Mandatory Climate Reporting is Here: Insights & Recommendations for Preparations in 2025
The Australian Sustainability Reporting Standards (ASRS) are now in force for the first group of companies captured under the legislation and with updates published in mid-September 2024, businesses need to understand what lies ahead. Here, we explore the key changes to the AASB S2 Climate-related Disclosure requirements and offer practical recommendations to help organisations prepare for the new reporting standards.
Note – These insights were discussed in our November webinar with Climate Zero, which can be watched in full on Vimeo via: https://vimeo.com/1032888052
Recent Updates: What You Need to Know
The latest updates to the ASRS provide additional details, but there are no unexpected changes. Key highlights include:
Alignment with ISSB’s IFRS: The new ASRS closely aligns with the International Sustainability Standards Board's IFRS standards, ensuring interoperability for companies that report under the IFRS in different jurisdictions.
Broadened Scope of AASB S1 (General Requirements): The scope of AASB S1 (a voluntary standard) now includes a wider range of sustainability topics, such as biodiversity, signaling a broader focus beyond climate.
Assurance Requirements Modified: For this first year, governance assurance has shifted from "reasonable assurance" in a draft version to "limited assurance" – and the same goes for scope 1 and 2 assurance. Reasonable assurance will still be required for these disclosures in years 2 and 3, before expanding to all disclosures by year 4.
Scenario Modelling: Climate scenario modelling requirements have been updated, specifying that organisations must model scenarios where global temperature rise is kept below 1.5°C and where it exceeds 2°C.
Carbon Accounting Methodology: Entities must use the GHG Protocol for carbon accounting unless they fall under the NGERs framework, in which case they can choose between NGERs or the GHG Protocol.
Financed Emissions: Asset managers, commercial banking, and insurance services must provide additional details regarding financed emissions, including attribution methods and sectoral breakdowns.
Scope 2 Data: The requirement to disclose market-based scope 2 emissions has been removed, meaning only location-based data is mandatory, although we still recommend disclosing both methods for accurate alignment with the GHG Protocol requirements.
In summary, while there are some specific updates, the majority of the draft disclosures remain unchanged.
Who is Impacted & Implications for Businesses
Who is Impacted: Initially, Group 1 entities (e.g. large ASX-listed companies) are affected. However, the real challenge will be for Group 2 and 3 entities, many of whom are still at the beginning of their climate and wider sustainability journey. If your organisation hasn't yet started, there is significant work ahead.
What it Could Mean for You: For companies that haven't voluntarily reported under frameworks like TCFD, GRI, SASB, or IFRS, complying with the ASRS may feel overwhelming. Early action will be key to managing this burden.
Preparing in 2025: Key Considerations
As the ASRS has now been introduced as of January 01 and you plan for the year ahead, here are some crucial factors to keep in mind:
Strategic Approach: Tackle reporting strategically to capture value beyond compliance. Focusing solely on reporting risks making it feel like a burden (and therefore only seen as a cost on the business) rather than an opportunity to drive meaningful climate action and commercial resilience.
Streamline Processes: Sustainability managers must streamline their processes to avoid being consumed by reporting duties at the expense of operationalising their ESG strategies and climate transition plans.
Engage CFOs Early: It’s critical to bring CFOs into the conversation early and keep them engaged throughout the process. Their questions and input should be addressed upfront and integrated at every step of the process, not only limited to select milestones or final disclosure reviews.
Reporting Considerations
Content & Materiality: Decisions around what information to include or exclude should be given ample time, at least two to three iterations are often needed. Thoughtfully define materiality thresholds to determine which risks and opportunities are genuinely significant and should therefore end up in the report.
Effective Communication: Striking a balance between sufficient detail for disclosures and clear, concise communication for shareholders is a fine balance. This will take time to refine and debate internally to ensure all stakeholders are confident with what information they are putting out there.
Scenario Analysis: Consider how you will conduct scenario analysis consistently across time. Define the perspectives and parameters for assessing both physical and transition risks. Ensure all team members understand Climate Value at Risk (CVaR) models.
Governance & Timeframes
Data Collection Deadlines: Set clear timeframes for data collection to meet reporting deadlines effectively. What are your checkpoints for reporting throughout the year? What data may need to be modeled and then reconciled at the end of the financial year?
Assurance Requirements: Understand assurance requirements fully. For example, if your Board commits to quarterly emissions data reviews, ensure these are documented to enable traceability for auditors.
Completeness Challenge: Address how you will manage ‘completeness’ ensuring you are not missing key data points in your reporting. Do new tools and systems (such as corporate traveler dashboards) need to be implemented to assist with streamlining these processes?
Other Considerations
Learning Across Groups: Group 2 and 3 entities captured under the ASRS can learn from Group 1's experiences, but there is also value in learning from companies that already disclose under the ISSB/IFRS and TCFD standards – as well as the CRD in New Zealand (noting its requirements differ to the ASRS).
Seeking Assistance: Engaging external, technical expertise could make the heavy lifting much more manageable. Particularly in relation to the scenario analysis and transition planning requirements.
Our Final Thoughts...
The finalised ASRS AASB S2 standard represents an important step forward in sustainability reporting for Australian companies. While last year's updates bring some additional specifics, the foundation remains consistent. Preparing early and strategically can transform this reporting requirement into an opportunity to derive value, operationalise ESG strategies, and strengthen climate and financial resilience across Australian businesses.
Need help navigating these changes? Our team is here to assist with every step of the process. Reach out for a conversation about how we can support your business on its journey to compliance and climate action.
Contact Rewild Agency's Director of Climate & ESG Abbie Freestone via abbie@rewild.agency.
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