AASB S2: A guide for companies

In September 2024, the Australian Accounting Standards Board (AASB) adopted new sustainability disclosure requirements called the Australian Sustainability Reporting Standards (ASRS). These requirements are currently in effect; the first group of in-scope companies are expected to publish their sustainability reports in the summer of 2026. The next wave of companies must report in 2027 on FY2026 data.

These standards have two components: AASB S1, which covers voluntary disclosure of general sustainability-related risks and opportunities, and AASB S2, which covers mandatory disclosure of climate-related risks and opportunities. AASB S2 provides the standards that companies must use when preparing their sustainability report. These standards are broadly aligned with the International Sustainability Standards Board’s (ISSB) published standards.

This guide covers:

• Which companies are in-scope for AASB S2 reporting
• When companies need to report based on group
• What AASB S2 requires, and how to report
• Assurance requirements and non-compliance penalties for AASB S2

Who is in scope for AASB S2 reporting?

Australia’s largest companies, emitters, and financial institutions will come into scope in three groups based on their size and the start of their financial year.

When will the AASB S2 come into effect for different groups?

Each group will begin reporting for financial years that start on or after:

• Group 1: January 1, 2025 (first publications expected in early 2026)
• Group 2: July 1, 2026 (publication in 2027)
• Group 3: July 1, 2027 (publication in 2028)

What does complying with AASB S2 require?

Disclosures under AASB S2 are built around the four key pillars of the IFRS S2 standards (which in turn are the same as those of the Task Force for Climate-related Disclosure):

1. Governance. The governance processes, controls and procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities.
2. Strategy. The entity’s strategy for managing climate-related risks and opportunities, including the entity’s Climate Transition Plan.
3. Risk management. The entity’s processes to identify, assess, prioritise and monitor climate-related risks and opportunities.
4. Metrics and targets. A number of quantitative and qualitative climate-related metrics and targets, including Scope 1, 2, and 3 emissions.

AASB S2 deviates from the IFRS S2 in minor ways, including:

• AASB S2 does not require industry-based metrics or reference SASB standards. The AASB is undertaking a separate project to consider industry-based disclosure and aiming to finalize mandatory requirements of industry-specific information by 2030.
• AASB S2 can be used by not-for-profit entities, whereas IFRS S2 is only suitable for for-profit entities.

Additionally, in their AASB S2-compliant disclosures, organisations must consider at least two mandatory climate scenarios, with one consistent with warming of 1.5 degrees and another “high warming” scenario that well exceeds 2 degrees. By contrast, IFRS S2 does not specify what scenarios reporting undertakings must use.

How should NGER reporters approach AASB S2?

The National Greenhouse and Energy Reporting Scheme (NGER) is a parallel mandatory disclosure regulation administered by Australia’s Clean Energy Regulator since 2008.

The NGER Scheme requires the use of Global Warming Potential values from the IPCC’s Fifth Assessment Report (AR5). By contrast, AASB S2 requires the use of the GWP values from the latest IPCC Assessment Report (currently AR6). Some companies may be in scope for both NGER and AASB S2 and face conflicting methodological requirements.

To provide relief to these companies, AASB S2 allows companies in-scope for NGER to use their NGER emissions calculations for their AASB S2 disclosures.

Do AASB S2 disclosures require assurance?

Yes, AASB S2 disclosures will have progressively increasing assurance requirements starting in year 1 of reporting.

The assurance phase-in model is provided below.

* These refer to an entity’s disclosures on what its climate-related risks and opportunities are, and whether those risks are physical or transition risk.

Are there penalties associated with non-compliance?

False or misleading climate statements could result in penalties up to $15 million or 10% of annual turnover. In line with non-compliance penalties for financial reporting, reporting companies’ directors may be held personally liable for misleading statements. To incentivize complete and useful disclosures in an area of uncertainty, directors are granted limited immunity for “protected statements” in sustainability reports of financial years between January 1, 2025 and December 31, 2027. During this period, only ASIC will be able to take non-criminal action against deceptive conduct. Protected statements include:

• Year 1: All forward-looking, climate-related statements.
• Years 1-3: Scope 3 emissions, scenario analysis, and transition plans.

How do non-Australian groups with in-scope Australian subsidiaries report?

Each individual subsidiary that meets the AASB S2 thresholds must file a separate report with the Australian Securities and Investments Commission. There is no exemption for using group-level disclosures in lieu of subsidiary-specific ones.

How should companies file their AASB S2-aligned sustainability reports?

Climate-related financial disclosures should be made within a standalone “sustainability report” in the company’s annual financial report. Under the Corporations Act, a sustainability report filed with ASIC should contain three components:

1. Climate statements for the year. An AASB S2-aligned disclosure is the climate statement. This statement must also disclose the company’s climate-related scenario analysis to the two mandatory scenarios (1.5°C and 2°C average warming).
2. Notes to the climate statements. ASIC does not currently expect corporations to need to include supplementary notes to their climate statements in their disclosures. This provision exists in case any future mandates for disclosing notes to the climate statement arise.
3. Directors’ declaration about the statements and notes. A declaration by the directors that the sustainability report is in accordance with the Corporations Act and AASB S2. Note that several parts of the sustainability report are considered “protected statements” between January 1, 2025 and December 31, 2027.

Sustainability reports are generally due within 3 months of the end of the reporting company’s financial year. The reports must be filed on ASIC’s portal (they may be filed by the company itself or a registered agent).

What’s next?

Watershed can help you prepare for AASB S2 reporting. Using software as the backbone of your measurement increases the calculation transparency and reduces the manual work needed to complete the exercise. Watershed:

• Guides customers through drafting narrative responses with climate risk analysis support, peer benchmarks, expert guidance, and AI-driven tools;
• Pre-populates GHG emissions fields where available to reduce manual work;
• Includes tools to enable real action—like supplier engagement or reductions modeling—for when your focus turns from compliance to decarbonization.