RADAR
Understanding the businesses driving Australia’s economy
SPOTLIGHT ON MANDATORY CLIMATE REPORTING & ESG
About this report
Each year, Pitcher Partners’ Business Radar looks into the trends, challenges and opportunities facing Australia’s middle market business leaders with independently commissioned research.
Our most recent survey captured the sentiment of 140 owners and leaders of middle market businesses across a range of growth stages, states and industries captured in February 2025.
Here, you’ll read how leaders feel about the current and future success of their businesses and what that could indicate for Australia’s economy.
We also look at the Australian middle market’s readiness for – and attitude towards –incoming mandatory climate reporting requirements and Environmental, Social and Governance (ESG) reporting.
Key findings
1
2
3
4
Stable middle market confidence is requiring more of a balancing act as higher costs and stubborn inflation are offset by increased demand and technology-driven efficiencies
Awareness of mandatory climate reporting is rising but many middle market leaders are still unclear on what it means for their business
There seems to be a gap between the perception and reality of the time and effort required to comply with mandatory climate reporting
Australia’s middle market could be underestimating the tangible financial benefits of implementing ESG initiatives
Aussie middle market businesses in a balancing act
Stable confidence is harder than it looks
Business confidence levels haven’t notably changed in the last year –it seems to be ‘steady as she goes’ for most middle market business leaders. That’s consistent across businesses of all sizes and with leaders of different ages. The exception was in Queensland where middle market leaders are nearly 13% more confident in the future success of their business than their counterparts in other states.
One of the biggest drivers of business confidence in Queensland has been the change in government and some of their newly introduced initiatives – the re-established Queensland Productivity Commission, and the permanent reduction of public transport fares to 50 cents which has seen cost of living pressures easing and consumer spending increasing.
The Queensland business environment has become more favourable. Middle market businesses have reported strong customer acquisition, and profitability has been high over the past year.
New legislation relating to the sector and the new government changeover in QLD.
Survey respondent comment about what is impacting business confidence
That stability perhaps hides hard work under the surface – the furiously paddling legs as businesses fight rising cost pressure by leveraging technology efficiencies and stronger demand.
Confidence in own business
The economic impact of Cyclone Alfred will test business confidence in the short to medium term, while the 2032 Brisbane Olympics will present downstream business opportunities that will likely boost confidence.
Kylie Lamprecht, Partner, Pitcher Partners Brisbane
12-month growth prospects: a downward trend
Confidence in the 12-month growth prospects of respondents’ industries (down 10%) and Australia’s economy (down 11%) compared to mid-2023’s peak is showing a gradual downward trend. The combination of increased operating costs and labour costs with rising interest rates and inflation over the last two years has slowly eroded middle market confidence, with increased demand, the advance of technology and consumer preferences unable to halt the retreat.
With a recent interest rate drop (announced after the survey was in market) potentially aiding a return of confidence, it will be interesting to see how the middle market responds in future reports. Middle market business confidence over time
Nerves around global economy
Confidence in the 12-month growth prospects of the global economy tells a different story. Sitting at 7.15 in our Business Radar report in July 2024 confidence has dropped almost half a point to 6.73. This shift likely highlights the stirrings of something like unease surrounding recent geopolitical manoeuvrings: power jostling between China, Russia and the US, President Trump’s raft of tariffs and general unpredictability, as a survey respondent articulates: “Geopolitical tensions and some government policies are not working in the favour of our growth.”
These events could reinforce the need for Australian exporters to adequately diversify their geographic markets where it makes sense to do so. Some respondents are already taking up the opportunity: “The Asian market is the biggest growth area for our business, and I expect it to continue this way.”
Threats to business confidence
When asked about the top three external factors negatively impacting their business confidence, our decision-makers had their eye on the bottom line. Inflation, increased operating and labour costs and changing interest rates hold steady in the top spots since our previous survey. However, all have now eased slightly.
Cost
of living adversely affects the consumer’s disposable income, reducing the ability to pay for services.
Dropped 13% since July 2024 survey, as business operations and supply chains adjust to the new normal, and next-gen technology increases operational efficiency.
While increased operating costs remain in second place, we see a big drop of 13%. Given the passage of time, business operations and supply chains are adjusting to the new normal and the robust economy has allowed price rises to flow through. There has also been a stronger focus on achieving greater operational efficiency, aided by an increase in next-generation technology, such as AI.
