Draft AASB Sustainability Standards – The Next Step Towards Mandatory Climate Disclosures in Australia
On 23 October 2023, the Australian Accounting Standards Board (AASB) took a significant step forward in developing climate reporting standards for Australian entities by releasing the Australian Sustainability Reporting Standards Exposure Draft. These are commonly being referred to as the Draft AASB Sustainability Standards or the Draft ASRS Standards.
The AASB’s Exposure Draft clarifies the information that Australian entities will be required to disclose under Australian government’s proposed mandatory climate-related financial disclosures, which are set to commence for Australia’s largest listed and unlisted companies and financial institutions from 1 July 2024.
“The move to introduce standardised, internationally aligned reporting requirements for large entities will provide Australians and investors greater consistency, transparency and accountability.”Dr Keith Kendall, Chair of AASB
AASB Sustainability Standards Overview
The Exposure Draft contains three separate AASB Sustainability Standards (Draft ASRS Standards):
- Draft ASRS 1 General Requirements for Disclosure of Climate-related Financial Information – contains requirements relating to the presentation of disclosures
- Draft ASRS 2 Climate-related Financial Disclosures – details specific climate-related disclosure requirements
- Draft ASRS 101 References in Australian Sustainability Reporting Standards –contains versions of non-legislative documents that are referenced in the ASRS Standards and does not impose any additional requirements.
The Draft ASRS Standards are based on the global best-practice International Sustainability Standards Board’s (ISSB’s) IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures standards that were released in June 2023. We delved into the ISSB standards in an earlier article.
AASB Sustainability Standards Vs ISSB Standards
While the Draft AASB Sustainability Standards are very similar to the ISSB standards, they differ in two main ways:
- ASRS 1 does not require an entity to disclose sustainability-related financial information, except in relation to climate. Accordingly, the primary focus of the ASRS Standards will be on climate-related disclosures.
- The ASRS Standards have been adapted to the Australian landscape, specifying the use of Australian legislation, frameworks and methodologies which underpin certain disclosures. For example, the calculation of greenhouse gas emissions should be measured using methodologies outlined in the National Greenhouse and Energy Reporting Scheme (NGERS) legislation. As a further example, climate resilience must be assessed against at least two possible future states, and one of these must be consistent with the most ambitious global temperature goal set out in the Climate Change Act 2022 (1.5C).
In addition, the Draft ASRS Standards are proposed to apply not only to companies that will be subject to mandatory disclosure requirements, but also to not-for-profit entities.
AASB Sustainability Standards – actions to take now
The release of the Draft AASB Sustainability Standards ASRS 1, ASRS 2 and ASRS 101 are a key and welcome step on the road towards mandatory climate-related disclosures.
Companies should review the Draft ASRS Standards to ensure they understand the reporting requirements, the gaps in their existing reporting, and the steps and time required to ensure compliance.
This is particularly salient for large Australian companies, who may be required to report as early as 1 July 2025. In addition, stakeholders can provide feedback to the Draft ASRS Standards during the consultation period, which lasts until 1 March 2024.
Learn more about the Draft ASRS Standards and climate risk reporting
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Julian is a qualified lawyer and teacher with broad industry experience in commercial law, teaching and management consulting on projects involving carbon accounting and disclosures under the TCFD framework. View Julian’s Profile