Australia’s new sustainability reporting framework is now in effect, requiring certain entities reporting under Chapter 2M of the Corporations Act 2001 (the Act) to prepare a sustainability report that includes climate-related financial disclosures in accordance with the Australian Sustainability Reporting Standards (ASRS) issued by the Australian Accounting Standards Board (AASB).
Entities required to prepare a sustainability report
Entities fall within the scope of the legislation (s292A of the Act) if they have an obligation to prepare and lodge financial reports under Chapter 2M of the Act and meet any of the following three criteria, assessed at financial year-end:
- Satisfy two out of three financial size thresholds outlined in the table below;
- Are registered under the NGER Act or required to register under the NGER Act; or
- Being an asset owner such as a registered scheme, registerable superannuation entity or retail corporate collective investment vehicle (CCIV) with consolidated assets exceeding the specified threshold.
A phased approach to the first year of reporting will apply to entities in scope. It will commence for financial years beginning on or after 1 January 2025 for Group 1 entities, 1 July 2026 for Group 2 entities, and 1 July 2027 for Group 3 entities, as shown below.
| First annual reporting period starting on or after | Large entities (including their controlled entities) meeting at least two of the three size criteria below | National Greenhouse and Energy Reporting (NGER) Reporters |
Asset Owners | ||
| Consolidated revenue | EOFY consolidated gross assets | EOFY employees | |||
| 1 January 2025 Group 1 |
$500 million or more | $1 billion or more | 500 or more | Above NGER publication threshold |
N/A – Scoped out of Group 1 |
| 1 July 2026 Group 2 |
$200 million or more | $500 million or more | 250 or more | All other NGER reporters |
$5 billion assets under management or more |
| 1 July 2027 Group 3 |
$50 million or more | $25 million or more | 100 or more | N/A | Refer to Group 3 size criteria |
Once an entity is subject to these reporting requirements, it must submit a sustainability report annually unless it no longer meets the criteria. Entities should carefully assess their legal reporting obligations to ensure compliance. If uncertain about their reporting requirements, they should seek legal advice.
A common misconception is that Australian small businesses that do not meet the size thresholds for annual sustainability reporting will be unaffected by the new requirements. However, they may still be impacted if they are part of the value chain of a larger entity with reporting obligations. Larger businesses subject to the legislation may require their suppliers and partners to provide climate-related information to meet their compliance requirements. As a result, entities outside the scope of the legislation may still need to collect and disclose certain climate-related data, such as greenhouse gas emissions, when engaging with their customers or suppliers.
What are the sustainability reporting standards?
The AASB issued the first sustainability reporting standards in September 2024, which are:
- AASB S1: General Requirements for Disclosure of Sustainability-related Financial Information – a voluntary Standard
- AASB S2: Climate-related Disclosures – a mandatory Standard.
As a starting point when applying AASB S2, entities are required to identify all climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.
The Australian Government has adopted a ‘climate first, not only’ approach to sustainable finance, which prioritises climate-related disclosures. While AASB S1 remains voluntary, its broader framework for sustainability-related disclosures could be used in the future as Australia moves towards a more comprehensive sustainability reporting regime.
While the new sustainability reporting framework presents opportunities for value creation, entities will need to navigate several challenges, including:
Data Availability and quality – Ensuring access to high-quality, comparable and verifiable data, often requiring investment in new systems and processes.
Integration with Financial Reporting – Aligning climate-related financial disclosures with financial reporting, incorporating forward-looking estimates and scenario analysis.
Compliance costs and resource allocation – Balancing the financial and operational burden of meeting evolving regulatory requirements while ensuring long-term strategic benefits.
Evolving regulatory landscape – Keeping up with frequent changes in sustainability reporting standards and frameworks to ensure ongoing compliance and best practices.
Assurance and transparency – Strengthening governance and controls to support reliable disclosures that meet stakeholder expectations.
Entities impacted cannot afford to wait. Immediate action to establish the governance, strategy, risk management and data requirements is critical for ensuring compliance with the new legislation and positioning for long-term success.
To begin your journey, here are some key immediate action items that you could implement to deal with these challenges:
Educate and align leadership
Familiarise yourself with the new sustainability reporting framework, which includes gaining an understanding of the disclosure requirements under AASB S2 Climate-related Disclosures, a mandatory disclosure standard for prescribed entities. Ensure that boards and executives are fully informed about the requirements and implications of the new regulations. Establish accountability for climate-related reporting at senior levels, identifying who is responsible and taking the lead, as well as the entity’s resource needs to meet and manage ongoing reporting requirements.
Conduct a gap analysis under the four key pillars prescribed under the disclosure requirements
Assess current practices against the four key pillars— governance, strategy, risk assessment, metrics, and targets —under the new climate-related financial disclosure requirements. This will help identify specific areas where governance, processes and data availability fall short of the disclosure requirements. Prioritise areas needing immediate attention, such as data collection systems, governance structures, strategic and risk management approaches and the appropriateness of applicable metrics and targets.
Develop an implementation roadmap
Consider the internal capacity, resources and expertise required for managing reporting obligations. Outline clear steps, timelines and resource allocations for meeting compliance deadlines and incorporate flexibility to adapt to evolving requirements or emerging guidance.
Data and technology
Based on the outcomes of the gap analysis, consider whether investment is needed to enhance systems for collecting, verifying and reporting climate-related financial information. This includes the potential need to invest in tools to support accurate, complete and consistent reporting.
Pilot testing and pre-assurance readiness
Prepare a trial sustainability report to test data collection and reporting processes. Identify and address issues before formal reporting and consider conducting a dry run to assess assurance readiness and obtain feedback on reporting processes.
Our expert audit and assurance advisors understand the opportunities and challenges businesses face in adapting to Australia’s new sustainability reporting framework. We can help you navigate these opportunities and challenges and stay ahead by explaining the reporting and assurance requirements and how your business is impacted. Sustainability reporting is a journey of continuous improvement, and if you’d like support during your implementation journey across your assurance needs as you prepare for formal reporting under the new legislation requirements, contact your local William Buck Audit and Assurance advisor.
