ESG Compliance in 2026: What Boards of Mid‑Sized Businesses Need to Get Right

The Australian and New Zealand regulatory environment is tightening, and for many boards, ESG has quietly shifted from a delegated operational issue to a core governance and risk matter.

By 2026, directors of mid‑sized organisations, particularly privately owned and family‑run businesses, will be judged not only on financial stewardship, but on how effectively they understand, oversee and integrate environmental, social and governance (ESG) risks into decision‑making.

What some board members fail to grasp is the role ESG has to play. It is not about ‘showcasing’ responsibility and sustainability. Instead, focusing on ESG has the power to reduce risk exposure, improve commercial viability and demonstrate more holistic accountability from board level down. 

Based on regulatory developments and what we are seeing across construction, manufacturing and resources sectors, here are five ESG compliance ‘truths’ boards can overlook:

1. ESG is now unequivocally a board responsibility

In 2026, ESG can no longer sit in a policy folder, remain siloed as marketing narrative, or be assigned to a single executive. Regulators, financiers, customers and insurers increasingly expect boards to apply the same discipline to ESG as they do to finance, safety and enterprise risk.

This matters for two reasons.

First, from a liability and risk perspective. Climate and sustainability risks are now considered foreseeable. Where boards fail to identify and oversee those risks, exposure increases for directors as well as the organisation.

Second, from a business performance perspective. Evidence shows organisations with stronger governance around people, safety, diversity and long‑term risk outperform peers over time. ESG has become a lens through which stakeholders assess whether a business is well‑run and resilient.

What boards often underestimate: For mid‑sized and owner‑led companies, clarity around governance is essential. ESG responsibilities are often fragmented across finance, HSEQ, operations and marketing, with no single line of accountability back to the board. 

2. Mandatory climate reporting is no longer a “large company problem”

ASIC’s new sustainability reporting requirements have been described as the “biggest change to corporate reporting in a generation”. 

The phased rollout means:

• Group 1 entities are already reporting on climate‑related financial data
• Group 2 organisations (revenue > $200m, assets > $500m, 250+ employees) will start reporting from July this year
• Group 3 organisations (revenue > $50m, assets > $25m, 100+ employees) follow from mid‑2027

Disclosures must be included in a Sustainability Report forming part of the Annual Report, and boards are required to approve a directors’ declaration confirming compliance with the Corporations Act and climate reporting standards.

This requires a material shift for boards. Approval now extends beyond financial numbers into emissions data, climate scenarios, transition planning and risk assumptions.

What boards often underestimate: For mid‑sized businesses, the risk is not simply missing a reporting deadline. It is approving disclosures without sufficient confidence in the underlying data, controls or assumptions. Directors are increasingly required to sign off on information which, in many organisations, has never previously been subject to audit‑grade scrutiny.

3. Greenwashing and enforcement risks are rising 

Regulators have moved decisively from guidance to enforcement.

ASIC has already taken multiple greenwashing matters to court, targeting vague net‑zero commitments, selective disclosures and unsupported claims. Reputational damage has often been as significant as financial penalties.

For boards, this creates a new governance risk: what the organisation says publicly must be defensible, consistent and supported by systems and evidence.

This extends beyond sustainability reports to:

• Marketing materials
• Investor and lender presentations
• Website claims
• Tender responses and customer communications

What boards often underestimate: In many mid‑sized businesses, ESG claims are created faster than the systems needed to support them. Without clear review, detailed policies and approval controls, well‑intentioned statements can expose the board to unnecessary risk.

4. Emissions obligations have strategic, not just operational, consequences

For emissions‑intensive facilities, the Australian Clean Energy Regulator’s Safeguard Mechanism directly links operational emissions performance to national reduction targets.

Boards of affected entities must oversee how the organisation responds as constraints tighten. Options may include:

• Operational abatement
• Capital investment decisions
• Changes to product mix or supply chains
• Use of offsets where appropriate

These are strategic decisions, with implications for capital allocation, competitiveness and long‑term viability.

What boards often underestimate: Emissions management is often treated as a technical or site‑level issue. In reality, it influences strategic planning, investment horizons, and customer relationships, all of which are core board responsibilities.

5. Governance expectations are converging – listed or not

ASX Corporate Governance Principles already require disclosure of material ESG risks and opportunities, and these expectations are increasingly shaping behaviour beyond listed entities.

Banks, insurers, Tier 1 customers and global supply chains are applying similar expectations to private and mid‑market businesses. In practice, this means many unlisted boards are being assessed against listed‑company standards.

What boards often underestimate: Governance expectations now travel through commercial relationships. Even where regulation does not formally apply, customer and financier expectations often do.

ESG priorities for boards in 2026

Boards can manage ESG effectively this year by focusing early on a small number of fundamentals:

• Clarify ESG governance: Define board and committee responsibilities, ensure access to ESG and climate expertise, and integrate ESG into decision‑making rather than treating it as a parallel stream.
• Build confidence in data and disclosures: Establish clear ownership, systems and controls so boards can approve sustainability reporting with confidence.
• Control ESG claims: Implement robust review processes so all public statements are accurate, evidence‑based and aligned with strategy.
• Integrate ESG into risk and strategy: Embed climate and ESG considerations into risk appetite, capital planning and long‑term strategy.
• Engage stakeholders deliberately: Maintain credible, evidence‑based dialogue with customers, regulators, investors and employees.

Is your board missing the mark on ESG?

In practice, ESG governance is no different to any other board responsibility. It requires clarity on requirements, ownership of information, allocation of resources and ongoing oversight.

Where we see boards struggle is not ambition, but making ESG practical, proportionate and aligned to how the business actually operates.

If your board cannot confidently answer who owns ESG data, how climate risk informs strategy, or whether public claims are defensible, it may be time for a focused governance review.

Everfocus works with boards and leadership teams in construction, manufacturing and resources to make ESG governance clear, practical and scalable – without adding unnecessary complexity.

A consultation with Ryan can quickly clarify exposure, priorities and next steps. Book here.