Understanding Australia's Mandatory Sustainability Reporting Regime
Sustainability reporting has emerged as a key focus due to the mandatory sustainability reporting requirements introduced in Australia.
In September 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 was enacted, establishing the legislative framework for mandatory sustainability reporting.
The mandatory sustainability reporting regime is being phased across three groups of reporting entities based on the size and level of emissions, over a four-year period.
The mandatory sustainability reporting regime comprises the following three key components:
- The Corporations Act 2001 - Legislative amendments
- AASB Sustainability Reporting Standards
- Australian Standards on Sustainability Assurance
In addition, ASIC issued the Regulatory Guide 280: Sustainability Report in March 2025 to provide a comprehensive overview of the key components of Australia’s sustainability reporting framework, as well as their view and expectations regarding compliance with sustainability reporting requirements in the market.
Entities that are required to prepare annual financial statements under Chapter 2M of the Corporations Act 2001 (the Corporations Act) and also meet one of the sustainability reporting thresholds in section 292A of the Corporations Act (for example, the corporate size thresholds, the emissions thresholds, and the value of asset thresholds), must prepare a sustainability report.
The sustainability report is required to contain climate-related financial information as per the requirements of the Corporations Act, and the disclosure requirements outlined in AASB S2 Climate-related Disclosures.
This report explores Australia’s mandatory sustainability reporting regime, including the details of the Corporations Act - legislative amendments, the Australia’s sustainability reporting standards: AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information and AASB S2 Climate-related Disclosures, as well as the Australian Standards on Sustainability Assurance: ASSA 5000 and ASSA 5010. It also discusses ASIC’s overall role in monitoring compliance for sustainability reporting. In addition, the report also includes the FAQs sections, covering the commonly asked questions in the market relating to sustainability reporting obligations.
CONTENT
1. Overview of reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
- 1.1 Sustainability reporting thresholds criteria
- 1.2 Three-phased implementation approach for sustainability reporting
- 1.3 FAQs – Reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
- 1.4 Sustainability report disclosures in the annual report- Legislation requirements
- 1.5 Directors’ duties and roles in sustainability reporting
2. Overview of Australian Sustainability Reporting Standards
3. Australian Standards on Sustainability Assurance
4. ASIC’s Role
5. FAQs – Sustainability Reporting, Annual Reports, Audit and Reporting Requirements in Australia
1. Overview of reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
Entities that are required to prepare annual financial statements under Chapter 2M of the Corporations Act and that meet one of the sustainability reporting thresholds in section 292A of the Corporations Act are required to prepare a sustainability report.
What are the reporting obligations under Chapter 2M and section 292A of the Corporations Act?
Under Chapter 2M of the Corporations Act 2001, reporting obligations apply to entities such as disclosing entity, unlisted public company, registered scheme and large proprietary company. A disclosing entity is defined under the Corporations Act as – a company or entity that is listed on a financial market in Australia; or has issued enhanced disclosure securities that are still on issue and were offered under a disclosure document.
Legislative amendments introduced to include mandatory sustainability reporting requirements for entities that meet the sustainability reporting thresholds in section 292A of the Corporations Act.
Where a company is required to report under Chapter 2M, its financial reports must be prepared in accordance with the requirements of the Corporations Act, being audited and lodged with ASIC within the applicable statutory lodgement deadlines, unless specific relief has been granted by ASIC.
Details of the sustainability reporting thresholds in section 294A of the Corporations Act is outlined in the following table.
1.1 Sustainability reporting thresholds criteria
Table - 1.1 Sustainability reporting must be prepared if entities meet one of the following criteria:
| Corporations Act | Criteria |
|---|---|
| Section 292A (3) | If an entity satisfies at least two of the below criteria:
*Refer to Table – 1.2 for the commencement date of mandatory sustainability reporting. The regime will be phased across three groups of reporting entities based on their size and emissions. |
| Section 292A (5) | An entity for a financial year if the entity is either:
|
Section 292A (6) | An entity for a financial year if both of the following criteria are met:
|
Entities are required to assess whether they meet any of the sustainability reporting criteria when determining their obligation to prepare a sustainability report. Once an entity is required to prepare a sustainability report under the Corporations Act, the reporting obligation is not a one-off requirement and applied on an ongoing annual basis, as long as the entity continues to meet the sustainability reporting thresholds.
As sustainability reporting is a relatively new requirement in Australia, first-time preparers may face significant complexity and implementation challenges. Accordingly, management should commence preparations early to ensure the sustainability reporting requirements are fully complied with in accordance with the legislation and the AASB Sustainability Reporting Standards.
Table - 1.2 Three-phased implementation approach for sustainability reporting
The mandatory sustainability reporting requirements are introduced in different phases, with entities categorised as Group 1, Group 2, and Group 3 based on specific thresholds and criteria.
| Commencement date | Category 1 – The Corporate size thresholds Entities that meet at least two of the following three criteria: | Category 2 – The emissions thresholds National Greenhouse and Energy Reporting (NGER) Reporter | Category 3 – The value of assets thresholds Asset owners – Registered schemes, registrable superannuation entities (RSEs) and retail CCIVs |
|---|---|---|---|
| Group 1 For the reporting period commencing on or from 1 January 2025 | Consolidated gross revenue: $500 million or more Consolidated assets: $1 billion or more Employees (FTEs): 500 or more | Entities, other than registered schemes, RSEs or retail CCIVs, that are:
An NGER reporter emitted 50 kilotonnes or more of carbon dioxide equivalence (CO₂‑e) and therefore meets the threshold outlined in s13(1)(a) of the NGER Act. | Not within the scope of Group 1 |
| Group 2 For the reporting period commencing on or from 1 July 2026 | Consolidated gross revenue: $200 million or more Consolidated assets: $500 million or more Employees (FTEs): 250 or more | A registered corporation under the NGER Act or are required to make an application to be registered under s12(1) of the NGER Act. * All other NGER reporters | The value of assets at the end of the financial year of the entity (and the entities it controls) is equal to or greater than $5 billion. Value of assets threshold applies exclusively to entities that are registered schemes, RSEs or retail CCIVs. |
| Group 3 For the reporting period commencing on or from 1 July 2027 | Consolidated gross revenue: $50 million or more Consolidated assets: $25 million or more Employees (FTEs): 100 or more | N/A | N/A |
*A registered corporation under the National Greenhouse and Energy Reporting (NGER) Act 2007 is the controlling operation of a group that meets or is likely to meet one or more thresholds under the NGER Act.
