Welcome to the first edition of Herbert Smith Freehills’ Australian ESG bulletin, ‘Keeping Up with ESG’ for 2024.

Our monthly ESG bulletin provides a targeted snapshot of key developments we see as reflecting the “must know” trends in the Australian market. In this edition, we spotlight the Australian Government’s release of draft legislation for mandatory climate-related financial disclosure and the EU’s provisional agreement on the Corporate Sustainability Due Diligence Directive.

Key highlights

  1. In the spotlight: Australian mandatory climate reporting and EU sustainability due diligence developments
  2. COP28 outcomes
  3. AGMs: Recent requisitioned resolution trends
  4. ESG litigation update: key proceedings concerning energy, oil and gas companies
  5. Nature Repair Market given the green light
  6. Spotlight on modern slavery continues

In the spotlight: Australian Government releases draft legislation for mandatory climate-related financial disclosure and EU agrees Corporate Sustainability Due Diligence Directive

On 12 January 2024, Treasury released its anticipated policy position and exposure draft legislation for the Australian mandatory climate-related disclosure regime following two rounds of consultation in 2023. Key features of the exposure draft may help to provide answers to at least a few of our burning questions:

Q: Where will the disclosures sit?

A: The fourth frontier, a new sustainability report – Climate-related financial disclosures are required to sit in a separate sustainability report which will form the fourth report within the annual report. While this could signal (at least a conceptual) step away from the integrated reporting practices our clients are used to, we also suggest preparing for the flow-on effects for Annual General Meetings (AGM’s) – as the consideration of a sustainability report as well as the annual financial report will now form part of the business of the meeting, and auditors will need to be prepared to answer questions related to the climate disclosures.

Q: Will companies be protected from liability as they adjust to this new wave of reporting?

A: Not completely, and not for long – As expected, entities will be provided relief for a fixed three-year period from 1 July 2024 to 30 June 2027 for disclosures relating to Scope 3 greenhouse gas emissions and scenario analysis only. This is a move away from previous commentary from Treasury which suggested modified liability would also apply in respect of transition plans.

Q: What is required in terms of assurance over our climate-related disclosures? 

A: Not as much as was initially proposed – The exposure draft legislation indicates a relaxed timeline for assurance requirements, with a proposed phased approach requiring only limited assurance over statements relating to Scope 1 and 2 greenhouse gas emissions until 30 June 2030.

Q: Can we report as a consolidated group?

A: Most likely yes – Entities which are exempt from lodging financial reports under Chapter 2M of the Corporations Act (including pursuant to deed of cross-guarantee relief and other class order relief instruments), will be exempt from making their own climate-related disclosures. This exemption is expected to provide relief for non-wholly owned subsidiaries and certain other members of larger corporate groups. Although it is not yet clear what this will mean for entities consolidated into the reporting of overseas based parents.

EU’s Corporate Sustainability Due Diligence Directive (CSDDD) obtains provisional agreement (and what this means for Australian companies)

On 14 December 2023, the European Council and Parliament announced they had reached a provisional agreement on the content of the new due diligence directive.

The CSDDD will apply to large EU companies with over 500 employees and a net worldwide turnover of at least €150 million, and non-EU companies with at least €150 million net turnover generated in the EU (i.e. Australian companies with an EU presence which surpasses this threshold).

On the basis of the provisional agreement, any Australian-based company covered within CSDDD scope will need to identify, assess, prevent, mitigate, bring an end to, and remedy actual and potential adverse impacts on the environment and human rights from their own operations, those of their upstream business partners, and those that stem from specified downstream activities, including the distribution and recycling of their products. Once the agreed text has been formally endorsed and adopted by the European Council and European Parliament, EU member states will have 2 years to implement the CSDDD into their national law. For more information see our recent note below.

Read more

COP28 outcomes

The 28th Conference of Parties to the UN Framework Convention on Climate Change concluded on 13 December 2023. Following intense negotiation and extension to the summit, the final text of the Global Stocktake called on countries to contribute, “taking into account their different national circumstances, pathways and approaches” to “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner”. It marks the first time fossil fuels were directly mentioned in a COP decision.