A new addition to this report, cybersecurity, has entered the top five, with 15% of respondents listing it as one of their top three threats to business confidence. In early 2023, we asked our business leaders about their approach to cybersecurity. While many were well prepared, the data did suggest a worrying disconnect between their perception of the threat levels and the actual steps taken. For example, almost half of respondents agreed or strongly agreed that their business “isn’t an attractive target for a cyber-attack, so the risk of an attack is low.” This suggested at the time that many businesses saw cybersecurity as a risk in general but one that didn’t apply much to them. The new confidence data indicates that this attitude is changing.
Business owners perfect their balancing act
Confidence is not simply impacted by external factors but has been shored up by careful juggling by decision-makers. While inflation and operating costs are applying pressure, businesses are managing to keep their offering relevant and pivot where necessary to meet customer requirements and boost overall demand. With the chance of more global turmoil in the near future, it will be interesting to see how well Australia’s middle market maintains its confidence equilibrium.
Given the passage of time, business operations and supply chains are adjusting to the new normal and the robust economy has allowed price rises to flow through.
Survey respondent
Survey respondent
Ready or not –mandatory climate reporting, ESG and Aussie middle market preparedness
Climate related risks and opportunities
Physical risks
Short-term events
Long-term shifts in climate
Transition risks
Arising from transition of the economy to lower-carbon –including legal, technological, market, reputational and financial
Business owners must be informed about their reporting requirements, and the climate reporting legislation gives a framework for this responsibility. This includes temporary exceptions which give a period of regulator-only enforcement over certain disclosures (and that includes Scope 3 emissions, scenario analysis and transition plan disclosures). A business’s mandatory climate reporting, often submitted as a Sustainability Report, is lodged with ASIC together with the financial report, director’s report and auditor’s report. The Sustainability Report is publicly available.
Opportunities
Potential positive effects from climate on entitiy’s operation
Failing to comply with mandatory climate reporting requirements can lead to civil penalties, and ASIC can take action against misleading or deceptive conduct like greenwashing.
Awareness? Yes. Clarity? No.
Our respondents showed strong awareness of the incoming requirements, but many remain unclear on what it will actually mean for their businesses. Six in 10 say they have some level of familiarity with the new requirements, and more than half feel confident that they know what needs to happen to reach compliance. However, 75% say they’re not at all prepared or only somewhat prepared for mandatory climate reporting, despite the fast-approaching deadlines. And smaller businesses (less than $50 million in turnover), tended to be less prepared compared to larger businesses ($200 million in turnover) – 80% versus 46% respectively. While some requirements are familiar, greenhouse gas emissions accounting may be the most challenging and novel requirement, particularly for indirect Scope 3 emissions outside of an organisation’s direct control.
Familiarity with the mandatory climate reporting requirements coming into effect in 2025
Very familiar
Somewhat familiar
Heard of it, but don’t know the details
Not familiar at all
Business preparedness for mandatory climate reporting requirements
Well prepared
Somewhat prepared
Not at all prepared
“Feel that it is another requirement that will get forgotten about until the last minute and then puts stress onto staff to complete.”
“Insufficient knowledge of climate reporting requirements leads to low confidence.”
“Not much has been told to us from government leading organisations. More detail and support will be required.”
Survey respondents
Anticipated timeline for mandatory climate reporting compliance
Sweet spot: the reality of how long it will actually take
55% ready in one year or less
53% haven’t taken action yet to implement any ESG initiatives
11% ready in >18 months
6% mentioned that it was not applicable for their business
Compared to the total sample, the businesses with shorter compliance timelines feel more confident that they understand mandatory climate reporting requirements.
(Not) ready for action
Mandatory climate reporting is only one part of the ESG puzzle, and other ESG aspects, while not mandatory, shouldn’t be overlooked. Only 15% of middle market leaders have started taking active steps to improve their business through an ESG lens with a further 36% planning their initiatives. Almost half have taken no action, indicating that only those with a strategic imperative are electing to report voluntarily. Which makes sense – reporting before the mandatory requirement can provide time for these businesses to enact improvements, with future reporting to highlight improved outcomes achieved.
Current stage of business engagement with ESG initiatives
Implementing and reporting – taking active steps to improve our business activities through an ESG lens
Engaged and planning ESG initiatives
Thinking about how ESG initiatives may impact our business
We have the right people in place who are well versed on what is required of us.
Survey respondent from the mining industry
49% haven’t taken any action
Extra work or business benefit?
The middle market’s slower progress towards compliance could be linked to the perceived lack of value that the requirements add to their businesses. It’s clear that for many businesses, the reporting requirements are seen as an administrative burden. Those who haven’t taken action are far more likely to see the reporting requirements as negative (16%) or neutral (63%). Only 21% view it as positive.
