When AASB S2 mandatory reporting begins for your entity, the result is a formal document lodged alongside your annual report. Understanding what that document must contain — and what ASIC and the Corporations Act require — is the foundation for structuring your reporting process.

The climate statement

The primary component of mandatory sustainability reporting is the climate statement — a formal document prepared in accordance with the Corporations Act (as amended) and AASB S2.

The climate statement must comply with AASB S2 in the same way that financial statements must comply with the Accounting Standards. ASIC has oversight authority and can take action where statements are non-compliant or misleading.

A complete AASB S2 climate statement includes disclosures across four pillars:

Governance — How the board and management oversee and manage climate-related risks and opportunities. This includes the specific bodies responsible, how frequently they receive climate-related information, and how climate considerations are integrated into decision-making.

Strategy — The climate-related risks and opportunities identified, their potential effects on the business model and financial position across short, medium, and long-term horizons, and the resilience of the strategy under different climate scenarios.

Risk management — The processes for identifying, assessing, prioritising, and monitoring climate-related risks and opportunities, and how these integrate with the entity’s overall enterprise risk management framework.

Metrics and targets — Quantitative disclosures including Scope 1 and Scope 2 greenhouse gas emissions (and eventually Scope 3), plus any climate-related targets set and progress against them. All emissions figures must be in CO₂-equivalent tonnes.

Notes to the climate statement

The climate statement should include notes that explain:

Methodology — how emissions data was calculated, which boundaries were applied, which emission factor source and version was used
Estimation and uncertainty — which figures include estimates, the basis for estimation, and the associated uncertainty
Scope 3 disclosure (when applicable) — which categories are included, how value chain boundaries are defined, and the approach to data collection

These notes are analogous to accounting policy notes in financial statements — they allow readers to understand the basis for the figures and assess their reliability.

The directors’ declaration

Under the Corporations Act, the sustainability report must include a directors’ declaration — a formal statement by the directors that:

The climate statement complies with the Corporations Act and AASB S2
The climate statement gives a true and fair view of the climate-related risks and opportunities and the entity’s management of them
The directors are not aware of any circumstances that would prevent the statement from giving a true and fair view

This declaration carries personal accountability for directors. It is the mechanism that aligns sustainability reporting with financial reporting governance.

The assurance report

A mandatory sustainability report must be accompanied by an assurance report from a registered company auditor or approved auditor. The assurance report states the level of assurance obtained (limited or reasonable) and the assurance provider’s conclusion.

In the initial years, limited assurance applies. The assurance report gives readers confidence that the climate statement has been independently reviewed against AASB S2 requirements.

Lodgement and access

The sustainability report — comprising the climate statement, notes, directors’ declaration, and assurance report — must be lodged with ASIC as part of the annual report. For listed entities, it is also lodged with the ASX.

ASIC has indicated it will actively monitor sustainability reports for compliance with AASB S2, paying particular attention to:

Whether all required disclosure areas have been addressed
Whether emissions disclosures are supported by a clear methodology
Whether governance and strategy disclosures are substantive (not boilerplate)
Whether the directors’ declaration is appropriately supported by the underlying data

Starting from the structure

The most practical starting point when preparing for first-year reporting is to work from the AASB S2 standard directly — or from ASIC’s guidance and AASB S2 disclosure checklists — and map your existing processes to each required disclosure.

Gaps quickly become visible: most first-time reporters have some governance documentation, partial emissions data, and limited risk assessment. The gap between what they have and what the standard requires is the scope of work to be done before the first reporting period.

Ayika provides the data collection and audit trail infrastructure that underpins the metrics and notes sections of a compliant climate statement. Book a demo to see how it works.

What Australian Businesses Need to Include in a Sustainability Report Under AASB S2