A controlling corporation is defined as the highest-level Australian entity in a corporate group. A controlling corporation must apply for registration under section 12 of the NGER Act if it meets one or more of the thresholds under section 13 of the NGRE Act for a financial year. Registration is mandatory once a threshold is met. The thresholds are assessed on either a facility basis, or a corporate group basis, depending on the nature of the emissions, energy production, and energy consumption being measured.
Once registered, the controlling corporation is responsible for reporting greenhouse gas emissions, energy production and energy consumption under the NGER scheme.
Facility threshold
A controlling corporation, or a member of its corporate group, that has operational control over a facility, during the financial year, causes:
- The total emission of greenhouse gases that have a carbon dioxide equivalence (CO2-e) of 25 kilo tonnes (kt) or more
- The total production of 100 terajoules (TJ) or more of energy
- The total consumption of 100 terajoules (TJ) or more of energy
If a group entity has operational control of a facility for a number of, but not all days in a financial year (the control days), the thresholds are then adjusted by multiplying the relevant thresholds by the number of operational control days, divided by the number of days in the financial year:
Corporate group threshold
A controlling corporation will meet a corporate group threshold during a financial year where:
- The total emissions of greenhouse gases from the operation of facilities has a carbon dioxide equivalence (CO2-e) of 50 kilo tonnes (kt) or more
- The total production of 200 terajoules (TJ) or more of energy
- The total consumption of 200 terajoules (TJ) or more of energy
Once the corporate group threshold has been met, all facilities within the corporate group are required to be reported, regardless of whether individual facilities meet the applicable facility threshold. It is important to note that energy threshold calculations are not limited to electricity production or consumption. They also include energy derived from liquid, gaseous, solid, and other fuel types, such as the use of diesel in vehicles.
NGER reporter: Carbon dioxide equivalence (CO₂-e) measurement
As outlined above, under the emissions threshold test, where an entity’s combined Scope 1 and Scope 2 greenhouse gas emissions equals or exceeds 50,000 tonnes of carbon dioxide equivalent, the entity will fall within Group 1 for sustainability reporting purposes, regardless of whether the corporate size thresholds are met. Where entities have not historically measured or calculated their greenhouse gas emissions, an obligation to prepare a sustainability report may not have been identified.
For the purposes of measuring the above threshold, Scope 1 and Scope 2 greenhouse gas emissions are not limited to carbon dioxide (CO₂). Instead, emissions are calculated by combining all relevant greenhouse gases, which are aggregated and expressed in tonnes of carbon dioxide equivalents (CO₂-e), using global warming potential (GWP) factors, which account for the differing climate impacts of each greenhouse gas relative to CO2.
Greenhouse gases reported under the NGER scheme include carbon dioxide (CO2), methane (CO4), nitrous oxide (N₂O), sulphur hexafluoride (SF6) and other specified kinds of hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs).
Lodgement Timeframe
The timing of lodgement of the sustainability report is consistent with the timing of lodgement of the annual financial statements. ASIC lodgement due date for a financial year is as below.
| Type of entities | Reporting timeframe |
| For reporting entities that are disclosing entities, registrable superannuation entities (RSEs) and registered schemes: | Within three months after the end of the financial reporting year end. |
| For all other reporting entities | Within four months after the end of the financial reporting year end.
|
1.3 FAQs - Reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
ANSWER:
This requirement relates to the corporate size threshold for entities reporting under Chapter 2M. Where an entity has controlled entities, it must assess these thresholds using the consolidated financial statements in accordance with AASB 10 Consolidated Financial Statements.
Revenue should be determined with reference to the definition of income and revenue provided in AASB 15 Revenue from Contracts with Customers, which may involve consideration of the entity's business model and primary ordinary income-generating activities.
Total assets should be taken directly from the consolidated statement of financial position.
For the calculation of the number of employees, employee numbers are assessed at the end of the financial year, with part-time employees counted as an appropriate fraction of a full time equivalent employee.
See the details of the Corporations Act - section 292A (4). In determining the treatment of casual employees for the purposes of assessing whether an entity meets the large proprietary company threshold, there is limited guidance in the Corporations Act. The employee threshold is assessed at the finanical year end, and in practice, only casual employees who are active at that date are included, typically where they are engaged on a regular basis. Where casual employees work irregular hours, reasonable estimates are used to determine an appropriate full time equivalent proportion.
ANSWER:
The corporate size threshold test applies to the consolidated revenue, gross assets and employees numbers and is assessed at the end of each financial year. Even if an entity does not currently meet the sustainability reporting thresholds at the time of assessment, an entity should evaluate its reporting obligations to ensure compliance in cases where forecasts indicate that the thresholds are likely to be met in the near future. This will allow time to prepare for sustainability reporting, if an entity is likely to be in scope in future years.
Entities should establish systems and processes that enable them to monitor and assess whether the thresholds are expected to be met in each financial reporting year end.
ANSWER:
ASIC has indicated that it will adopt a proportionate and pragmatic approach to supervising and enforcing sustainability reporting obligations in the early years. However, no automatic relief is available for first‑year non‑lodgement of a sustainability report.
