From 1 January 2025, many large Australian entities will need to include a Sustainability Report. The report will sit alongside the financial report, directors’ report and auditor’s report and, over time, will be subject to assurance and ASIC oversight. AASB S2 will be mandatory where an entity is required to prepare a sustainability report, while AASB S2 may be adopted voluntarily.
Under the new section 292A of the Corporations Act 2001, a Sustainability Report is required where an entity already prepares a Ch 2M financial report and meets the following thresholds:
What disclosures must be made?
The Sustainability Report must comply with the newly released AASB S2 Climate-related Disclosures. These disclosures specifically focus on the following:
- Governance – the processes, controls and procedures used to monitor and manage climate risks
- Strategy – the climate-related risks and opportunities and potential effects of these strategies of a business
- Risk management – the relevant processes used to identify, assess and manage climate-related risks
- Metrics and targets – Scope 1, scope 2 and scope 3 targets emitted by an entity, as well as climate-related targets e.g. net-zero by 2050
What does this all mean for private groups?
These reforms represent a fundamental recalibration of ESG expectations. Climate-related disclosures are set to be held to the same standard of rigour and reliability as financial statements, with an increasing emphasis on audit assurance.
Entities that are not directly subject to AASB S2, due to not meeting the applicable reporting thresholds, may still be affected indirectly. Those operating within supply chains or broader value chains of entities that are required to report – may face requests to provide climate-related data. This is particularly relevant where reporting entities need input to satisfy their own disclosure obligations. As a result, smaller entities may find it necessary to establish climate reporting capabilities to support the compliance requirements of their larger customers, partners, or stakeholders.
Next steps
- Get familiar with the Australian sustainability reporting framework, now in place.
- Understand when the reporting requirements apply to you.
- Start planning by performing a gap analysis and utilising the ESV sustainability reporting roadmap, ESV ESG Roadmap
- Keep up to date on further guidance or relief measures released by ASIC – we will also keep our clients up to date with changes.