Read more at Herbert Smith Freehills’ global COP28 hub and listen to our COP28 debrief through the lens of four paradigm shifts – (1) climate finance, (2) fast tracking the energy transition and emissions reduction, (3) nature and people, and (4) the “just transition”.

Read more: COP28 Hub

Listen: Third Wheel Podcast series

AGMs: Recent requisitioned resolution trends

Over the last couple of years, there has been a steady increase in both Australia and overseas in the number of shareholders seeking to put resolutions to AGMs – many relating to ESG-related matters. However, shareholders were relatively quiet in Australia in 2023, with fewer requisitioned resolutions lodged compared to previous years (particularly those relating to climate change and other ESG issues).

Having regard to the themes noted in recent requisitioned resolutions, we anticipate the  Australian AGM season may see an uptick in shareholder engagement and pressure this year. Based on activity in overseas jurisdictions, we expect that requisitioned resolutions in Australia will continue to expand beyond financial, operative (and in recent years, climate) performance. For example, Dutch pension fund, PGGM has become the lead filer of a shareholder resolution with McDonald’s requesting reporting – specifically, the “feasibility and practicality of establishing time-bound, quantitative goals to reduce supply chain water usage”. Another Dutch investor, Achmea Investment Management filed a shareholder resolution with Coca-Cola for “an enterprise-wide policy to move towards more healthy products”. Issues surrounding artificial intelligence are also gaining attention with a US union fund, AFL-CIO filing shareholder resolutions at both Apple and Disney to request an AI “transparency report” to cover any ethical guidelines to protect workers, customers and the public from harms.

While shareholder resolutions were not at the forefront of activism in 2023, based on what we have seen overseas, we predict that 2024 will see shareholders continue to make use of their requisition powers. Companies should be prepared to respond to such resolutions, including on a broad range of topics and emerging ESG-related issues.

ESG litigation update 

ExxonMobil files claim in USA to prevent vote on climate shareholder resolution

ExxonMobil has filed proceedings in the United States District Court for the Northern District of Texas to block a climate resolution proposed by activist investors, Arjuna Capital and Follow This, from being put to a vote at Exxon’s May shareholder meeting. The proposed resolution requires Exxon to set Scope 3 emissions targets and dramatically accelerate the pace of its emission-reduction plans.

Exxon allege that activist investor groups have abused the process of proposing shareholder votes that the proposal is “calculated to diminish the company’s existing business”. Exxon argues that the resolution violates SEC rules for investor petitions, because it is substantially similar to a proposal filed within the past five years, referring to proposals made by Follow This at past Exxon shareholder meetings, which were rejected by 72% of shareholders in 2022, and 90% of shareholders in 2023.

It is unusual for companies in the US to resort to Court proceedings to block a shareholder resolution, so the case will be followed closely. Exxon has asked for a decision by 19 March 2024, ahead of its annual meeting on May 29.

Federal Court dismisses claim in relation to Santos’ Barossa project

On 15 January 2024, the Federal Court handed down judgment in the Munkara v Santos proceeding, dismissing an application brought by Tiwi Islanders to block the construction of a pipeline for Santos’ Barossa gas project (available here).

The applicants claimed that Santos was required to submit a revised environmental plan for the project because it had been made aware that the project posed a significant risk to cultural heritage in the islands, which it had not properly assessed. There was no dispute regarding whether Santos had adequately performed the required consultations.

The Court dismissed the application and found that:

  • Risks which existed prior to Santos lodging its environmental plan could not be ‘new’ risks that would require a revised plan, notwithstanding that Santos was not previously aware of them.
  • There was insufficient evidence of potentially significant underwater archaeological sites along the pipe’s route.
  • The applicants had also not proven that the pipeline would interfere with their song lines.
  • The judgement also criticised the preparation of some of the applicants’ expert evidence, which re-enforces the importance of ensuring evidence preparation– especially evidence involving Indigenous culture – meets the rigorous standards required in court proceedings.

