Note: New to AASB S2? Read our guide here.
Over the last few months, Group 1 companies have been filing their AASB S2-aligned sustainability reports. These are the first major mandatory ISSB-aligned disclosures worldwide; around the world are watching to see what lessons can be learned. On May 18, the Australian Securities and Investments Commission (ASIC) published its early observations on this first wave of reports. This is the clearest signal yet of what the regulator expects from companies and how it plans to enforce the standard. Assurance providers will likely incorporate these expectations into their processes, so companies will want to pay close attention to avoid rework at the last minute.
Here are the five key takeaways.
1. ASIC is reading your filings closely
ASIC made clear it is actively scrutinizing what companies file. It highlighted examples where its staff attempted to follow cross-referenced information and struggled to locate relevant data. It also described cases where staff noted discrepancies between individual risks listed in a company's financial report and those in its sustainability report.
There may sometimes be debate within a company about whether anyone actually reads a full sustainability report. ASIC's observations should settle that—they only arise from active, detailed readings.
2. You can't disclaim your way out of accuracy
Companies cannot use disclaimers to say they aren't responsible for the accuracy or completeness of their disclosures. You need to be able to support what you publicly report. As ASIC noted, the fundamental goal of AASB S2 (or any ISSB-aligned disclosure) is to provide investors with trustworthy, decision-useful information – adding disclaimers around accuracy defeats the purpose
For quantitative disclosures, that means being able to provide a clear trail between raw data and published figures. For qualitative disclosures, it means making sure the relevant teams have reviewed what's being said and are comfortable defending it. Establish clear internal sign-offs so everyone knows who is responsible for supporting a given disclosure.
3. Your sustainability and financial reports must align
ASIC flagged that risks or opportunities classified one way in financial statements shouldn't be classified differently in sustainability reports.
Build a process to make sure these two reports are consistent. If separate teams own them, start the conversation now about how to align. Some leading companies have created ESG controller–type roles to manage this; others bring the finance team in after the first draft of the sustainability report for a cross-check. Figure out what works for your company.
Whoever is responsible for completing the AASB S2 report should also read the financial report in full—specifically checking that risk classifications, opportunity descriptions, and climate-related language are consistent across both documents.
4. Be transparent about assumptions and estimates
ASIC expects companies to clearly summarize the assumptions behind their analyses and describe where they used estimates and why. For Group 1 companies reporting scope 3 emissions for the first time, this is especially important.
It's also relevant for climate scenario analyses. Be specific about what scenarios you're using, where you sourced them, and how you assessed the impact to your business model.
5. Make it clear what's mandatory AASB S2 and what's voluntary
ASIC found it difficult to distinguish between voluntary climate information and mandatory AASB S2 disclosures. The challenge is that companies want to publish sustainability reports that tell a cohesive story and fairly represent all of their climate-related risks and opportunities. Strictly following the AASB S2 format may not allow them to do that.
ASIC suggested index tables at the end of the report showing where to find each AASB S2 disclosure. You could also add footnotes or parentheses to relevant disclosures to help readers understand what is AASB S2-aligned.
What to do now?
Group 1 companies working on FY26 reports should incorporate this guidance, where possible, before the June 30 submission deadline. Specifically:
- Review your draft sustainability report against your financial report for consistency.
- Confirm that internal sign-off processes are documented and complete.
- Add an index table or other labeling to distinguish mandatory AASB S2 disclosures from voluntary content.
Group 2 companies (and Group 1 companies planning their next reports) should assess whether their current approach meets these expectations and adjust their process now.
How Watershed can help
Data lineage and audit readiness. Watershed's data lineage feature lets you trace any published figure back to the raw data in one click—exactly the kind of trail ASIC expects. Our reporting module tracks who wrote, edited, and signed off on report language, so governance is built in.
Cross-checking financial and sustainability reports.. Watershed’s Reporting agents flag gaps and potential inconsistencies, and help teams draft sustainability statements with supporting evidence. They’re developed in partnership with Watershed’s sustainability advisors—so the guidance is tuned to real reporting workflows and the way sustainability disclosures are reviewed, not generic AI writing.
AASB S2 index tables. Watershed's report builder lets you enter information at the data-point level and export a reference table mapped to individual AASB S2 requirements—addressing ASIC's concern about distinguishing mandatory from voluntary content.
Advisory support. Our expert advisory team can help draft, review, and cross-check your AASB S2 report before it goes to your assurance provider.
