Climate change and environmental concerns are no longer peripheral issues. Australian CFOs are facing mounting pressure from investors and stakeholders to prioritise sustainability. The latest federal budget reflects this shift, unveiling new measures impacting corporate strategy and financial reporting.

The budget extends the sustainable finance taxonomy to agriculture (the taxonomy helps address greenwashing and supports decarbonisation investment), a cornerstone for Australia's net-zero ambitions. This presents a compelling opportunity for CFOs to secure capital aligned with sustainable practices.

The government's commitment to standardised sustainability reporting includes funding allocated for best-practice guidance on net-zero transition plans. CFOs will gain a roadmap for communicating their company's climate goals and progress.

• Increased ASIC enforcement against greenwashing underscores the importance of transparency and credibility in sustainability disclosures (good data matters).
• To ensure accurate, auditable ESG disclosures companies will need to measure Scope 1 and 2 and begin to map their Scope 3 supply chain emissions calculations **.
• For CFOs & Finance teams, pressure will grow to proactively address reporting and stay ahead. For this, they can leverage better data to shift the culture and embed ESG into financial decision-making (historically ESG data has not had the robust audible scrutiny as finance data). Beyond disclosure, this includes adding a sustainability lens to modelling cost-benefit analysis, scenario analysis, resource allocation, as well as using sustainability criteria in business cases, risk management, and governance processes.

Added investment in the AASB and AUASB * increases the focus on robust sustainability reporting standards. This will enhance the comparability and reliability of sustainability data, empowering CFOs to make informed strategic decisions and effectively communicate ESG performance to investors. For CFOs, making strategic decisions for net-zero transition requires a comprehensive data-driven approach. This includes establishing science-based targets, tracking emissions, and transparently communicating progress. From an operational standpoint, Finance teams will need to build robust carbon accounting processes and capabilities, and begin to track emission reduction strategies, and monitor and manage climate risk.

To navigate this landscape, CFOs must build a strong foundation for ESG data quality, grow internal capability, and automate data collection processes. FP&A and Finance teams charged with additional reporting duties will not have resources or free time for value-added analysis when still dependant on manual processes.

The budget highlights the importance of a comprehensive sustainability strategy. The Nature Repair Market initiative and continued investment in the circular economy signal the government's commitment to broader environmental considerations. CFOs should consider these evolving regulations and stakeholder expectations when formulating their long-term sustainability plans. While these budget measures are a positive step, successful implementation is vital. Three actions for CFOs to seeking to elevate sustainability:

• Implement robust ESG platforms and processes to gather and validate historic actuals data – this will support trusted reporting with audit-ready processes
• Align sustainability data with existing platforms, and harness AI's potential to streamline processes – this will help with data quality including identifying outliers, and interpolating to extend datasets
• Identify clear sustainability metrics & dashboards for strategic planning and operational forecasting – this will allow teams like procurement begin to align with corporate-level ESG strategy

CFOs should stay abreast of emerging regulations (for example, in Europe, corporates report on double-materiality, rather than the single financial view) and industry practices to ensure their companies are well-positioned. Proactively embracing sustainability through robust data, disclosure and decarbonisation strategies will secure access to capital, enhance brand reputation, mitigate environmental risks, and ultimately contribute to long-term financial success.

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* Australian Accounting Standards Board & Auditing and Assurance Standards Board

** Where Scope 1: Direct emissions from owned or controlled sources. Scope 2: Indirect emissions from purchased electricity, heat or steam. Scope 3: All other indirect emissions from a company's activities, not included in Scope 1 or 2

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