Further, ASIC has highlighted that non‑lodgement of financial, or sustainability reports may constitute a significant matter under RG 34: Auditor obligations – Reporting to ASIC, meaning auditors may be required to report such non‑compliance to ASIC.
Similarly, the ASX has amended its listing rules to clarify that listed entities which do not lodge a sustainability report on time will not immediately be suspended. However, this does not preclude the ASX from implementing a suspension or other sanctions in instances where entities do not meet their sustainability reporting obligations.
ANSWER:
No. An entity that is not required to report under Chapter 2M of the Corporations Act, or that has been granted relief under an ASIC class order, is not required to prepare a sustainability report. For example, public companies registered with the ACNC are not subject to the sustainability reporting requirements.
ANSWER:
The reporting obligations for Companies Limited by Guarantee are outlined in section 285A - Part 2M of the Corporations Act. When the entity has annual consolidated revenue of $1 million or more and meets any of the sustainability reporting categories (see Table 1-2) , it is required to prepare a sustainability report.
Where an entity is a Company Limited by Guarantee and is registered with ACNC, it is not required to prepare or lodge a financial report under Chapter 2M of the Corporations Act. As a mandatory sustainability report applies only to entities that are required to report under Chapter 2M of the Corporations Act, ACNC registered entities are therefore not required to prepare a sustainability report.
1.4 Sustainability report disclosure in the annual report – Legislation requirements
Climate Statement Reporting Content
The climate statements are those statemnents made in accordance with section 296A (2) of the Corporations Act and AASB S2 Climate-related Disclosures.
The Sustainability Report must contain the following documents under the requirements of the Corporations Act:
- Climate statement
- Accompanying notes to the climate statement
- Directors’ declaration
Details of the key features of each document included in the sustainability report are set out below:
| Climate Statement | The Climate Statement and the accompanying notes are required to include the following disclosures under section 296D of the Corporations Act:
that are required to be disclosed by the relevant sustainability standards (i.e., AASB S2 Climate-related Disclosures)
ASIC has stated in RG 280 that in their view, companies are unlikely to comply with the Corporations Act requirements if they use a climate scenario based on an increase that is less than 2.5 degrees Celsius. Climate statements must include information on climate-related risks and opportunities in accordance with the requirements of AASB S2 Climate-related Disclosures. |
| Notes to the Climate Statement | |
| Directors’ Declaration | A sustainability report must include directors’ declaration about climate statements and the accompanying notes. The directors’ declaration is a declaration by the directors as to whether in the directors’ opinion, the substantive provisions of the sustainability report are in accordance with the Corporations Act, including:
The declaration must be made in accordance with a resolution of the directors; with the specified date and signed by director(s). Usually this would be the same date as the directors’ declaration in respect of the financial report. |
| Greenhouse gas emission | Definition | Type | Examples |
Scope 1 | Direct greenhouse gas emissions that occur from sources that are owned or controlled by an entity | Direct emissions |
|
Scope 2 | Indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by an entity | Indirect emissions |
|
Scope 3 | Indirect greenhouse gas emissions (not included in Scope 2 greenhouse gas emissions) that occur in the value chain of an entity, including both upstream and downstream emissions.
Scope 3 greenhouse gas emissions include the Scope 3 categories in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011). | Indirect emissions
|
|
1.5 Directors’ duties and roles in sustainability reporting
ASIC outlined its view on the directors' duties and roles, and their sustainability reporting obligations in the Regulatory Guide.
Directors of the reporting entities are required to provide a declaration confirming whether in their opinion, the sustainability reports are in compliance with the requirements of the Corporations Act and AASB S2 Climate-related Disclosures.
As directors of reporting entities, directors have obligations to ensure that the entity complies with its sustainability reporting requirements. These obligations include, but are not limited to, the following:
- Its reporting entity’s sustainability reporting obligations
- The climate-related risks or opportunities relevant to the reporting entities that could be expected to affect its prospect
- The requirement of establishing a system that identifies, assesses and monitors any material financial risks and opportunities relating to climate.
- The requirement to implement controls, policies and procedures for overseeing, managing and preparing the sustainability report. This includes identifying relevant business units and responsible employees for the key inputs; as well as determining the sources of climate-related financial information that form the underlying basis of the sustainability report disclosures.
- The requirement of establishing the controls, policies and procedures for the retention of sustainability records; and,
- The importance of applying a critical and informed lens to the disclosures proposed in the sustainability report.
For financial years commencing between 1 January 2025 and 31 December 2027, the directors’ declaration is amended under the transitional rules to require directors of reporting entities to state that they have taken reasonable steps to ensure the substantive provisions of the sustainability report comply with the Corporations Act and AASB S2.
Modified liability settings
Section 1707D of the Corporations Act introduces the limited immunity for statements in the new sustainability reporting regime (i.e., modified liability settings) for certain statements made in relation to the sustainability reporting during the initial transition period.
Under the modified liability setting scheme, no action, suit or proceedings will be brought against a person in relation to a protected statement; or a statement that is required to be made under a Commonwealth Law; other than a criminal proceeding or an action brought by AISC. However, this protection does not apply where ASIC determines that the disclosures constitute greenwashing.
A statement is a protected statement where it is made in:
- The sustainability report; or
- The auditor’s report of an audit or review of a sustainability report
The following are examples of circumstances where a protected statement is required to be made under Commonwealth Law:
| Protected statement | Legislation reference |
| A protected statement that is required to be disclosed by a reporting entity in compliance with its continuous disclosure obligations. | The Corporations Act, section 674 – Continuous disclosure - listed disclosing entity bound by a disclosure requirement in market listing rules - reasonable person’s expectations The Corporations Act, section 675 - Continuous disclosure – other disclosing entities - reasonable person’s expectations |
| A protected statement that is required to be included in the Operating and Financial review (OFR). | The Corporations Act, section 299A (1) – Annual directors’ report – additional general requirements for listed entities. |
| A protected statement that is required to be included in a disclosure document. | The Corporations Act, section 710 – Prospectus content – general disclosure test. |
| A protected statement that is required to be included in a PDS. | The Corporations Act, section 1013D The Corporations Act, section 1013E |
| A protected statement that is required to be updated or corrected under a direction given by ASIC. | The Corporations Act, section 296E(1) (g) – ASIC directions. |
ASIC provides further guidance on RG 280 Sustainability Reporting regarding the modified liability setting.
