Understanding AASB S2: Australia’s New Climate-Related Financial Disclosure Standard
Guiding your business toward credible and compliant climate reporting
Ensure clarity, consistency and credibility in climate reporting
Australia’s corporate reporting landscape is undergoing a fundamental shift with the introduction of mandatory climate-related disclosures under AASB S2. This new standard is part of a broader regulatory reform introduced through the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024. It amends the Corporations Act to require large companies to disclose sustainability-related information in line with international best practice.
AASB S2 has been developed by the Australian Accounting Standards Board (AASB) and is closely aligned with the global framework set by the International Sustainability Standards Board (ISSB). It forms part of a wider move to embed climate risk into financial reporting, improve transparency for investors, and support Australia’s transition to a low-carbon economy.
The legislation mandates a phased approach to implementation, beginning in 2025, and introduces enhanced expectations around emissions disclosure, climate governance, scenario analysis and assurance. For many companies, this represents a step-change in both the scope and depth of disclosure required.
At LRQA, we are helping clients prepare for these changes with confidence. Our approach focuses on targeted, efficient and decision-useful reporting that goes beyond box-ticking. Our global experience in climate reporting, supply chain decarbonisation and independent assurance ensure that your disclosures are compliance-aligned but also action-orientated, supporting progress, not just paperwork.
What is AASB S2?
AASB S2 aligns closely with the ISSB’s International Financial Reporting Standards (IFRS) S2 and sets out how companies must disclose governance, strategy, risk management and performance in relation to climate change.
The standard requires the reporting of:
• Governance structures responsible for climate oversight
• Business strategies related to climate risks and opportunities
• Risk management processes for identifying and managing material climate impacts
• Metrics and targets, including scope 1, 2 and 3 greenhouse gas emissions
It also introduces new obligations for director-level declarations and external assurance, both of which reinforce the importance of credible, auditable, and decision-useful reporting. These requirements aren’t simply administrative, they’re intended to enhance investor trust and ensure that climate is embedded in financial planning and governance processes.
LRQA supports organisations to meet these requirements without unnecessary complexity. We help focus attention where it matters most, keeping reporting lean, accurate and fit for purpose.
Who has to report?
Both listed and unlisted entities that meet these criteria will be required to make mandatory climate disclosures. Implementation will be phased in according to regulatory thresholds.
These disclosures must be included in a separate Sustainability Report, forming the fourth component of an entity’s Annual Reporting suite alongside the Financial Report, Directors’ Report and Auditor’s Report.
Why act now?
Early action on AASB S2 brings measurable benefits. Companies that begin preparing now are better placed to manage risks, build investor confidence and ensure the quality of their disclosures. Waiting until reporting deadlines can increase the likelihood of data gaps, audit challenges and reputational risk.
LRQA helps organisations embed climate considerations into their broader business strategy. We offer end-to-end support for AASB S2 preparation, including gap analysis, emissions data readiness (including scope 3), scenario modelling, stakeholder engagement and assurance readiness.
Our work is designed to be scalable, cost-effective and impact-focused. We understand that many companies are facing resource constraints, internal fragmentation and time pressures. That is why our support is targeted, risk-based and aligned to real-world implementation; helping your teams to move forward with confidence and clarity.
How we can help
Gap analysis
Assess current reporting against AASB S2 and ASRS requirements, identify gaps and provide a clear roadmap to compliance.
Technical advisory
LRQA provides tailored support for emissions reduction planning, climate risk management and capacity building across internal teams and supply chain partners. Our advisory services are built around your organisation’s unique structure, needs and readiness level.
GHG verification
Ensure accurate, credible GHG emissions reporting with LRQA’s expert verification services, aligned with AASB S2 requirements and global standards like ISO 14064.
Reporting and disclosure services
Our reporting and disclosure Services cover climate, sustainability and responsible sourcing and are customised to meet your organisation’s specific requirements.
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Frequently Asked Questions
What is AASB S2?
