Is your organisation ready for ESG compliance?
Meet Australia’s AASB S1 & S2 climate‑risk disclosure standards with Claritas ESG – the AI chatbot that cuts research time, clarifies requirements and helps you report with confidence.
of ASX 200 companies have a Net‑Zero target
disclose some Scope 3 emissions
have undertaken & disclose scenario analysis
Defining ESG & Its Importance
ESG (Environmental, Social, Governance) is a framework for assessing non‑financial factors that influence a company’s long‑term value. ESG initiatives enhance resilience, strengthen stakeholder trust and drive operational efficiency.
- Climate mitigation & GHG emissions
- Energy & resource efficiency
- Biodiversity & natural capital
- Diversity, equity & inclusion
- Human rights & modern slavery
- Workplace health & safety
- Board oversight & diversity
- Anti‑corruption & tax transparency
- ESG‑linked remuneration
Australia’s Mandatory Sustainability Reporting
The Australian Sustainability Reporting Standards (ASRS), aligned to IFRS S1/S2, apply from 1 Jan 2025 for Group 1 entities.
General Sustainability‑related Financial Disclosure
Requires entities to disclose material sustainability risks & opportunities across short, medium & long‑term horizons.
Climate‑related Disclosures
Focuses on governance, strategy, risk management, metrics & targets – including GHG emissions.
Effective 1 Jan 2025Who Needs to Report & When?
Group 1
From 1 Jan 2025
500+ employees, $1bn+ assets or $500m+ revenue; NGER reporters.
Limited assurance initially.
Group 2
Est. 1 Jul 2026
250‑500 employees, $500m‑$1bn assets or $200m‑$500m revenue.
Follows Group 1 path.
Group 3
Est. 1 Jul 2027
100‑250 employees, $25m‑$500m assets or $50m‑$200m revenue.
Assurance phases in.
Thresholds for Groups 2 & 3 are indicative pending legislation.
Deep‑dive – AASB S2 Climate Disclosure Pillars
Understand the four key areas required under AASB S2.
Governance
Key disclosure elements:
- Board & committee oversight of climate risks
- Management competencies & roles
- Integration into strategic decisions
Practical Tips
- Update governance frameworks & charters
- Link executive remuneration to climate KPIs
Director Duties & AASB S2 Liability Framework
Understanding the comprehensive governance requirements and liability protections for boards navigating mandatory sustainability reporting in Australia.
Board & Director Responsibilities
ASIC guidance (RG 280.55) emphasizes that directors must apply an inquiring mind to sustainability reports while making independent assessments even when relying on expert information.
Key Director Obligations:
- Understand climate-related risks (physical & transition) that could affect the entity's prospects
- Establish systems to identify, assess and monitor material financial risks and opportunities
- Implement controls, policies and procedures for sustainability reporting and record-keeping
- Apply critical lens to methodologies, inputs, assumptions and potential material omissions
- APRA-regulated entities: additionally refer to CPG 229 Climate change financial risks
Directors' Declaration Requirements
The declaration requirements follow a phased implementation approach:
Before 1 January 2028
Directors must declare that, in their opinion, the entity has taken reasonable steps to ensure the sustainability report complies with the Corporations Act and AASB S2.
From 1 January 2028
Directors must declare whether, in their opinion, the sustainability report is in accordance with the Corporations Act and AASB S2.
Companies should develop clear policies defining what constitutes "reasonable steps" for director due diligence, similar to prospectus verification processes but adapted to AASB S2 requirements.
Modified Liability Regime
Australia's transitional framework provides temporary civil liability protection for specific "protected statements" during the implementation phase:
| Statement Type | Protection Period |
|---|---|
| Forward-looking climate statements | 1-Jan to 31-Dec 2025 only |
| Scope 3 emissions disclosures | 1-Jan 2025 to 31-Dec 2027 |
| Scenario analysis | 1-Jan 2025 to 31-Dec 2027 |
| Transition plan disclosures | 1-Jan 2025 to 31-Dec 2027 |
Important Liability Limitations
- Protection applies only to statements made for the purpose of complying with sustainability standards
- Statements outside sustainability reports are protected only when required by Commonwealth law
- Voluntary disclosures, summarized statements, and expanded content are not protected
- Cross-referenced statements in sustainability reports do not receive liability protection
Governance Best Practices
- Create clear protocols for creating, identifying, and updating protected statements
- Establish board committee oversight of sustainability reporting
- Document board challenge processes for climate-related disclosures
- Implement verification processes similar to prospectus due diligence
- Maintain decision records regarding voluntary vs. mandatory disclosures
Frequently Asked Questions: Director Duties
Most ASX 200 companies now conduct board-level reviews of climate risks quarterly, with in-depth reviews annually. Learn more from our ESG chatbot.
While not explicitly defined by ASIC, appropriate verification processes typically include board approval of methodologies, external review of data, and documented challenge sessions. Consult our chatbot for industry-specific guidance.
Indirect Impact Through the Value Chain
Even non‑reporters will face data requests from customers, financiers & insurers preparing their own ASRS reports.
- GHG emissions inventory & assurance (Scopes 1‑3)
- Emission‑reduction strategies & targets
- Climate resilience & transition plans
- Energy consumption & intensity metrics
- Internal climate governance policies
Sustainable Supply Chain
Optimizing operations for environmental efficiency
Ready to navigate AASB S1 & S2 with confidence?
Claritas helps Australian companies understand requirements, streamline reporting, and turn compliance into a strategic advantage.