It stated that the modified liability settings do not extend to the statement made voluntarily, unless the disclosure is required under Commonwealth Law. In other words, where a reporting entity discloses sustainability-related information in the sustainability report beyond what is required under the sustainability standards, the modified liability settings will not apply to those voluntary sustainability-related disclosures.
The following table outlines the details of protected statements and the applicable modified liability periods:
| Protected statement | Location and purpose of statement | Modified liability period |
| A statement relating to climate and, at the time it is made, is about the future. |
| Report prepared for financial years commencing between 1 January 2025 and 31 December 2025. |
A statement made about:
|
| Report prepared for financial years commencing between 1 January 2025 and 31 December 2027. |
Forward looking information in climate statements
Material climate-related financial risks and opportunities are expected to affect many reporting entities directly or indirectly over the short, medium, and long-term. While it may initially appear that some entities have minimal exposure to climate risks, this is likely to be rare in practice once all factors are considered.
For example, even an entity with no direct exposure may be impacted if their customers are disrupted as a result of more frequent flooding or other extreme weather events. Similarly, some entities may experience changed customer behaviour as customers seek suppliers with lower carbon footprints in order to meet their own Scope 3 emissions targets.
Under the Corporations Act and AASB S2 Climate-related Disclosures, entities are required to disclose their governance, strategy and risk-management process in relation to these climate-related financial risks and opportunities, incorporating relevant forward-looking information.
Forward looking climate-related information needs to be useful for decision making by users of the annual report and should support regulators in assessing the potential future financial stability implications of climate change for reporting entities.
The Standard requires entities to use all reasonable and supportable information available at the reporting date, without undue cost or effort, when preparing climate-related disclosures. To assist users of the annual report in assessing whether to rely on this information, entities must describe the underlying assumptions and the methods used in developing the information, together with any factors that the information reflects the entities actual plans and decisions. The Australian Accounting Standards Board provides further guidance on the concept of “reasonable and supportable information” and “undue cost or effort” in its Technical FAQs. The requirement in the Standard to use all reasonable and supportable information available without undue cost or effort is intended to address data limitations and measurement uncertainty, particularly for entities that are new to climate reporting. It is designed to ease concerns amount the need for flawless data.
What is meant by “reasonable and supportable information available at the reporting date”, and “without undue cost or effort”?
This requires entities to use information that is entity specific, takes account of general conditions in the external environment, and includes information about past events, current conditions, and reasonable forecasts of future conditions, as specified by AASB S2 in certain cases.
In addition, information should be based on what the entity already uses in preparing its financial statements, operating its business model, setting its strategy, and managing its risks and opportunities. It is expected that this information should be available without requiring exhaustive data gathering efforts. This would allow achieving an appropriate balance between primary users’ information needs and the costs and effort incurred by the entity.
What constitutes undue cost or effort may change over time, and entities are expected to apply consistent data and assumptions as systems and capabilities mature.
SECTION 2- Overview of Australian Sustainability Reporting Standards
CONTENT
1. Overview of reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
2. Overview of Australian Sustainability Reporting Standards
2.1 AASB S1 General Requirements of Sustainability-related Financial Information
2.2 AASB S 2 Climate-related Disclosures
2.2.1 General requirements for disclosure of climate-related financial information
2.2.2 Materiality
2.3 Comparison – AASB S1 vs. IFRS S1
2.4 Comparison – AASB S2 vs. IFRS S2
3. Australian Standards and Sustainability Assurance (ASSA)
4. ASIC’s Role
5. FAQs – Sustainability Reporting, Annual Reports, Audit and Reporting Requirements in Australia
2. Overview of Australian Sustainability Reporting Standards
The Corporations Act requires the reporting entities’ sustainability report to be prepared under the requirements of Australian Sustainability Reporting Standards (ASRS). The Australian Accounting Standards Board issued the following new sustainability reporting standards:
- AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information
- AASB S2 Climate-related Disclosures
AASB S1 is a voluntary standard for disclosure of sustainability related financial information. Only AASB S2 is required for Corporations Act reporting. Both Standards are based on the equivalent IFRS Sustainability Disclosure Standards, with necessary modifications to reflect the Australian legal and institutional environment.
AASB S1 General Requirements of Sustainability-related Financial Information
- The Australian equivalent of IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information
- AASB S1 set out the general requirements for an entity to disclose information about its sustainability-related risks and opportunities
A Voluntary Standard that provides requirements for entities that choose to disclose sustainability related information
SCOPE
- Conceptual foundation, including the details of fair presentation, materiality, reporting entity, connected information
- Governance
- Strategy
- Risk Management
- Metrics and Targets
AASB S2 Climate-related Disclosures
- The Australian equivalent of IFRS S2 – Climate-related Disclosure
- AASB S2 sets out the requirements for an entity to disclose information about its climate-related risks and opportunities.
- Appendix D in AASB S2 – sets out the general requirements for disclosure of climate-related financial information
Mandatory Standard for the sustainability reporting as per the requirements of the Corporations Act 2001
SCOPE
- Governance
- Strategy
- Risk Management
- Metrics and Targets
2.1 AASB S1 General Requirements of Sustainability-related Financial Information
The overall objective of AASB S1 is to provide guidance to an entity to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general purpose financial reports in making decisions relating to providing resources to the entity.