Greenwashing claim commenced against Woodside

On 13 December 2023, Greenpeace Australia Pacific filed greenwashing proceedings against Woodside Energy alleging that Woodside’s climate targets and disclosures are misleading or deceptive. Greenpeace’s claim focuses on two allegedly misleading representations made by Woodside:

  • 2022 emissions reductions: Woodside is alleged to have represented that it cut pollution from its operations by 11% in 2022. However, Greenpeace argues that this reduction figure relied on, and that actual emissions in fact increased by 3%.
  • Net zero by 2050 target: Woodside’s net zero by 2050 target is alleged to be misleading because, while it includes scope 1 and 2 emissions, it does not include scope 3 emissions.

Woodside has stated publicly that it rejects the claims and will defend the proceeding.

Nature Repair Market given the green light

On 15 December 2023, the Nature Repair Act 2023 (Cth) commenced. The Act establishes a national voluntary framework for projects to enhance and protect nature and biodiversity outcomes. It introduces a market of tradeable biodiversity certificates to encourage investment in nature repair and protection projects. Under the framework, landholders will be eligible for tradeable biodiversity certificates if they undertake projects that improve biodiversity outcomes.

In our biodiversity toolkit, we explain how business can navigate the emerging regulatory landscape designed to protect nature and biodiversity.

Read more: Nature repair market

Biodiversity tookkit

Spotlight on modern slavery continues

Continuing the broader focus on workers’ conditions, modern slavery remains in the spotlight in Australia’s policy and legislative realms, and legal system, with the end of 2023 seeing:

  • the Commonwealth Government release its response to the Rapid Review into the Exploitation of Australia’s Visa System report (Report). The Report had found that temporary migrant workers in Australia suffered “grotesque abuses” and that “temporary migrant workers are at greater risk of employer abuse and exploitation”. The Report included 34 recommendations, 20 of which the Government has agreed fully, whilst 4 have been agreed in-part or in-principle, 8 have been noted and 2 disagreed with;
  • the introduction of Federal Legislation which proposes the appointment of Australia’s first Anti-Slavery Commissioner – a role which is intended to focus on raising awareness of modern slavery, increasing organisations’ awareness of risk in operations and supply chains, and supporting victim-survivors of modern slavery; and
  • the Federal Court of Australia ordering a former Indian High Commissioner to Australia to pay over $136,000 (plus interest) in respect of unpaid wages to a former domestic worker who, the Court heard, had been required to work 17.5 hours a day, across 7 days a week, and was paid less than $10 a day. Whilst the factual circumstances of this case are relatively unique, it demonstrates how Australia’s existing employment law regime interacts with modern slavery considerations. The case necessarily involved considerations of the status of employment and foreign immunity, with the Court concluding that:

Together these events demonstrate that the focus on modern slavery, and necessarily the working conditions of vulnerable workers, will continue.

ESG thought leadership

To read more of our ESG thought leadership, please see:


Written with assistance of Paige Mortimer (Environment, Planning & Communities), Zulema Townsend and Samuel Goodear (Head Office Advisory Team), Darcy Moffat (Employment, Industrial Relations and Safety) and Georgia Gee (Disputes)


Key ESG contacts

Please contact your usual ESG contact or the below.

Timothy Stutt
Timothy Stutt
Partner, Sydney
+61 2 9225 5794
Heidi Asten
Heidi Asten
Partner, Melbourne
+61 3 9288 1710
Melanie Debenham
Melanie Debenham
Partner, Perth
+61 8 9211 7560
Mark Smyth
Mark Smyth
Partner, Sydney
+61 2 9225 5440
Jon Evans
Jon Evans
Partner, Melbourne
+61 3 9288 1574
Olga Klimczak
Olga Klimczak
Partner, Perth
+61 8 9211 7624
Isabella Kelly
Isabella Kelly
Senior Assoicate, Sydney
+61 2 9322 4397