The Australian Sustainability Reporting Standards (ASRS) align sustainability reporting with the importance of financial reporting. Its framework is informed by international standards, particularly IFRS S1 and S2. The ASRS aims to ensure that companies disclose sustainability-related risks and opportunities affecting their financial health, operations, and broader societal impacts. The scope includes mandatory AASB S2 climate-related disclosures and voluntary AASB S1 general sustainability disclosures. These standards are phased, starting in 2026 for financial year 2025.
Reporting requirements
ASRS necessitates that sustainability-related information be integrated into financial reports. Companies must disclose governance, strategy, risk management, and metrics related to sustainability risks and opportunities. AASB S1 focuses on voluntary disclosures about material risks affecting cash flow and cost of capital, while AASB S2 mandates disclosures about climate risks. Entities must conduct scenario analyses under both low (1.5°C) and high (2.5°C or more) global warming scenarios.
Group-specific thresholds determine reporting obligations:
Group 1: >500 employees, >AUD 500m revenue, or >AUD 1b total assets.
Group 2: >250 employees, >AUD 200m revenue, or >AUD 500m total assets.
Group 3: >100 employees, >AUD 50m revenue, or >AUD 25m total assets.
Preparing for the ASRS
Preparation involves four steps: conducting a materiality assessment, identifying necessary disclosures, performing a gap analysis, and creating a compliance roadmap. For entities focusing solely on AASB S2, the roadmap concentrates on mandated disclosures like greenhouse gas (GHG) emissions (Scopes 1, 2, and 3), climate-related opportunities, and risks.
Sustainability assurance begins at a limited level, offering moderate confidence, and will transition to reasonable assurance by 2030. This progression will require entities to enhance internal processes for accurate, auditable disclosures. Entities are advised to begin preparations early to ensure compliance.
Individual vs consolidated reporting
Entities preparing consolidated financial reports may opt to provide sustainability disclosures at the group level. In such cases, individual entities are exempt from separate sustainability reporting, provided the consolidated disclosures include relevant information. This approach streamlines reporting for multi-entity organisations, reducing duplication.
Disclosure requirements
Mandatory disclosures under AASB S2 include governance structures, climate-related strategy, risk management processes, and performance metrics. These must include specific measures, such as GHG emissions, transition and physical risks, and internal carbon pricing. AASB S1 disclosures remain voluntary and focus on broader sustainability risks, with exemptions for commercially sensitive information.
Sustainability report presentation
The sustainability report forms part of the annual financial report under the Corporations Act 2001. Entities must lodge reports with the Australian Securities and Investments Commission (ASIC) within three or four months of the financial year-end, aligning with financial reporting deadlines. Reports must include directors’ declarations, auditor statements, and statements on materiality assessments. Non-material findings must still be disclosed with explanations.
Recommendations
To ensure compliance, entities should conduct materiality assessments to identify relevant sustainability topics early. Developing a roadmap for both AASB S1 and S2 compliance is critical, especially for organisations subject to mandatory disclosures. Emphasis should be placed on strengthening governance frameworks, integrating sustainability considerations into risk management, and enhancing internal reporting capabilities.
By adopting these measures, companies can ensure robust compliance with ASRS while contributing to transparent sustainability practices.