Here’s what you need to know about mandatory climate reporting in Australia
In September 2024, Australia passed laws introducing mandatory climate reporting, reshaping the way companies account for climate risks and opportunities. For CFOs and finance teams in Queensland, this shift represents both a compliance obligation and a strategic opportunity.
The changes are part of a global move towards greater transparency and accountability. Investors, regulators and communities increasingly want to know how businesses are positioned to deal with the realities of a changing climate.
At Losee Consulting, we work with our clients to go beyond compliance identifying opportunities for growth and long-term success. Below is our guide to help get you started.
What is mandatory climate reporting?
Mandatory climate reporting refers to the legal requirement for certain companies to disclose information about how climate change impacts their business. These disclosures align with global frameworks including the International Sustainability Standards Board (ISSB) IFRS S2 Climate-related Disclosures, which draw on the Taskforce on Climate-related Financial Disclosures (TCFD).
The Australian Accounting Standards Board (AASB) approved its first sustainability reporting standards on 20 September 2024:
- AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information (voluntary)
- AASB S2 Climate-related Disclosures (mandatory).
More generally, AASB S1 outlines general requirements for disclosing all sustainability-related financial risks, while AASB S2 focuses specifically on disclosures related to climate-related risks and opportunities. This article will begin our exploration AASB S2 mandatory climate-related disclosures.
In Australia, mandatory reporting is being phased in, with large listed and unlisted companies, financial institutions and superannuation funds the first in tranche.
What’s changing with the new regulatory framework
From January 2025, Australia’s largest companies will need to publish climate disclosures as part of their annual reporting. The law requires companies to publish an annual ‘climate statement’ that outlines any material climate risks they may face, and their scopes one, two and three greenhouse gas emissions.
Who needs to report and when
The legislation phases in reporting requirements for companies by their size and risk profile.
Importantly, all climate disclosures will sit in a Sustainability Report, which becomes a required component of the annual reporting suite alongside the financial report, directors’ report and auditor’s report.
The following table outlines the key dates to be aware of when it comes to AASB S2 reporting:
| Group | First reporting period | Reports due | Scope 3 emissions required | Assurance (limited) |
| 1 | FY 2025-26 | With financial reports and directors report as part of annual reports. See detail ASIC sustainability reporting. | A transition relief is available to not disclose Scope 3 in the first year of reporting. See detail appendix C. | Phased-in. Limited and then Reasonable. See detail assurance requirements. |
| 2 | FY 2026-27 | |||
| 3 | FY 2027-28 |
The Auditing and Assurance Standards Board has provided the detail about assurance requirements here: Climate and Sustainability Assurance Requirements.
| First reporting period | Reports due | |
| 1 | FY 2025-26 | With financial reports and directors report as part of annual reports. See detail ASIC sustainability reporting. |
| 2 | FY 2026-27 | |
| 3 | FY 2027-28 |
| Scope 3 emissions required | Assurance (limited) | |
| 1 | A transition relief is available to not disclose Scope 3 in the first year of reporting. See detail appendix C. | Phased-in. Limited and then Reasonable. See detail assurance requirements. |
| 2 | ||
| 3 |
The Auditing and Assurance Standards Board has provided the detail about assurance requirements here: Climate and Sustainability Assurance Requirements.
What needs to be disclosed in your sustainability report
Under section 296A of the Corporations Act 2001, your sustainability report must include three core elements:
Climate Statements
- Aligned with AASB S2 Climate-related Disclosures
- Disclose material financial risks or opportunities related to climate
- Report on governance, strategy and risk management processes
- Provide metrics and targets, including:
- Scope 1: direct emissions (e.g., fuel)
- Scope 2: indirect emissions (e.g., electricity)
- Scope 3: other indirect emissions (e.g., supply chains, travel).
- Include climate-resilience analysis against at least two scenarios:
- A 1.5°C temperature rise above pre-industrial levels.
- A rise well above 2°C.
Notes to the Climate Statements
- Provide supporting explanations for disclosures (though ASIC notes detailed notes are not generally expected).
Directors’ Declaration
- Confirm the sustainability report complies with the Corporations Act and AASB S2.
- For the first three years of reporting: Qualified Director’s Declaration should state directors believe the entity took reasonable steps to ensure compliance
- Following this three year period, directors will have to make a full, unqualified declaration.
Special Case: Entities with No Material Climate Risks or Opportunities
- Available only to Group 3 entities (from 1 July 2027).
- State that no material climate-related financial risks or opportunities exist.
- Explain how this determination was made.
Why it matters for CFOs and finance teams
For finance leaders, mandatory climate reporting isn’t just another compliance exercise. It requires integrating climate considerations into financial planning, capital allocation and risk management.
- Gathering reliable emissions data across operations and supply chains. Data may be granular and dispersed and not necessarily captured in existing systems.
- Building modelling capabilities for climate scenario analysis. Scenario analysis is well understood in business, but establishing these on a sound understanding of the physical science and expected clean energy transitions is a new challenge.
- Embedding climate risks into enterprise risk management frameworks. Although conventional risk assessment has been the go-to for climate risk assessment for many years, it can be a stretch for enterprise frameworks.