AASB S1 is a voluntary standard in Australia, that entities may choose to adopt when disclosing their sustainability-related risks and opportunities. It is not currently mandated under the Corporations Act.
AASB S1 adopts a four-pillar core content which requires a reporting entity to provide financial statements disclosure for:
| Core Content | Details |
| Governance | The governance processes, controls and procedures the entity uses to monitor and manage sustainability-related risks and opportunities. |
| Strategy | The approach the entity uses to manage sustainability-related risks and opportunities. |
| Risk Management | The processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities. |
| Metrics and Targets | The entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation. |
The main principles and guidance of AASB S1 are:
- Identifying the objective of sustainability-related financial information
- Establishing the conceptual foundation for sustainability-related financial information, to ensure its relevance and that the information disclosed provides a faithful representation of the matters it is intended to represent
- The core content – governance, strategy, risk management, and metrics and targets are expected to be disclosed as particular sustainability topics
- Sources of guidance on disclosing sustainability-related financial information
- The location and timing of sustainability-related financial information disclosures
- The disclosure of comparative information in the sustainability report; and
- Judgements, uncertainties and errors affecting sustainability-related financial information
Effective date - Applies to annual reporting periods beginning on or after 1 January 2025. Early application is permitted.
Transition relief - An entity is not required to provide the comparative information for the sustainability-related disclosure for any period before the initial application.
2.2 AASB S2 Climate-related Disclosures
AASB S2 sets out the disclosure requirements for an entity to disclose information about its climate-related risks and opportunities that could reasonably affect their cash flows, access to finance or cost of capital over the short, medium or long term. These disclosures must be useful to primary users of general purpose financial reports.
Why did the Australian Accounting Standard's board issue AASB S2 Climate-related Disclosures?
In March 2024, the Australian government introduced the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) into Parliament. The Bill was passed and received Royal Assent in September 2024, amending the Corporations Act 2001 to introduce mandatory climate-related financial disclosures for certain corporations and other entities.
While AASB S2 is based on IFRS S2, it is important to note that compliance with AASB S2 in the annual report, does not equate to compliance with the IFRS Sustainability Disclosure Standards, as some of the disclosure details are tailored to Australia entities only.
AASB S2 is a mandatory standard for entities preparing financial reports under Chapter 2M of the Corporations Act. The general requirements of AASB S2 are aligned with the requirements outlined in AASB S1, including the details of core content elements.
Effective date – AASB S2 applies to annual reporting periods beginning on or after 1 January 2025. Early application is permitted. The Corporations Act specifies three applications dates, on a phased basis depending on the reporting entity group.
Transitional relief - AASB S2 provides the following transition relief in the first annual reporting period in which the Standard applies:
- An entity is not required to provide the comparative information for the climate-related disclosure for any period before the initial application.
- One year relief permitting an entity to continue using other methods in measuring Scope 1, Scope 2, and Scope 3 GHG emissions, other than the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004).
- An entity is not required to disclose its Scope 3 greenhouse gas emissions in the first year of application. This includes, where the entity participates in asset management, commercial banking or insurance activities, the additional information about its financial emissions.
2.2.1 General requirements for disclosure of climate-related financial information
AASB S2 Appendix D sets out the general requirements for the presentation of the climate-related financial information disclosures.
The content of Appendix D is based on AASB S1 General Requirements of Sustainability-related Financial Information. The reporting entity must apply all the disclosure requirements outlined in Appendix D, and comply with all the requirements in accordance with AASB S2.
2.2.2 Materiality
Materiality is a fundamental concept used in the financial accounting standards, and now it is also applied in the context of sustainability reporting.
The objective of AASB S2 is to provide decision-useful information to users of general purpose financial statements. Therefore it is required that an entity disclose material information about the climate-related risks and opportunities that could influence the decisions of users of general purpose financial report. This concept is consistent with the materiality definition used in other Australian Accounting Standards.
Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to which the information relates, in the context of the entity’s climate-related financial disclosures.
In the context of climate-related financial disclosures, information is material if omitting, mis-stating or obscuring that information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports, which provide information about a specific reporting entity. (AASB S1, para 14, 18)
As noted above, the objective of AASB S2 is to provide decision-useful information to users of general purpose financial statements. The primary users of the financial statements are the existing and potential investors, lenders and other creditors. This is defined under AASB S1, Appendix A.
Management of the reporting entity is responsible for performing the materiality assessment; identifying and disclosing material information; and assessing whether information is material based on whether that information could reasonably be expected to influence decisions of primary users of the financial statements.
However, it is important to note that although the entity is responsible for performing the materiality assessment, such assessment must be made from the perspective of the primary users of general purpose financial reports, rather than being based solely on the perspectives of management, the board or other stakeholders.
In financial reporting, materiality is generally set as a single dollar figure (sometimes called overall materiality), that is applied to all balances and disclosures within the financial statements. A lower materiality threshold may then be used for those financial statement areas considered to be of greater interest to users, such as director’s remuneration or related party transactions.
In sustainability reporting, it is not possible to set a single overall materiality threshold, due to the many different types of disclosures required, and the variety of both quantitative and qualitative information. Each disclosure or metric therefore requires its own materiality assessment.
No. Double materiality refers to a dual-focus approach that considers 1) materiality in the context of enterprise value creation and 2) materiality in the context of significant impacts on the economy, environment, and people. Double materiality is a concept in sustainability reporting that expands traditional financial reporting to include two interconnected perspectives, which are financial materiality (outside in view) and impact materiality (inside out view).
However, AASB S1 and AASB S2 adopt a single materiality approach, which aligns with IFRS Sustainability Disclosure Standards.