AASB S2 is Australia’s mandatory climate-related financial disclosure standard, effective 1 January 2025. It aligns with IFRS S2 and requires businesses to report on climate risks, opportunities and greenhouse gas (GHG) emissions, including Scope 1, 2 and 3 emissions. The standard is designed to enhance transparency, improve investor confidence and integrate climate considerations into corporate governance and strategy.
Who needs to comply with AASB S2?
Both listed and unlisted entities meeting specific thresholds must report in phases:
- Group 1 (FY ending Dec 2025): Large entities with 500+ employees, $500M+ revenue, or $1B+ assets.
- Group 2 (FY ending June 2026): Mid-sized entities with lower thresholds.
- Group 3 (FY ending July 2027): Additional businesses phased in over time.
What needs to be reported under AASB S2?
Organisations must disclose a range of climate-related financial and strategic data, increasing in complexity over time. Key areas include:
- Governance: How climate risk is managed at the board and executive levels.
- Strategy: Transition plans, emissions reduction targets, capital allocation and carbon offset use.
- Risk & Opportunity Management: Identification and financial impact of climate risks and opportunities.
- Metrics & Targets: Scope 1 & 2 emissions in the first year; Scope 3 reporting from year two.
- Financial Materiality: Climate risks that materially impact financial performance must be disclosed.
What are Scope 1, 2 and 3 emissions?
Scope 1: Direct emissions from company-owned sources (e.g., fuel combustion).
Scope 2: Indirect emissions from purchased electricity, steam, or heating.
Scope 3: Indirect emissions across the value chain (e.g., supplier emissions, transportation, waste).
Why is Scope 3 reporting challenging?
Scope 3 emissions require tracking indirect emissions across supply chains, often involving multiple third-party suppliers and data collection complexities. As this requirement begins in the second reporting year, businesses need to build systems now to track and measure these emissions effectively.
When do disclosures need to be submitted?
Disclosures are due at the same time as financial reports, within a Sustainability Report.
- For most Group 1 companies: Reports are due by September 2026 for the 2025 financial year.
Where do these disclosures appear?
AASB S2 mandates a separate Sustainability Report, forming the fourth pillar of corporate annual reporting, alongside:
- Financial Report
- Directors' Report
- Auditor’s Report
How will the reporting requirements increase over time?
AASB S2 introduces a progressive reporting framework:
- Year 1: Qualitative climate risk disclosures allowed; Scope 1 & 2 emissions reporting begins.
- Year 2: Scope 3 emissions reporting becomes mandatory.
- Future years: Increased quantitative disclosures, stricter assurance requirements.
By July 2030, all disclosures will require reasonable assurance.
What happens if a company doesn’t comply?
Non-compliance results in civil penalties and failure to report accurately could lead to regulatory scrutiny and reputational risks.
Why are climate-related financial disclosures required?
While mandated, these disclosures help businesses:
- Align with investor expectations and ESG requirements.
- Identify risks and opportunities in a decarbonising economy.
- Improve long-term business resilience and sustainability strategies.
How can businesses prepare for AASB S2?
To ensure compliance, businesses should:
- Conduct a gap analysis to assess readiness for AASB S2.
- Develop data collection systems for Scope 1, 2 and 3 emissions.
- Integrate climate risk assessments into governance frameworks.
- Ensure alignment with global sustainability frameworks like IFRS S2 and TCFD.
Why work with us?
With over 800 ESG experts globally, we work alongside you to create solutions that address the unique challenges faced by your business. We have deep expertise in existing and forthcoming ESG legislation and are relied on by some of the world’s most recognisable brands. We partner with you to understand your unique challenges, building a proactive and pragmatic approach to ESG due diligence.
Global capability
Our solutions are delivered by a global team of specialists in ESG, supply chain, cybersecurity and compliance. This experience and reach help us understand the risks and opportunities your business faces today, wherever you operate.
We partner with you
To fully understand the challenges you face and identify the right solutions, we form deep partnerships with our clients that enable us to gain a comprehensive understanding of their business risks and opportunities.
A history of firsts
We were the first to receive accreditation to deliver certification services for a range of quality, environmental, and health and safety standards across the globe. And we continue to be instrumental in developing a variety of ESG-related standards and schemes.
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