AASB S2 unpacked: how did Australia’s Group 1 climate reporting fare?

1. Variability is a defining feature of the first wave

Perhaps unsurprisingly, there is significant variability in disclosures across Group 1. Differences are visible across industries and, in some cases, between direct peers.

One of the clearest areas of divergence is financial quantification. Two-thirds of companies quantified the impact of climate risks and opportunities on financial position, performance and cash flows. Others relied more heavily on proportionality mechanisms within AASB S2, often citing high measurement uncertainty. While the standard allows for this uncertainty, this does require judgement—and judgement invites scrutiny. ASIC has already signalled this will be an area of focus.¹ For the most part, these disclosures were not subject to mandatory assurance and so it remains to be seen whether these judgements on proportionality will hold up to audit testing in future. Clear documentation of judgements and methodologies will be essential. 

Where climate exposure is higher, maturity is generally more advanced. Organisations operating in heavy emitting sectors, such as in Energy, Utilities and Resources demonstrated more developed disclosures. Just under two-thirds disclosed a climate transition plan, ranging from operational initiatives (energy efficiency, renewable procurement, fleet electrification) through to comprehensive transition strategies covering defined investment programs and Scope 1, 2 and elements of Scope 3 Greenhouse Gas emissions.

Around 65% disclosed specific climate targets. In higher-exposure sectors, there was stronger alignment between identified risks, strategic response and longer-term decarbonisation pathways. Scenario analysis was more developed. Governance linkages were clearer—in half of reports, climate metrics were connected to executive remuneration.  

Time horizons and chosen scenarios also differed, reflecting industry-specific planning cycles and exposure, with the Energy, Utilities and Resources sector time horizons often anchored to asset lives.

Most organisations converged around globally recognised reference scenarios, including those from the Network for Greening the Financial System (NGFS), the Intergovernmental Panel on Climate Change (IPCC AR6) and the International Energy Agency (IEA). A majority used the Intergovernmental Panel on Climate Change (IPCC SSP-RCP 1-1.9), likely to satisfy the Corporations Act requirement for a 1.5°C scenario.

The variability isn’t surprising. It reflects the current maturity—and is a starting point.

What this means

First-year disclosures show where organisations are on the maturity curve. An emerging baseline is forming—but leading practice is yet to be landed. 

Many organisations have established governance, risk and transition planning structures. The next phase is progression - embedding climate into enterprise risk management, executive accountability and target setting—not just reporting them. 

2. Significant effort invested—with compliance achieved

The scale of effort is clear. Report length ranged from 7 to 82 pages, noting that some reports also included voluntary sustainability information. On average, reports were 30 pages long. We’ve seen firsthand the time and resources required to meet this reporting obligation. 

Variation reflects the qualitative nature of the standard. Some organisations included detailed AASB S2 indices, clearly mapping disclosures to requirements—a practical step that improves transparency and readability. In some cases, companies also expanded disclosures within their sustainability report to include voluntary sustainability content.

All but two organisations applied transitional relief for the disclosure of comparative information. Most applied Scope 3 Greenhouse Gas emissions transitional relief, although 12 voluntarily disclosed certain Scope 3 categories. 

Calculating Scope 3 emissions is a significant exercise. It requires value chain engagement, data estimation methodologies and significant judgement. With Scope 3 becoming mandatory to be reported in year two, and subject to assurance under ASSA 5010 in later years², early engagement with assurance providers will reduce restatement risk and strengthen confidence in estimates.

How did the reports perform?

• All sustainability reports received unqualified limited assurance opinions.  
  This means auditors identified no material issues within the mandatory scope. 

• Climate risks and opportunities were relevant to every sustainability report.
  100% of sustainability reports disclosed climate-related risks and opportunities that were reasonably expected to impact the organisation. 

• One organisation obtained reasonable assurance over Scope 1 and 2 emissions.  
  This higher level of confidence likely signals a more mature, data-rich enterprise environment.

• Only one entity sought (and obtained) assurance across its full Sustainability Report.   
  Only certain disclosures are required to be assured in year one. This organisation chose to extend assurance beyond the mandatory scope—a step beyond compliance toward greater confidence in its reporting.
• Around half also sought additional limited assurance over voluntary sustainability information, most commonly voluntary Scope 3 emissions disclosures.  
  While Scope 3 was not yet required, some organisations chose to have parts of it assured, supporting credibility and preparing for future mandatory requirements. 

• Just over half of reporters elected to disclose Scope 2 market-based emissions. 
  These were only subject to assurance if disclosed.

What this means

For many of you, year one marks a shift from ‘narrative’ sustainability reporting to statutory disclosure. 

The unqualified assurance opinions highlight the hard work put in preparing for mandatory reporting and establish a solid foundation for future reporting. Voluntary disclosures, particularly of Scope 3 emissions, speaks to a willingness to move ahead of minimum requirements, build credibility early, and proactively sharpen risk management decisions. 

For most organisations, year one has been about meeting the standard. What comes next is a shift in mindset—from compliance to value creation.

Reporting can be used as a mechanism to inform strategy and drive business growth. Used well it can help you surface new revenue opportunities, highlight margin improvement potential, optimise and de-risk supply chains, and even inform longer-term business model reinvention. That’s where your growth and resilience intersect. 

It also matters externally. Investors and customers are becoming more selective about who they back and who they trade with. Clear, credible sustainability information supports trust—and trust supports access to capital and markets.

And climate is unlikely to be the end of the story. The Australian Government’s ‘climate-first, but not only’³ approach signals that broader sustainability disclosures may follow as global standards mature. 
 
You don’t need to wait for mandatory requirements to expand. For example, you can begin assessing nature-related dependencies and exposures now as you consider climate-related risks and opportunities across your value chain—and assess how they may affect revenue, operations and long-term value as part of broader strategic planning.

In short, the reporting requirement may be new. The strategic opportunity is not.

If you’re a Chief Financial Officer or Chief Sustainability Officer preparing for your first report—or your next cycle—we believe the following four focus areas will help:

1. Make judgements explicit and get governance sign-off early

Value chain boundaries. Materiality definitions. Financial quantification methodologies. Climate scenario selection.

These are significant judgements. Organisations that formalised and documented them early, and secured governance endorsement, faced fewer challenges post year-end in finalising their reports.

Clarity reduces friction.  

2. Improve clarity to users and explain where uncertainty remains

Emerging practice reflects a pragmatic approach: quantifying impacts where information is available enhances users’ understanding of exposure to climate risks and opportunities. Proportionality mechanisms should be applied only where measurement uncertainty is genuinely high—users are seeking a clear view of exposure, resilience and strategic response.

Where internal modelling has been performed, for example, reluctance to disclose outcomes is unlikely to be sufficient on its own to rely on proportionality mechanisms. Clear explanation of assumptions, methodologies and limitations supports the objectives of AASB S2.

3. Keep disclosures focused, factual and readable 
 
Report length varied significantly. More pages do not necessarily mean more clarity. Keep disclosures factual, concise and decision-relevant.

Draft early. Seek board or governance feedback early. This will reduce late-stage rework. 

4. Engage early on assurance to boost confidence and reduce risk  
 
Assurance shouldn’t start at the end of the process. 

Bringing assurance considerations into key judgements, particularly around methodologies, boundaries, and even ahead of time for Scope 3, can help surface issues early and reduce late-stage pressure.

Early engagement also gives management and directors greater visibility of higher-risk areas before sign-off. As assurance requirements expand, that early alignment can make the reporting cycle smoother and more predictable.