion of human rights and civic freedoms.
Why does it matter?
While geopolitical tensions have contributed to a shift in short-term risks, the report shows environmental risks remain the most significant long-term threat. As a result, while attention has been temporarily diverted to short-term risks, long-term environmental risks cannot be ignored. Delaying adaptation and nature‑positive investment may heighten future loss, instability and financial costs.
The report highlights the impact of more extreme weather events on existing critical infrastructure, which may contribute to wider social and economic challenges, and recommends that climate considerations be central to infrastructure development. It also notes that the rise of middle classes in emerging markets and the rapid build-out of AI infrastructure may cause energy needs to spike, causing a potential lift in cost-of-living concerns and inequality.
While AI presents significant economic and productivity opportunities, the report highlights the need for responsible AI development as well as clear governance and regulatory oversight.
The risks highlighted in the report are likely to impact countries differently yet they remain interconnected. For a climate-exposed, trade-dependent country like Australia, it is beneficial to incorporate these risk considerations into policies and decisions.
Putting ethics into AI
Responsible AI development is in focus with the Federal Government releasing its National Artificial Intelligence Plan, which charts a roadmap for Australia to become a global leader in the ethical development of this rapidly evolving technology.
The plan’s key goals include capturing opportunities through digital infrastructure investment, developing national data centre principles to guide sustainable investment and supporting local AI capability, with AUD 460 million already committed to AI initiatives.
A key focus is ensuring the benefits of AI reach all Australians. This will require promoting AI adoption across business, government and communities and tailoring support for regional areas, SMEs and digitally excluded groups, along with developing the workforce through AI literacy programs in schools, TAFEs and community organisations.
The third goal aims to improve AI safety measures, such as strengthening legal and regulatory frameworks for responsible AI and establishing the Australian AI Safety Institute to monitor and mitigate emerging AI risks.
Why does it matter?
Australia is well-placed to become a regional data centre hub and has an important role to play in the AI revolution. The National AI Plan may provide the responsible and ethical framework required to guide its success.
The government is also developing a set of national data centre principles to guide data centre investment, which will include expectations around environmental sustainability, including renewable energy sourcing and efficient cooling technologies.
Data centres have significant water and energy needs – they consumed 4TW of electricity in 2024 (around 2 per cent of NEM power) – and AEMO forecasts that demand will triple by 2030. Future growth in renewable energy generation may be critical to achieving Australia’s data centre goals.
By requiring proactive workforce upskilling and inclusion strategies, the National AI Plan also recognises the potential transformative impact of AI on business operations and job markets. Establishment of the Australian AI Safety Institute may also help to minimise risk such as bias, privacy breaches and misuse of the technology, while bringing rigour to responsible AI governance.
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