Under the requirements of AASB S1 and AASB S2, an entity is required to disclose climate related risks and opportunities only to the extent that they could expect to affect the entity’s prospects. While an entity’s impacts on the economy, environment and people may be relevant in identifying risks and opportunities, AASB S1 and AASB S2 do not apply a double materiality framework that separately requires disclosure of impacts regardless of their financial effect.
2.3 Comparision -
AASB S1 vs IFRS S1
- AASB S1 is closely aligned with the requirements of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
- The AASB modified the Standard only to the extent necessary to accommodate the Australian legal and institutional environment.
Key differences between AASB S1 and IFRS S1 are highlighted as below:
AASB S1 – General Requirements for Disclosure of Sustainability-related Financial Information
Voluntary Standard
IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information
Mandatory Standard
IFRS S1 was developed by the ISSB as a mandatory standard to be applied concurrently with IFRS S2 Climate-related Disclosures.
Transition reliefs (Amended in AASB S1)
- The relief in IFRS S1 that previously permitted an entity, on first applying the Standard, to defer the reporting of sustainability-related financial information until after the publication of the related financial statements has been removed in AASB S1.
- The options that allowed an entity under IFRS S1, on first application of the Standard, to disclose information solely on climate-related risks and opportunities has been deleted in AASB S1.
An entity voluntarily applying AASB S1 for the first time would disclose information about sustainability-related risks and opportunities broader than climate-related risks and opportunities.
Comparative information is not required for any period before the the first application for IFRS S1 and AASB S1.
2.4 Comparision –
AASB S2 vs IFRS S2
- AASB S2 is closely aligned with the requirement if IFRS S2 Climate-related Disclosures
- Similar to AASB S1, the AASB modified the Standard to the extent necessary to take account of the Australian legal and institutional environment.
Key differences between AASB S2 and IFRS S2 are highlighted as below:
AASB S2 Climate-related Disclosures
Mandatory Standard
No requirements to refer and consider industry-based information or to disclose industry-based metrics.
No requirement to refer and consider Sustainability Accounting Standards Board (SASB) and industry-based guidance on implementing IFRS S2 issued by International Sustainability Standards Board (ISSB).
IFRS S2 Climate-related Disclosures
Mandatory Standard
Required to disclose industry-based metrics.
Included the requirement for reporting entities to consider the applicability of disclosure topics defined in the Sustainability Accounting Standards Board (SASB) Standard.
AASB S2 Appendix D have been amended, specifying that an entity’s climate-related financial disclosures shall be for the same reporting entity as the related financial statements unless otherwise permitted by law.
This modification ensures that climate related financial disclosures prepared under AASB S2 align with the reporting entity used in the related financial statements, while preserving the flexibility provided by section 292A(2) of the Corporations Act 2001.
Under section 292A(2) of the Corporations Act 2001, where a parent entity is required to prepare consolidated financial statements, the parent entity may prepare a sustainability report for the consolidated entity for the financial year. In this case, the parent entity is the only entity within the consolidated group required to prepare a sustainability report, and the sustainability report is prepared as if the consolidated entity were a single entity.
SECTION 3
Australian Standards on Sustainability Assurance (ASSA)
CONTENT
1. Overview of reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
2. Overview of Australian Sustainability Reporting Standards
3. Australian Standards on Sustainability Assurance (ASSA)
4. ASIC’s Role
5. FAQs – Sustainability Reporting, Annual Reports, Audit and Reporting Requirements in Australia
3. Australian Standards on Sustainability Assurance (ASSA)
Following the amendments introduced by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, the Corporations Act now mandates that the climate related financial reporting, from its commencement for financial years starting on or after 1 January 2025, is subject to assurance in accordance with the Australian Standards on Sustainability Assurance (ASSA), issued by the Auditing and Assurance Board (AUASB).
Sustainability reporting now forms part of an entity’s reporting obligations under the Corporations Act. Climate-related disclosure information is required to be reliable and decision-useful for the primary users of the financial statements. Accordingly, assurance plays a critical role in providing confidence that sustainability reported information has been prepared, in all material respects, in accordance with the applicable sustainability reporting requirements.
The AUASB is empowered under the Corporations Act to make auditing standards for the purposes of the Corporations Act or the ASIC Act; and accordingly, approved the following sustainability assurance standards in January 2025 to support the assurance of sustainability reporting in Australia:
- ASSA 5000 General Requirements for Sustainability Assurance Engagements
- ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001
ASSA 5000 is the Australian equivalent standard to ISSA 5000 General Requirements for Sustainability Assurance Engagements, which was approved by the International Sustainability Assurance Standards Board (IASSB) in September 2024. The Standard was issued by the Australian Auditing and Assurance Standards Board (AUASB) under section 336 (1) of the Corporations Act.
The purpose of ASSA 5000 is to establish requirements for the audit and review of information in sustainability reports prepared under Chapter 2M of the Corporations Act, and to provide a framework for assurance over sustainability information.
ASSA 5000 applies to assurance engagements on the following criteria:
- Sustainability information in a sustainability report for a financial year in accordance with the Corporations Act 2001 (the Act)
- Sustainability information where the engagement is held out to have been conducted in accordance with ASSA 5000; and
- Sustainability information for any other purpose, except where ASAE 3410 Assurance Engagements on Greenhouse Gas Statement (ASAE 3410) is required to be applied
ASSA 5000 also applied, as appropriate, to assurance on other sustainability information, including mandatory and voluntary assurance.
- For the assurance over information reported to the Clean Energy Regulator, the applicable assurance standards would be ASAE 3000 Assurance Engagement Other than Audits or Reviews of Historical Financial Information, rather than ASSA 5000.
- ASSA 5000 is designed as a comprehensive standard for sustainability assurance engagements, applying to both reasonable assurance (audit) and limited assurance (review) engagements. The Standard draws extensively on existing Australian assurance frameworks, including ASAE 3000 and the Australian Auditing Standards applicable to financial statement audits, while being adopted to the unique nature of sustainability information.
