Publication of the first two IFRS® Sustainability Disclosure Standards is a key milestone in the International Sustainability Standards Board (ISSB)’s vision – to create a global baseline for investor-focused sustainability reporting that local jurisdictions can build on.
The Australian Government has determined that the IFRS Sustainability Disclosure Standards will form the baseline for sustainability reporting in Australia and legislation to give effect to this, applicable to certain entities from 1 January 2025.
Realising a global baseline
The ISSB’s first two standards are designed to be applied together, supporting companies to identify and report information that investors need for informed decision making – in other words, information that would affect the assessments that investors make about companies’ future cash flows.
To achieve this, the general standard provides a framework for companies to report on all relevant sustainability-related topics across the areas of governance, strategy, risk management, and metrics and targets.
This is supported by more detailed guidance on how to report on climate-related risks and opportunities in the climate standard. In the future, additional standards covering other topics are expected – but in the meantime companies will use guidance highlighted in the general standard to report on other topics.
The standards are effective from 1 January 2024, but it is for individual jurisdictions to decide whether and when to adopt.
What does this mean for Australia?
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 – the ISSB's first two standards.
Mandatory reporting of climate-related disclosures is for financial years beginning on or after 1 January 2025 (or later).
Reporting timelines for eligible Australian entities
Required to prepare a financial report under Chapter 2M of the Corporations Act 2001
1 January 2025
Group 1
First annual reporting periods beginning on or after 1 January 2025
Meet two of the three reporting thresholds:
- $500 million or more
Consolidated gross revenue - $1 billion or more
Consolidated assets - >500 Employees
NGER Reporters: Above NGER1 publication threshold
Asset Owners: Scoped out of Group 1
1 July 2026
Group 2
First annual reporting periods beginning on or after 1 July 2026
Meet two of the three reporting thresholds:
- $200 million or more
Consolidated gross revenue - $500 million or more
Consolidated assets - >250 Employees
NGER Reporters: All other NGER reporters
Asset Owners: $5 billion or more assets under management
1 July 2027
Group 3
First annual reporting periods beginning on or after 1 July 2027
Meet two of the three reporting thresholds:
- $50 million or more
Consolidated gross revenue - $25 million or more
Consolidated assets - >100 Employees
1. National Greenhouse and Energy Reporting Scheme
Frequently asked questions
What are the key requirements of the climate-related financial disclosures legislation?
- Reporting entities: Those with Corporations Act 2001 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.
What are the key differences between AASB S1 and AASB S2 and the 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 approved Climate-related disclosures legislation.
- 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: 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.
- AASB S2: No requirement to consider or disclose industry-based metrics or the Sustainability Accounting Standards Board (SASB) Standards.
What assurance requirements are the climate-related disclosures subject to?
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.
The Auditing and Assurance Standards Board (AUASB) issued exposure draft ED 02/04 Proposed Australian Standard on Sustainability Assurance ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports Under the Corporations Act 2001 in September 2024 outlining the proposed assurance phasing model with the expectation of issuing a final standard by December 2024. 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.
Will there be regulatory guidance and support in the implementation of the climate-related disclosures regime?
ASIC is the regulator responsible for administering the mandatory climate-related disclosures regime. ASIC has communicated that it will issue regulatory guidance and support in its implementation. This will include a regulatory guide 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.
What should you do next now the legislation has passed?
- 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.
KPMG International's ISSB Standards Today hub provides our latest insights and guidance.
