Reporting Update 24RU-12
January 2025 – Updated for recent developments relating to the finalisation of the assurance phasing model and proposed amendments by the government to extend the modified liability setting to voluntary sustainability reports under certain circumstances.
Australia’s sustainability reporting framework is now in place after the climate-related financial disclosures legislation – Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (see Schedule 4) (Act) received Royal Assent in early September 2024.
The Act mandates relevant entities to disclose their climate-related plans, financial risks and opportunities, in accordance with Australian Sustainability Reporting Standards (ASRS) made by the Australian Accounting Standards Board (AASB).
The first ASRS were also issued in September 2024 by the AASB and comprise:
- AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information – a voluntary Standard
- AASB S2 Climate-related Disclosures – a mandatory Standard.
AASB S1 and AASB S2 are aligned internationally to IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures with minimal variations.
Mandatory reporting of climate-related disclosures is for financial years beginning on or after 1 January 2025 (or later).
Key requirements of the legislation
- Reporting entities: Those with Corporations Act Chapter 2M reporting obligations meeting prescribed thresholds.
- Phasing: The first sustainability report will be issued for annual reporting periods starting 1 January 2025 (or 31 December 2025 year-end). First mandatory reporting date for 30 June year ends will be 30 June 2026. The timing of first reporting by in-scope entities is based on size or level of emissions.
- Reporting content: As required by ASRS, as well as information derived from climate scenario analysis carried out using at least two specified scenarios.
- Reporting framework: Within a sustainability report in the annual report and lodged in accordance with current annual reporting requirements.
- Assurance requirements: Phased approach ending with reasonable assurance of all climate-related financial disclosures made from years beginning 1 July 2030.
- Liability framework: Modified liability approach for both directors and auditors to disclosures of Scope 3 emissions, scenario analysis, transition plans and climate-related forward-looking statements.
We welcome the new standards, which will ultimately help improve transparency. With the new legislation in place, investors, as well as the Australian public, will soon be able to easily understand an entity’s climate strategy and associated financial risks.
What are the key differences to ISSB Standards?
- Scope: AASB S1 is a voluntary standard on general requirements for sustainability-related financial information while AASB S2 is a mandatory standard on climate reporting in line with the recently Senate-approved Climate-related disclosures Bill.
- Application: AASB S1 and AASB S2 apply to both for-profit and not-for-profit entities.
- AASB S1: Apart from being a voluntary standard, no differences. Incorporates all IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information requirements without modification.
- AASB S2:
- General requirements for disclosure: incorporates selected content from AASB S1 (general requirements for disclosure) necessary to make AASB S2 function as the standalone standard for all climate-related financial disclosures. That content is included in Appendix D of AASB S2.
- Industry-based information: no requirement to consider or disclose industry-based metrics or the Sustainability Accounting Standards Board (SASB) Standards.
January 2025 Update
In its January 2025 meeting, the International Sustainability Standards Board proposed a set of narrow-scope amendments to support implementation of IFRS S2. The proposed amendments would be particularly relevant for companies with insurance or investment banking activities. They would also be of interest to companies that are currently planning their implementation or have already conducted a gap assessment.
Read our article – Proposals to simplify IFRS S2 – to find out more.
Download Reporting Update
Further details are set out in this Reporting Update.
Latest regulatory developments
Assurance requirements
The climate disclosures contained in the sustainability report will be subject to similar assurance requirements to those currently in the Corporations Act 2001 for financial reports.
In January 2025, the Auditing and Assurance Standards Board (AUASB) approved:
- Australian Standard on Sustainability Assurance (ASSA) 5010 Timeline for Audits and Reviews of Information in Sustainability Reports Under the Corporations Act 2001 outlining the assurance phasing model. The assurance phasing model aligns with the requirement in the Act for an ‘end state’ of reasonable assurance of all climate disclosures made from years commencing 1 July 2030 onwards. The final phasing model requires only limited or reasonable assurance in any one year.
- ASSA 5000 General Requirements for Sustainability Assurance Engagements built on ISSA 5000 with differences limited to 'Australianised' certain terms. ASSA 5000 is effective for assurance engagements on sustainability information reported for periods beginning on or after 1 January 2025 with earlier adoption permitted.
Further guidance and reporting relief
ASIC is the regulator responsible for administering the mandatory climate-related disclosures regime. ASIC has released a Consultation Paper on sustainability reporting including its Draft Regulatory Guide (RG) to support in its implementation. The Draft RG provides explanations on addressing its approach to relief from the obligations, and interaction of the regime with existing legal and regulatory requirements. ASIC has further advised that in the early stages it will take a pragmatic approach to the supervision and enforcement of the regime.
ASIC also provides resources on its website for preparers and users of sustainability reports.
Next steps
- Get familiar with the Australian sustainability reporting framework now in place.
- Understand when the reporting requirements apply to you.
- Start planning – perform a gap analysis and create a roadmap to identify capacity constraints.
- Reach out to your KPMG contact during your planning process.
- Be alert for guidance and relief issued by ASIC, the regulator responsible for overseeing sustainability reporting practices.