- For mandatory climate reporting under the Corporations Act, ASSA 5000 is subject to the phasing in of limited and reasonable assurance, outlined under ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001.
- Effective date: For assurance engagements on sustainability information in a sustainability report prepared under Chapter 2M of the Corporations Act 2001 for periods beginning on or after 1 January 2025; or as at a specific date on or after 1 January 2025, with earlier adoption permitted.
What is the difference between reasonable assurance and limited assurance?
Reasonable assurance provides a higher, but not absolute level of assurance. In contrast, limited assurance provides a greater than no assurance but less than reasonable assurance.
It is important to note that, while the level of assurance provided is high in reasonable assurance engagements, reasonable assurance is not absolute (that is 100% assurance) due to inherent limitations in internal controls, the nature of audit evidence, and use of auditor’s professional judgement.
In a limited assurance engagement, the auditors’ conclusion is typically expressed in a negative form. For example, the assurance report states that, based on the procedures performed, nothing has come to attention that would cause them to believe that the subject matter information is materially misstated.
ASSA 5010 sets out the requirements governing whether a sustainability report is subject to limited assurance (review) or audit during the period from 1 January 2025 to 30 June 2030, in accordance with the requirements of Chapter 2M of the Corporations Act 2001. The AUASB issued ASSA 5010 under the Corporations Act 2001 as required by s1707E (2) of the Act.
ASSA 5010 specifies the phased introduction of assurance requirements for each of the three groups of reporting entities, with earlier assurance permitted. Importantly, Year 1 restricts the scope of assurance offered to only certain areas of the sustainability report.
| Year commencing | Year 1¹ | Year 2 | Year 3 | Year 4² | Year 5 | Year 6 |
|---|---|---|---|---|---|---|
| Group 1 | 1/1/25 to 30/6/26 | 1/7/26 to 30/6/27 | 1/7/27 to 30/6/28 | 1/7/28 to 30/6/29 | 1/7/29 to 30/6/30 | 1/7/30 to 30/6/31 |
| Group 2 | 1/7/26 to 30/6/27 | 1/7/27 to 30/6/28 | 1/7/28 to 30/6/29 | 1/7/29 to 30/6/30 | 1/7/30 to 30/6/31 | 1/7/31 to 30/6/32 |
| Group 3 | 1/7/27 to 30/6/28 | 1/7/28 to 30/6/29 | 1/7/29 to 30/6/30 | 1/7/30 to 30/6/31 | 1/7/31 to 30/6/32 | 1/7/32 to 30/6/33 |
| Governance | Limited | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Strategy – Risk and opportunities³ | Limited⁶ | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Climate resilience assessments / Scenario analysis | None⁵ | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Transition plans⁴ | None⁵ | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Risk management | None⁵ | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Scope 1 and 2 emissions | Limited | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Scope 3 emissions | N/A⁵ | Limited | Limited | Reasonable | Reasonable | Reasonable |
| Climate – Related metrics and Targets | None⁵ | Limited | Limited | Reasonable | Reasonable | Reasonable |
Group 1 entities with year commencing 1/1/25 to 30/6/30 are subject to the Year 1 provision twice. Reporting of Scope 3 emissions is required for years commencing on or after 1/1/26 for Group 1 entities.
For years commencing on or after 1/7/30, the Corporations Act requires reasonable assurance for all mandatory climate disclosures.
The phasing of assurance on statements that there are no material climate-related risks and opportunities would be the same as for “Strategy – Risk and opportunities”.
Where the entity does not intend to disclose a transition plan or target, assurance work in the first instance concerns whether the entity has a transition plan or target to be disclosed.
“None” indicates that disclosure is required but it is not subject to assurance; whereas “N/A” indicates that disclosure is not required. In Year 1, no assurance is required for information in relation to climate resilience assessments / scenario analysis, transition plans, risk management; and climate-related metrics and targets.
Only subparagraphs 9(a), 10(a) and 10(b) of AASB S2 Climate-related Disclosures.
3.1. FAQs –Sustainability Assurance Engagement
If the Registrable Superannuation Entity (RSE) is a reporting entity, then it can only have one auditor for both the sustainability report and the annual financial report.
A company, registered scheme or retail CCIV may have more than one auditor, which is permitted under section 324AA (1) and section 1232(1) of the Corporations Act. The auditor of the sustainability reporting is not required to be the same as the auditor of the annual financial report, but they must be a Registered Company Auditor under the Corporations Act. However, in practice, the appointment of different auditors for the sustainability report and the financial report may increase challenges and create inefficiencies in managing the overall audit process, and as a result, may not be a practical approach.
Yes. According to the ASIC’s response in the FAQs – Review or audit of sustainability reports, the lead auditor for the sustainability report and the lead auditor for the annual financial report does not need to be the same. Similarly, different review auditors may be appointed for the sustainability report and the annual financial report. However, both the lead auditors and the review auditors must be Registered Company Auditors.
4. ASIC’s Role in Sustainability Reporting
CONTENT
1. Overview of reporting obligations under Chapter 2M and section 292A of the Corporations Act 2001
2. Overview of Australian Sustainability Reporting Standards
3. Australian Standards on Sustainability Assurance (ASSA)
4. ASIC’s Role
5. FAQs – Sustainability Reporting, Annual Reports, Audit and Reporting Requirements in Australia
4. ASIC’s Role in Sustainability Reporting
The Australian Securities & Investment Commission (“ASIC”) is responsible for administering the sustainability reporting requirements under the Corporations Act and monitoring the compliance of the sustainability reporting disclosure in the market. This includes examining the disclosures in the sustainability reports lodged with ASIC.
ASIC has indicated it will take a proportionate and pragmatic approach to supervise and regulate sustainability reporting during the early years in the market to allow reporting entities to gradually transition and build up their sustainability reporting capabilities.