In contrast, 60% of businesses that have taken action view them positively, with minimal negative sentiment.
Many middle market businesses are not likely to be caught in the reporting regime, unless required as part of the supply chain emissions reporting. 60%
of businesses that have taken action in reporting their requirements view them positively, with minimal negative sentiment
Scope 3 emissions reporting is to commence in the second year of a business’s mandatory reporting. Scope 3 is quite invasive and requires affected businesses to report on indirect carbon emissions that occur in its value chain, both upstream and downstream. Middle market businesses that may think they do not meet the large business thresholds for mandatory reporting could be thinking this doesn’t apply to them. If they are part of a larger value chain, Scope 3 reporting required by bigger businesses in their value chain will bring them into the reporting regime by requiring their emissions measures.
It’s
a real sleeper issue for businesses that may not be required to mandatorily report – they find themselves caught up in the Scope 3 reporting of their largest customers. Overlooking or underestimating this could be a costly mistake if it results in losing a customer to a more prepared competitor.
Jyotika Rangel, Partner, Pitcher Partners Sydney
However, undertaking carbon footprint analyses can identify cost-saving opportunities for businesses, such as reducing energy consumption. It is worth noting that public sector or high-profile listed businesses are including carbon consideration in their procurement decisions. Middle market businesses with this profile of customer can view this as a risk or an opportunity, depending on how prepared they are. Equally important to operations is the value that transparency offers to current and prospective staff, who are increasingly choosing environmentally minded employers. Financially, undertaking carbon footprint analyses can also identify cost-saving opportunities for businesses, such as exploring options to reduce energy consumption and look for more efficient alternatives.
“We do not manufacture anything, just have our services which do not relate to climate change requirements.”
“Increases workload when there [are] already significant compliance related pressures, however I do agree that there is some need for it especially in other industries.”
“It would help my business improve on risk management and also encourage investors who are seeking climate resilient investment to invest.”
“Mandatory climate reporting ensures that companies disclose their environmental impact, which is crucial for stakeholders, investors, and the public to understand and assess the sustainability practices of businesses.”
“We believe every business [and] individual all have their role to play in addressing climate change.”
Survey respondents
Business boosters and blocks
All this tracking and reporting is clearly not without its challenges – most of which comes down to resourcing. Our respondents say they worry about having enough time, money, staff or expertise. 37% of businesses expect to spend more to meet these requirements, while 34% say they’ll struggle with constraints on resources, such as time, budget and staff. Similarly, 35% feel they lack the internal expertise needed to deal with the complexity of guidelines.
Still, respondents believe mandatory climate reporting will enhance their brand reputation (40%) and reduce costs through lower staff turnover or resource use (39%). The third biggest anticipated benefit (37%) is that complying with this new legislation will allow them to more readily meet other requirements, which could help them earn government subsidies or avoid fines.
We have no preparation for it and needing to prepare for it will not be financially beneficial but seems to be mandatory.
Survey respondent from the accommodation and food services industry
It is going to improve
risk management and increase transparency and accountability. It’s also enhanced stakeholders’ engagement and driving sustainable business practices.
Incorporating sustainability as part of the long-term planning of the business can differentiate a business from its competitors. A proactive approach to sustainability can also foster innovation, as companies seek new ways to reduce their environmental footprint always with the view to improving their overall performance.
Turn the negative into a positive
Effective governance and strategic planning are crucial in meeting the new ESG and mandatory climate reporting requirements. By integrating these reporting requirements into the company’s governance framework, businesses can make sure that they are not only compliant but also strategically positioned to benefit from these regulations. This involves setting clear objectives, allocating resources efficiently, and continuously monitoring progress to meet the reporting standards.
Compliance can deliver real benefits for businesses as emissions reductions bring efficient processes and substitutes. For instance, businesses can adopt energyefficient technologies, streamline operations to reduce waste, and explore alternative materials that have a lower environmental impact. These initiatives not only help in meeting compliance requirements but can also lead to reduced emissions, cost savings and operational efficiencies.
Survey respondent
Gavin Debono, Partner, Pitcher Partners Melbourne
The investment magic of ESG
When it comes to investment, ESG reporting has far more impact than mandatory climate reporting. And perhaps overlooked by this cohort is the tangible impact exceptional ESG reporting has on the success of business investment or sale.
In an independent study of active dealmakers in M&A, Pitcher Partners’ research found that ESG is continuing to be central to dealmaking.
It’s seen as a reliable way to uncover risk – particularly to reputation – and ensure transactions meet stricter compliance standards. It’s why businesses facing ESG challenges are slower to deliver on their exit strategies and expect lower valuations or minimal buyer interest.