- Ensuring board and executive teams are climate-literate and accountable. While directors and executives are generally astute and savvy, there is an educational process required to enable them to comfortably rise to the new expectations for climate reporting.
At the same time, effective reporting can unlock opportunities, strengthen investor confidence, improve access to sustainable finance, and drive long-term value creation. See the “Turning compliance into an opportunity” section below.
Here are some key considerations:
Capital allocation
Scenario testing can reveal potential asset impairments, stranded assets or major capital requirements for adaptation. CFOs will need to build climate factors into budgeting, valuation and investment processes.
Audit and assurance
As assurance requirements expand, expect costs for external audit and verification of climate disclosures. Limited assurance begins in early years, moving to full assurance by 2030.
Legal and insurance risk
Once the modified liability period ends, misstatements or omissions could trigger legal action. CFOs should review insurance arrangements and ensure forward-looking disclosures are backed by robust evidence.
Cost and capability
Building systems for emissions tracking, scenario analysis and climate governance will require upfront investment. Delaying will only increase costs later.
Why you should plan ahead
What if your business doesn’t fit neatly into the categories or assumptions that the framers of the AASB S2 requirements had in mind? If this is the case, you might face additional challenges and may need to allow more time to plan and prepare your climate-related disclosures effectively.
For example, businesses with complex operations or those that rely on specialised or less common inputs – such as unique chemicals, proprietary materials, or specialised manufacturing processes – may find that standard emission factors or commonly used data sources don’t accurately capture their true greenhouse gas emissions.
In such cases, it’s important to consider custom-sourcing emission factors or developing tailored methodologies that better reflect your specific activities. This might involve collaborating with industry specialists to estimate emissions accurately.
Taking the time upfront to understand and map out your processes, and identifying where unique inputs impact your emissions profile, will help you produce disclosures that are both compliant and meaningful for investors and regulators. It also reduces the risk of inaccurate reporting or needing to revise disclosures later.
Ultimately, if your business has unique circumstances, proactive planning and potentially investing in additional specialists will be critical to meet the AASB S2 standards successfully.
Turning compliance into an opportunity
While mandatory climate reporting will introduce new compliance obligations, it also creates an opportunity for organisations to demonstrate resilience, transparency and forward-thinking leadership. Companies that treat climate reporting as a strategic exercise, not a box-ticking requirement, will be better placed to attract capital, customers and talent in a low-carbon economy.
Here are some example opportunities:
- Knowing the vulnerabilities of tangible assets to physical climate risks can be valuable if adjustments to an imminent upgrade can be augmented to build resilience, such as enhanced drainage for a property.
- Having a comprehensive understanding of your climate risks and robust public report available can feed directly into tendering for government work, such as for the Brisbane 2032 Olympic and Paralympic Games.
- When developing a medium term strategy for the business, you can see where divestment or acquisition might improve your prospects as the energy transition tightens (e.g. how suited is your fleet of vehicles, plant and equipment to a 2035 economy).
- You may have recognised the cost of energy to your business but not appreciated how to tackle it. Carbon footprinting and energy management go hand in hand and may highlight opportunities to consolidate energy providers, obtain more competitive prices or even invest in behind-the-meter solar or batteries where positive returns on investment can be demonstrated.
Practical steps for finance teams
For CFOs, here are the immediate priorities:
- Run a gap analysis: compare your current reporting to AASB S2 standards.
- Engage business leaders: make climate risk a standing item for leadership, board or audit committee meetings.
- Strengthen governance: clarify responsibilities for climate reporting across finance, risk and (if you have them) sustainability teams.
- Upgrade systems: consider investing in reliable emissions measurement, data architecture and modelling tools.
- Pilot disclosures: run test reports internally for ‘fresh eyes’ checks before official deadlines to identify weaknesses.
- Plan for assurance: engage external providers early to scope assurance requirements and manage costs.
- Document everything: keep strong records of assumptions, methodologies and management or board oversight for legal defensibility.
- Continuous improvement: treat reporting as an iterative process that matures year by year.
How to start your climate reporting journey
At Losee Consulting, we bring deep expertise in sustainability reporting, ESG strategy and climate risk management. As Queensland-based sustainability consultants, we understand the legislative landscape, local procurement requirements and the unique opportunities presented by Brisbane 2032.
We work with businesses to:
- Develop tailored ESG strategies aligned with mandatory climate reporting requirements
- Create sustainability reporting systems that satisfy regulators and impress procurement panels
- Strengthen resilience by embedding governance, ethical supply and environmental management across operations.
You can explore our services for a broader view of how we support organisations across ESG, risk management, and sustainability strategy.
Have further questions?
Contact the team at Losee Consulting for more information or guidance on how to comply with the new mandatory climate reporting requirements.
Scott Losee
BES, MPhil, MEIANZ, GAICD, ISAP
30+ years’ experience, Scott specialises in sustainability, carbon and energy advice, and climate adaptation. As founder and director of Losee Consulting, he brings senior leadership experience from both private and public sectors. He has led sustainability and energy strategies for major infrastructure projects, supports decision-making, develops tools, and engages stakeholders across organisations.