AASB S2 — Climate-related Disclosures — is the operative standard for Australia’s mandatory sustainability reporting regime. If you’re preparing to report for the first time, or trying to understand what will actually be required of your team, this guide explains each of the four disclosure areas in plain terms.

Background: where AASB S2 comes from

AASB S2 is closely modelled on IFRS S2, published by the International Sustainability Standards Board (ISSB) in 2023. The Australian standard was published by the AASB and is mandatory for Australian reporting entities that meet the size thresholds under the Corporations Act.

Unlike voluntary frameworks such as CDP, TCFD, or GRI, AASB S2 disclosures must be included in the entity’s annual report and are subject to external assurance. This raises the bar considerably on data quality and methodology.

Pillar 1: Governance

The governance section requires disclosure of how the board and management oversee and manage climate-related risks and opportunities.

What this means in practice:

Which board committee has responsibility for climate oversight, and how frequently does it receive briefings?
How does the executive team incorporate climate considerations into strategy and capital allocation decisions?
Are there management roles with explicit accountability for climate risk management?

The goal is to demonstrate that climate is integrated into actual governance structures — not just mentioned in a strategy document. Boards cannot simply delegate this to the sustainability team and consider it done.

Pillar 2: Strategy

The strategy section asks you to identify the climate-related risks and opportunities that could affect your business, and to explain how your strategy accounts for them.

Key elements:

Risk and opportunity identification — what physical risks (floods, heat, drought) or transition risks (carbon pricing, policy change, technology shifts) are material to your business?
Financial impact — how do these risks affect your financial position, performance, and cash flows over short, medium, and long-term horizons?
Climate resilience — how does your strategy hold up under different climate scenarios, including a 1.5°C and higher-warming scenario?

Scenario analysis is one of the most challenging aspects of this pillar for first-time reporters. It requires structured thinking about the future under different climate conditions — not a precise forecast, but a disciplined assessment of what different pathways might mean for the business.

Pillar 3: Risk Management

This section describes how your organisation identifies, assesses, and manages climate-related risks, and how that process integrates with your overall enterprise risk management framework.

What assessors look for:

Is climate risk formally included in your risk register?
What criteria do you use to assess climate risk likelihood and magnitude?
Who is responsible for managing climate risks, and how is that escalated?

A common gap is treating climate risk management as separate from the main risk framework. Assessors expect to see integration, not a parallel climate-only process.

Pillar 4: Metrics and Targets

This is the quantitative core of the standard, and it’s where data infrastructure matters most.

Required metrics include:

Scope 1 emissions — direct emissions from owned or controlled sources (fuel combustion, process emissions)
Scope 2 emissions — indirect emissions from purchased electricity, heat, or steam (location-based and market-based)
Scope 3 emissions — value chain emissions (subject to a transition relief period)
Climate-related targets — any quantitative targets set, progress against them, and the methodology used

All emissions must be reported in CO₂-equivalent (CO₂e), using an approved methodology and current emission factors (in Australia, the NGA Factors published by DCCEEW).

Critically, these figures must be traceable. An assurance provider will ask to see the source documents (invoices, meter readings, factor references) that support the reported totals. “A spreadsheet our team compiled” is not a sufficient response.

The transition relief provisions

The AASB has built in some transition relief for earlier years of mandatory reporting:

Scope 3 emissions can be omitted from the first one or two years of reporting, depending on the group
Comparative prior period data is not required in year one
Scenario analysis has an additional year of relief for smaller reporting entities

This relief buys time — but it doesn’t remove the need to start building data collection processes now. Year two comes quickly.

What this means for your data

Every number in the metrics section needs a chain of evidence: source document → data extraction → emissions factor applied → calculation → total reported. Without that chain, limited assurance becomes difficult and reasonable assurance is impossible.

The businesses that are well-positioned for AASB S2 reporting have invested in making that chain systematic, not ad hoc.

Ayika is designed to give you that chain: from utility invoices and meter readings through to traceable, assurance-ready emissions figures. See how it works.

A Simple Guide to AASB S2 Climate Disclosures