What is AASB S2? Climate reporting for Australian organisations

If organisations have been dealing with international clients or suppliers, this might feel familiar. Those tender documents asking about climate oversight, risk strategies, emissions data, and net zero goals? That's the global shift toward climate reporting in action. The Australian Accounting Standards Board's (AASB) S2 Climate-related Disclosures standard brings us into line with what's been happening worldwide. AASB S2 represents the biggest shift in corporate reporting since financial reporting. Political winds may change, but the business case for climate disclosure isn't going anywhere. So what does this mean for organisations day-to-day?

Think of AASB S2 as Australia's version of the International Sustainability Standards Board's (ISSB) IFRS S2 Climate-related Disclosures. At its core: eligible organisations need to disclose information about climate-related risks and opportunities that could reasonably affect their financial position^[1]. The standard builds on the Task Force on Climate-related Financial Disclosures (TCFD) framework^[2] that many larger Australian organisations were already using voluntarily, particularly those backed by major banks or institutional investors. The key difference? For many organisations, it's no longer optional.

AASB S2 organises climate disclosures around four core elements that work together. These are the same TCFD pillars many organisations already know (now part of the ISSB framework), and once it's broken down, similarities with what organisations already do becomes clearer.

1. Governance

This is common across most standards (like the ISO standards suite). It is about leadership awareness. Boards and management teams need to show they're aware and across how climate impacts affect or may affect the organisation, not just ticking boxes. This means explaining who makes the climate decisions, how information flows up to leadership, and how climate considerations influence what the organisation does.

2. Strategy

This is where organisations explore and analyse how climate change may impact the organisation. It's about looking ahead - sometimes way ahead - and thinking through what physical risks (floods, heat waves, droughts) and transition risks (new policies, shifting markets, technology changes) might mean for business models and bottom lines.

3. Risk management

Here's where the rubber meets the road on managing climate risks. It's about showing how climate risks get identified, assessed, and managed alongside all the other risks organisations deal with every day. The key is integration, treating climate risk as part of everyday business risk, not a separate issue.

4. Metrics and targets

This covers the metrics organisations use to assess and manage climate risks and opportunities - greenhouse gas emissions (starting with Scope 1 and Scope 2, with Scope 3 coming later), climate-related targets, performance indicators, and progress tracking. It's about having meaningful measures that show how you are tracking and whether strategies are working.

Not every organisation falls under AASB S2 requirements, and the rollout happens in waves. Think of it like a staged festival entry - the biggest acts go first, then medium-sized groups, then smaller players. The requirements are based on organisation size using revenue, assets, and number of people with 2 of the three requirements being met as the threshold for reporting.

Materiality is about focusing on climate issues that could influence the decisions people make when looking at financial reports. It's not about listing every climate impact - it's about focusing on the things that could meaningfully affect financial position, performance, or prospects. This connection between climate issues and financial outcomes is what makes AASB S2 similar to TCFD but different from general sustainability reporting. Organisations are looking at climate through a financial and risk lens - which has both advantages and limitations (more on that in a future post).

AASB S2 is interconnected by nature. Leadership oversight, risk identification, data collection, and business model impacts need to work together systematically. Understanding where gaps exist and how to sequence improvements can make the difference between organisations that meet compliance requirements by ticking boxes, and those that find genuine business value by embedding it into how they work.

The standard recognises that organisations need time to develop capabilities. More complex elements like scenario analysis and transition planning have no assurance requirements initially, while governance and emissions reporting start with limited assurance requirements. This graduated timeline extends limited assurance to all areas from Years 2 and 3, with reasonable assurance across all areas from Year 4 onwards.

The phased approach acknowledges that building these capabilities takes time and coordination across multiple business functions. Establishing strong foundations early creates a platform for more sophisticated disclosures as your capabilities mature. What starts as governance and emissions tracking evolves into scenario analysis, transition planning, and forward-looking risk assessment. A more confident, future-ready response to change.

While AASB S2 might feel like another compliance requirement, forward-thinking organisations are discovering real strategic benefits that go beyond meeting regulatory requirements.

• Improved risk management comes from systematic assessment of climate threats that could impact operations, supply chains, or markets.
• Enhanced investor confidence flows from transparent disclosure that helps stakeholders understand how organisations are preparing for climate-related changes.
• Better decision-making happens as climate considerations become embedded into capital allocation and strategic planning processes. It's about making climate factors part of normal business thinking, not something separate.
• Competitive advantage emerges as customers, partners, and talented people increasingly prioritise working with climate-responsible organisations.

AASB S2 isn't just about regulations. It's about building organisational resilience for an economy where climate considerations are becoming fundamental to long-term business resilience.

Data gaps in emissions measurement

Start with available data while building more comprehensive systems. The graduated approach gives organisations time to develop measurement capabilities in Scope 1 and Scope 2, while laying the foundations for more complex Scope 3 emissions.

Scenario analysis complexity

Beginning with qualitative scenario analysis using publicly available scenarios allows organisations to build understanding before developing quantitative approaches. The standard recognises this progression by not requiring scenario analysis in the first year.

Resource constraints

The phased implementation timeline allows organisations to focus on governance and strategy elements first - these often require coordination more than technical resources.

Embedding with financial reporting

Cross-functional collaboration between sustainability, finance, and risk management teams supports alignment between climate and financial disclosures. Most implementation challenges have practical responses. The standard's graduated approach acknowledges that building climate reporting capabilities takes time, collaboration, and thoughtful effort.

Remember: AASB S2 implementation is a marathon, not a sprint. The standard's graduated approach acknowledges that organisations build capabilities over time. Understanding AASB S2 requirements is the starting point. The challenge most organisations face isn't knowing what's required - it's building the internal capability to implement effectively, with limited resources, while making it meaningful for your team and organisation.