How to Set and Report Climate Targets Under AASB S2

AASB S2 does not require Australian businesses to have climate targets. But if you do have targets — a net zero commitment, an emissions reduction goal, a science-based target — the standard requires detailed and specific disclosure of what the target is, how it was set, and how you’re tracking against it.

This distinction matters: setting a target creates disclosure obligations. An informal aspiration (“we’d like to be net zero by 2050”) that hasn’t been formally adopted doesn’t trigger the same requirements. But once a target is formally set and communicated, AASB S2’s target disclosure requirements apply.

What AASB S2 requires for target disclosures

For each climate-related target, the standard requires disclosure of:

1. The metric. What are you measuring? Total absolute Scope 1 and 2 emissions? An intensity ratio (emissions per unit of revenue, per square metre, per tonne of product)? Scope 3 emissions in a specific category?

2. The objective. What is the target designed to achieve? Net zero? A 50% absolute reduction? Carbon neutrality for operations? Alignment with a specific temperature pathway (1.5°C Science Based Target)?

3. Scope. Which Scope 1, 2, and Scope 3 categories are included? Are all operations included, or only certain geographies or business units?

4. Time period. The base year (starting point), the target year (end point), and any interim milestones along the way.

5. Base year emissions. The actual emissions in the base year, in tonnes CO₂e. If you’re targeting a 50% reduction from 2022, you need to disclose what your 2022 emissions were.

6. Interim milestones. For long-dated targets (2030, 2040, 2050), intermediate checkpoints demonstrate that the pathway is credible and not back-loaded.

7. Absolute or intensity-based. An absolute target commits to reducing total emissions regardless of business growth. An intensity target commits to reducing emissions per unit of activity — which may allow total emissions to rise if the business grows faster than the intensity improves.

8. How progress is monitored. Who is responsible for tracking progress? How often is it reviewed? How is it reported internally?

9. Role of carbon credits. If the target is a net target (relying on offsets for any component), disclose the anticipated reliance on carbon credits and the type of credits.

Absolute vs intensity targets

Absolute targets are the preferred form under most credible frameworks (Science Based Targets initiative, IPCC guidance). They commit to reducing the total amount of greenhouse gases emitted. If the business grows, absolute reductions still apply.

Intensity targets measure emissions relative to a unit of activity: per tonne of product, per square metre of building space, per dollar of revenue. They can be appropriate where business growth is expected and total emissions growth is difficult to avoid in the short term — but they are less credible for climate purposes because they can allow total emissions to increase.

For most AASB S2 reporters, an absolute target is expected unless there is a strong justification for intensity-based measurement.

Science-based targets

The Science Based Targets initiative (SBTi) provides methodology and validation for targets aligned with climate science. An SBTi-validated target must demonstrate:

• Scope 1 and 2 reductions consistent with a 1.5°C pathway
• Scope 3 assessment and reduction plans
• Use of the SBTi Corporate Net-Zero Standard (for net zero targets) or Near-Term targets

SBTi validation is not required by AASB S2, but it provides a recognised external credibility standard for targets that investors and customers increasingly expect.

The base year problem

A target without a credible base year is not a target — it’s a statement. Getting the base year right is critical:

• Use an actual measured year, not a projected or estimated year
• The base year emissions should be calculated using the same methodology as ongoing reporting
• If the base year predates rigorous emissions measurement, acknowledge the limitations

Base year recalculation: if your business significantly changes (through acquisition, divestiture, or major operational change), you may need to recalculate the base year to keep the target meaningful. AASB S2 requires disclosure of any such recalculations.

Tracking and reporting progress

Once a target is set, annual progress disclosure is required. This involves:

• The current year’s emissions against the base year
• Progress toward any interim milestones
• Whether the target trajectory is on track, and if not, what remediation is planned
• Any changes to the target scope, methodology, or base year

Progress reporting requires consistent annual emissions measurement — which brings you back to the data infrastructure question. A target is only as credible as the measurement system behind it.

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Ayika provides the annual emissions measurement system that target tracking depends on — consistent, comparable, and assurance-ready each year. Book a demo.