Australian businesses are now mandated to report on their climate-related financial disclosures starting in 2025. Is your company affected and how do you prepare?
As the weather here in QLD and across the country is heating up, don’t get caught sweating when reporting time comes around.
After much lead up, the Australian Accounting Standards Board (AASB) has released all the information surrounding the mandatory version of their sustainability reporting standard.
The first thing you need to establish is if your company is required to report under this standard. The criteria for the AASB S2 guidelines have been broken into three eligibility categories as well as three reporting groups.
Below are the categories that demonstrate which companies are mandated to report and when they will be expected to start doing so:
Read the full guide to mandatory climate reporting in Australia.
Note that ACNC registered Australian charities and not-for-profits are exempt from reporting under this regime.
Once you have confirmed that your company falls under one of the three reporting groups, your next step is to consider who in your organisation will be responsible for compiling and completing the report. Ask yourself:
- Does your company have enough internal resources?
- Do the people who are likely responsible have the knowledge/skills to complete it?
- Should you investigate the need to contract an external consultant to assist you?
What information is required in your climate-related disclosure?
To accurately answer the above you must understand the scope of works involved in submitting a climate-related financial disclosure alongside the company’s annual financial reporting to ASIC. As outlined in the AASB S2 Climate-related disclosure checklist the legislation requires information such as:
Governance
- What is the climate risk governance, including a company-wide climate change risks and opportunities strategy?
Strategy
- How will climate-related targets be resourced and achieved?
- Description of the climate-related issue within the business model and value chain.
- Disclosures of any climate-related transition plans
- A qualitative or quantitative projection on any financial impact resulting from climate-related risks and opportunities.
- Scenario analysis encompassing a 1.5 degree of warming versus a ‘high warming’ of 2 degrees and above. Alongside the procedure used to identify, assess, prioritise and monitor climate-related risks and opportunities.
Risk Management
- Disclosure of processes and related policies the company uses to identify, assess, prioritise and monitor climate-related risks.
Metrics and Targets
- Mostly encompasses Greenhouse Gas emissions, including Scope 1, 2 and 3 (note that scope 3 emissions are not mandatory during your first reporting year but will be from your second year onwards).
Additional information to note:
- This report will need to be lodged alongside the company’s standard annual financial report with company directors signing off on compliance declarations.
- You will need to ensure that all reporting evidence is organised and complete in the case of an audit in future years.
Preparing for the climate-related disclosures will likely be most labour intensive in the first year. However, the best thing you can do is set yourself up to monitor your metrics and targets, then periodically review the internal governance structures and climate strategy. If the processes and procedures are set up correctly, the subsequent reporting years will become a lot simpler.
What is the optimal process for completing the mandatory climate reporting?
Unfortunately, the answer to this question differs slightly depending on your company and industry. However, a good place to start is:
- Get familiar with the new reporting standards: AASB S2 Knowledge hub.
- Decide if you are going to acquire software or a program designed to assist with data collation.
- Alternatively, determine if your company will set up internal GHG tracking spreadsheets for scope 1, 2 and 3. These can be populated monthly or quarterly depending on the data and resource availability to reduce data gathering during reporting time.
You can use this GHG emissions disclosure requirement document to assist with what is needed. - Ensure that sustainability topics relevant to the report standards are periodically reviewed by a senior leadership management team.
- Communicate with your upstream and downstream value chain where applicable, as to what data you will be requesting from them for scope 3 emissions calculations.
- If seeking out external consultants to assist in this process, be sure to contact them sooner rather than later so that they can help set you up with any data tracking sheets or software, GHG tracking and monitoring schedules.
Are there any penalties or fines for insufficient climate reporting?
The AASB states that any false or misleading climate statements could result in penalties of up to $15 million or 10% of annual turnover with directors personally liable. These penalties will not come into effect straight away; a grace period has been implemented during the early years of the legislation being in effect.
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.
Rebekah Weston
BBus, MBus
Rebekah is a Sustainability Consultant with experience across construction accreditation, hospitality, non-profits, asset management, and manufacturing. Specialising in data analysis, she excels in data-driven reporting and decision-making. Rebekah combines strong communication skills with creative problem-solving and is expanding her expertise to drive impactful sustainability initiatives.