In short, meeting ESG guidelines with enthusiasm and proactivity should be seen as more than a matter of compliance or environmental ethics. It could profoundly improve business opportunities.
These new requirements will undoubtedly constitute an administrative burden for many businesses. However, those that tackle it proactively and with realistic expectations should find it could deliver a tangible competitive advantage.
52%
of respondents say ESG factors into every deal – Dealmakers Australia middle market 2025 outlook
ESG has been consistently drawing more focus year on year, and businesses without a clear ESG strategy will face increasing challenges in today’s market. Dealmakers are becoming more cautious, and a business lacking an ESG strategy poses compliance concerns as well as future reputational risks.
Stephen Craig, Partner, Pitcher Partners Melbourne
Insights for business Actions to take
Being prepared for reporting
For businesses considering their requirements under the mandatory climate reporting legislation, here are some practical steps you can take:
1
Assign a governance body
Formally assign a governance body within your business that will oversee climate-related risks and opportunities.
2 Check reporting requirements
Research and become familiar with your business’s reporting requirements.
3 Identify your business gaps
Check that your systems, work processes, staff and data are up to the task. Is your current data accurate and reliable, do managers and staff have sufficient skills in this area and do your systems capture the required information or need improving? Prepare an action plan to get where you need to be.
4 Seek expert advice
Not sure on what your requirements are or where to start? Speak to experts in the field of emissions and carbon reporting and tap into your business and professional networks.
5 Create a risk register
Determine how the business will identify, assess, prioritise and monitor climate risk, including creating a risk register capturing climate-related physical risks and transition risks.
6
Incorporate ESG into your overall business strategy
Look at tying your environmental goals to cost-saving measures, assessing major projects against their potential impact or requiring responsible sourcing in procurement.
Our global reach
We are proud to be a member of the Baker Tilly network, a global network of independent accounting and business advisory firms, whose member firms share our dedication to exceptional client service.
Every day, 43,500+ people in 143 territories share experiences and expertise to help privately held businesses and public interest entities meet challenges and proactively respond to opportunities. International capability and global consistency of service are central to the way we work.
3,840 partners
43,500+ experienced professionals
Baker Tilly International
Experts across a wide range of industry and business sectors, each Baker Tilly International member firm combines highquality services and in-depth local knowledge. Sharing knowledge and resources, our business approach brings together the power of the global network to deliver exceptional results to clients globally.
143 territories
$5.6bn worldwide revenue 2024 (USD)
Pitcher Partners
Pitcher Partners is an independent member of Baker Tilly International. Pitcher Partners’ strong relationship with other Baker Tilly International member firms, particularly in Asia-Pacific, provides clients with access to international networks, opportunities and expertise to expand globally.
Global statistic as at January 2025
Meet the Queensland Partners
Norman Thurecht
Managing Partner e nthurecht@pitcherpartners.com.au
Audit
Daniel Colwell e dconwell@pitcherpartners.com.au
Jason Evans e jevans@pitcherpartners.com.au
Cheryl Mason e cmason@pitcherpartners.com.au
Andrew Robin e arobin@pitcherpartners.com.au
Corporate Finance
Ventura Caso e vcaso@pitcherpartners.com.au
Warwick Face e wface@pitcherpartners.com.au
Kieran Wallis e kwallis@pitcherpartners.com.au
Pharmacy
Felicity Crimston e fcrimston@pitcherpartners.com.au
Robert Hughes e rhughes@pitcherpartners.com.au
Mark Nicholson e mnicholson@pitcherpartners.com.au
Private Business & Family Advisory
Peter Camenzuli e pcamenzuli@pitcherpartners.com.au
James Field e jfield@pitcherpartners.com.au
Nigel Fischer e nfischer@pitcherpartners.com.au
Brett Headrick e bheadrick@pitcherpartners.com.au
Jeremy Jones e jjones@pitcherpartners.com.au
Kylie Lamprecht e klamprecht@pitcherpartners.com.au
Karen Levine e klevine@pitcherpartners.com.au
Tracey Norris e tnorris@pitcherpartners.com.au
Cole Wilkinson e cwilkinson@pitcherpartners.com.au
Risk
Robyn Cooper e rcooper@pitcherpartners.com.au
Tax
Simon Chun e schun@pitcherpartners.com.au
Murray Graham e mgraham@pitcherpartners.com.au
Tom Splatt e tsplatt@pitcherpartners.com.au
Wealth
Edward Fletcher e efletcher@pitcherpartners.com.au