Cost greater to abandon net zero transition, say G7 leaders

BSI’s new report has found that businesses across the world’s largest economies are reframing how they talk about net zero, but remain committed to decarbonisation and wary of the cost of inaction.

The findings of its 2026 G7 Net Zero Temperature Check carry pointed implications for Australian businesses navigating mandatory climate reporting, escalating greenwashing enforcement and a record year for extreme weather losses.

The global study of more than 7000 business leaders across the G7 found that three in four (74%) believe the economic risks of not transitioning to net zero are greater than the risks of doing so. This is part of a wider trend BSI has termed ‘climate-coding’ — where businesses reframe net zero in terms of resilience, risk management and business continuity, rather than focusing solely on environmental impact.

In Australia, where insured losses from extreme weather events reached AU$3.5 billion in the first half of 2025 alone — including Cyclone Alfred, NSW floods and severe hailstorms, according to Insurance Council of Australia data — and where climate-related disasters are forecast to cost the economy $40.3 billion annually (Deloitte Access Economics), the business case for climate action is not theoretical. It is already on the balance sheet.

Australia’s regulatory environment is accelerating the shift

The findings land as Australian businesses face a regulatory environment that is ahead of G7 peers. Mandatory climate-related financial disclosures under the Australian Sustainability Reporting Standards (ASRS) are now live for Group 1 entities (from 1 January 2025), with Group 2 entities required to report from 1 July 2026.

Meanwhile, ASIC and the ACCC have intensified greenwashing enforcement, and the new AANA Environmental Claims Code (effective March 2025) sets stricter standards for how businesses communicate sustainability claims.

Globally, 61% of G7 business leaders said they had changed the way they promote or communicate net zero actions in response to climate scepticism in the last 12 months.

Charlene Loo, Managing Director, BSI Australia, said, “Recent geopolitical events have brought into stark focus the need for a societal shift towards renewable sources of energy. They have also shown the importance of adopting a resilience mindset when it comes to climate change, focusing on risk mitigation, supply chain management and future preparedness.

“Australian businesses are in many ways ahead of their G7 counterparts on the regulatory side — mandatory reporting is already in force here, while most G7 nations are still relying on voluntary frameworks. But the global data tells us that regulation alone isn’t driving action. Businesses everywhere are recognising that climate risk is business risk, and that the cost of walking away from net zero now is greater than the cost of pressing ahead.”

Commitment holds, but an investment gap is emerging

Across the G7, 83% of business leaders report being committed to achieving net zero by their national target, and 78% say they will continue pursuing it because it is good for business — regardless of political uncertainty. More than three-quarters (77%) say reducing net zero efforts would risk losing prior investment and increase future costs.

These findings align with the Australian experience: businesses that have invested in ASRS reporting systems, emissions baselines and governance frameworks face a sunk-cost reality that makes retreat more expensive than continuation.

However, a significant gap is emerging between ambition and investment. Globally, only 21% of businesses have actually invested in decarbonisation, with a further 33% in progress. Only 38% are confident they will increase net zero investment in the next 12 months.

With energy prices high four years after Russia’s invasion of Ukraine — and now even higher following the Iran conflict — this was the most common barrier to action across the G7, cited by one in four. Business leaders also highlighted the lack of financing from banks or government to invest in green tech (25%). Nearly one in four (23%) said prioritising business growth was more important.

The findings also highlight an emerging blind spot: only 38% of businesses globally have a process to account for the carbon footprint of their AI-powered systems, even as AI adoption accelerates. In Australia, where AI investment is growing rapidly, this is a largely unexamined sustainability risk.

Other barriers included lack of skills and knowledge to act on net zero (23%). Almost a third want either general or industry guidance and standards (31% and 30%), while 33% want training programs and workshops to help their business’s managers and employees to understand net zero and how to achieve it.

The report makes the following recommendations:

1. Reframe net zero as a core resilience strategy — and bring finance into the conversation.
    
2. Build climate adaptation into business planning.
    
3. Design ‘politics-proof’ roadmaps.
    
4. Consider internal capacity and seek support where needed.

The findings come as BSI prepares to publish the public consultation on the independent net zero standard, due for launch in 2027.

For more information and to access the full research, visit the BSI website.

Image credit: iStock.com/Bongkod Worakandecha