Enforcement
Where statements in a sustainability report are incorrect, incomplete, or misleading and are identified by ASIC through its surveillance program; ASIC has stated they will engage directly with reporting entities to understand the underlying basis. Reporting entities may be given the opportunity to make amendments or may be directed by ASIC to make specific changes. However, ASIC will commence an enforcement investigation where the deficiencies in reporting arise from misconduct of a serious or reckless nature.
Sustainability reporting and audit relief
ASIC has indicated they may grant relief to reporting entities from complying with their sustainability reporting and audit obligations in limited circumstance based on a statutory discretion, provided AISC is satisfied that at least one of the following criteria would be met if the reporting entities were required to comply with the sustainability reporting requirements:
- Compliance would make the financial report, sustainability report or other reports misleading
- Compliance would be inappropriate in the circumstances
- Compliance would impose unreasonable burdens
Relief may be granted on a class basis via legislative instruments, or on an individual basis; and ASIC may impose conditions on the relief it grants.
ASIC has confirmed that they are unlikely to grant relief solely due to the time and expense involved in preparing a sustainability report, or due to an entity wishing to maintain confidentiality of its sustainability information due to commercial sensitivity.
Following are the examples of sustainability reporting relief under an ASIC legislative instrument:
| ASIC Corporations (Reporting by Stapled Entities) Instrument 2023/673 | ASIC allows the stapled entity to prepare a sustainability report that includes climate-related financial disclosures on behalf of all the members of the stapled group as a single entity. |
| ASIC Corporations (Electronic Lodgement of Financial and Sustainability Reports) Instrument 2016/181 | ASIC allows the electronic lodgement of annual reports (including sustainability report) by a listed disclosing entity that is lodged with the eligible financial market operators, without lodging separate annual reports with ASIC. Eligible financial markets included – ASX Limited, National Stock Exchange of Australia Limited, SIM Venture Securities Exchange Limited and Sydney Stock Exchange Limited. |
4.1 RG 280 Sustainability Reporting
ASIC issued the Regulatory Guide 280 in March 2025. The regulatory guidance provides clarification and guidance for entities that are required to prepare sustainability reports with climate-related financial information under Chapter 2M of the Corporations Act.
The regulatory guide covers the following topics, outlining the expectation from ASIC regarding the mandatory sustainability reporting disclosure requirements in the Australia market.
- Preparation of the sustainability report
- Specific issues about the contents of the sustainability report
- Sustainability-related financial disclosures outside the sustainability report
- ASIC’s administration of the sustainability reporting requirements
RG 280 provides an important overview of the new sustainability reporting framework in Australia, setting out ASIC’s expectation regarding reporting entities’ obligations under the new climate-related disclosure regime. It also explains how ASIC will exercise its power under the legislation to ensure compliance with sustainability reporting requirements in the market. Reporting entities are highly encouraged to refer to RG 280 when preparing their climate-related sustainability disclosures, particularly during the initial transition period to ensure its compliance in reporting.
5. FAQs – Sustainability Reporting, Annual Reports, Audit and Reporting Requirements in Australia
Yes. Entities can voluntarily elect to apply AASB S1, and/ or AASB S2. AASB S1 is a voluntary standard that entities can choose to adopt even though it is not required for sustainability reporting compliance with the Corporation Act.
On the other hand, AASB S2 is a mandatory standard for entities to apply in accordance with the requirements of the Corporations Act 2001. If entities chooses to apply the sustainability reporting standards, they must comply with all the requirements that are specified in the Standards in order to claim compliance with that Standard in the financial statements.
Appendix 4.3B has not been amended in relation to sustainability reporting. The requirement for preliminary final reports under Listing Rule 4.3A and 4.3BB remains and does not mandate early disclosure for sustainability-related information. However, listed entities can choose to lodge the Appendix 4E with the full audited annual report (including the sustainability report).
The sustainability report forms part of the annual reports, and is required to be lodged with ASIC under section 319 of the Corporations Act 2001, where an entity meets the reporting criteria set out in section 292A.
ASX listed entities must follow the listed company reporting deadline to avoid suspension. In addition, the entities also need to comply their reporting obligations under section 319 of the Corporations Act to lodge the annual report to ASIC.
To avoid multiple lodgements, ASIC deems electronic lodgement with ASX to satisfy the lodgement obligations under the ASIC Corporations (Electronic Lodgement of Financial and Sustainability Reports) Instrument 2016/181. This allows entities to electronically lodge their annual report and sustainability report with ASX (or other listed markets outlined in the instrument), instead of lodging them directly with ASIC.
ASX has amened Listing Rule 17.5 following the introduction of mandatory sustainability reporting. Listing Rule 17.5 provides that listed entities will be suspended if they fail to lodge the annual reports required by the due due. The annual reports, which included annual directors' report, the statutory financial report and the auditor's report must be provided to ASX no later than three months after the reporting year end.
ASX has amended Listing Rule 17.5, which would allow late lodgement of the sustainability report without triggering a mandatory suspension. This is a consequential amendment which is intended to preserve the current operation of the Listing Rules following the amendments of the Corporations Act. The amended rule became effective on 16 January 2026, subject to regulatory approvals.
It is important to note that the rule change does not permit or otherwise enable the deferral of an entity’s annual sustainability reporting. Listed entities that are required to prepare an annual sustainability report must still provide that report to ASX within the timeframe required by Listing Rule 4.5 (being no later than three months after the end of the accounting period). Suspension of the entity’s securities will no longer be an automatic consequence of late lodgement. However, this would not prevent the ASX from imposing a suspension or other penalties in the case of an ongoing failure to lodge a sustainability report by an entity that is required to do so.
If you would like to discuss the requirements of sustainability reporting or assurance requirements, please contact your local RSM office.
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