Introduction

Australia’s first mandatory sustainability reports have now been lodged, and the early lessons are already clear. ASIC has shared some of its own observations from reviewing this first wave of reports.

Our SW Sustainability experts have also drawn on our experience supporting first-wave reporters, and we are seeing that the biggest challenges are not purely technical. They often sit at the intersection of judgement, governance, data quality, and documentation.

For organisations preparing for upcoming reporting cycles, the first wave provides a useful preview of where effort is needed most. Regulators have also started to signal their areas of focus, including the need for clear, decision-useful disclosures, defensible judgements, and reporting that aligns with the statutory framework under Chapter 2M and AASB S2.

Below are some of the practical insights we are seeing from the first wave of sustainability reporting in Australia and what they may mean for businesses getting ready to report.

Materiality is where many of the hardest judgements begin

Climate-related risks and opportunities sit at the centre of the reporting process. The challenge is not just identifying them, but assessing and documenting them in a way that is both business-relevant and reporting-ready.

One of the clearest lessons from the first wave is that education and engagement matter. For many boards, management teams, and operational stakeholders, sustainability reporting is still new.

Structured workshops can be an effective way to identify risks and opportunities. They serve a dual purpose by building management’s understanding of sustainability reporting and capturing the input needed for the report, along with the supporting documentation that underpins key disclosures.

A key lesson is the need to link climate risk to business risk. Some organisations initially conclude that they do not face significant climate risk. In practice, climate-related matters often overlap with existing business risks such as water availability, energy costs, asset resilience, and supply chain disruption. These issues may already be managed operationally, but they still need to be assessed through a climate-reporting lens.

When identifying the risk, transition risks in the value chain are also easy to overlook, even though the assessment may need to extend beyond the reporting entity itself.

Once risks are identified, the next step is to apply a clear materiality framework to determine what should be reported. That framework should evolve over time as the organisation builds capability, refines its understanding, and responds to input from stakeholders, auditors, and the market.

Materiality is not just about identifying material risks. It also requires judgement about what information about those risks matters to users. Where an organisation has already been affected by events such as flooding or bushfire, users may reasonably expect disclosure of that experience and its future implications, even if the historical financial impact was not, on its own, quantitatively material. This is consistent with ASIC’s early observations on sustainability reporting.

Greenhouse gas reporting is as much a process challenge as it is a data challenge

For many first-time reporters, greenhouse gas reporting has highlighted that the issue is not simply whether data exists, but whether it is sufficiently complete, consistent, and reliable for reporting and assurance purposes. Questions often arise around what to do when data is incomplete, how to use estimates appropriately, and how to document the basis for key assumptions.

A recurring practical issue is the need to reconcile emissions data back to underlying operational and financial records. For example, electricity data may need to be checked against site lists, invoices, or lease registers to support completeness. This is often where reporting teams discover that existing systems were not designed with external reporting in mind.

It is also important to recognise that some inputs are not static. Emission factors, global warming potential assumptions, and data sources can change over time. This means organisations need a methodology that is not only technically sound, but also documented well enough to explain changes from one reporting period to the next. AASB S2 specifically requires disclosures about greenhouse gases and the methods, assumptions, and inputs used.

Most organisations begin with manual processes, especially in the first year. That is often a practical starting point, but it quickly becomes clear that stronger internal processes and review controls are needed. Internal sense-checking is critical. In early cycles, teams are still building the experience needed to identify anomalies or challenge unusual results, so draft outputs and iterative review become an important part of getting to a robust result.

For larger groups, the complexity increases quickly. Different subsidiaries, business units and jurisdictions may rely on different source systems, definitions, and data owners. Starting early and avoiding assumptions about data availability are both critical.

Governance disclosures require more detail than many expect

Governance has emerged as one of the key focus areas in first-year reporting. While some organisations expected this section to be relatively straightforward, in practice it often requires careful drafting because the disclosures are qualitative, specific, and closely tied to how climate-related matters are actually governed within the business.

This is an area where it pays to slow down and work through the disclosure requirements carefully. Organisations need to balance the detailed requirements in AASB S2 with the broader legal and governance context under the Corporations Act, including the responsibilities of directors and those charged with governance.

The most effective governance disclosures tend to explain climate-related oversight in the context of the existing business rather than describing climate as a separate overlay. Existing board, management, and risk committee structures may already address relevant business risks. The task is often to identify where climate-related responsibilities already sit, where gaps remain, and how those roles and processes should be described clearly in the report.

Assurance readiness should start earlier than most teams think

The assurance process is still relatively new for many preparers, auditors, and boards. One practical lesson from the first wave is that organisations should allow more time than they initially expect for auditor review, challenge, and iteration. Multiple rounds of questions are common, and that needs to be built into the overall reporting timetable from the outset.

Good documentation makes a significant difference. A well-prepared internal paper trail can reduce friction during assurance by showing how conclusions were reached, what alternatives were considered, and where management judgement was applied.

In many cases, the published sustainability report is only the end product. It does not, by itself, show the underlying process, judgements, and evidence that sit behind the disclosures. That is why supporting documentation matters. This may include long lists of risks and opportunities considered, materiality assessments, rationale for inclusion or exclusion, records of scenario choices, and explanations of key assumptions. In practice, the draft report can be a useful checklist for identifying where further internal documentation is needed.

Key judgements and significant reporting decisions should also be summarised and presented to senior management and the board in a way that aligns with the organisation’s governance structure. This not only supports internal oversight, but also helps auditors understand the business context and the basis for management’s conclusions.

Key takeaway: First-year reporting does not need to be perfect, but it does need to be disciplined

One of the clearest messages from the first wave is that organisations should not let the pursuit of perfection delay progress. Sustainability reporting capability will evolve over time. What matters in the first year is establishing a proportionate, well-governed, and evidence-based process that can support the disclosures being made. In many cases, the act of drafting the report itself helps sharpen governance, data processes, and internal accountability.

ASIC’s observations

From ASIC’s media release on their initial observations from sustainability reporting, we note the following key points:

• 259 sustainability reports were lodged for the year ended 31 December 2025.
• ASIC observed a meaningful increase in both quantity and quality of climate-related financial information compared to prior voluntary disclosures.

However, some key deficiencies and areas for improvement were noted as follows:

Inappropriate disclaimers

Statements limiting reliance or responsibility (e.g. ‘not for investment decisions’) are not permitted and may mislead users.

Incomplete risk identification

Some entities failed to incorporate past events and known exposures when assessing future climate risks.

Weak disclosure of judgements/assumptions

Lack of clarity around key estimates and uncertainties reduces decision-usefulness.

Information overload risk

Excess voluntary disclosures can obscure material AASB S2 information.

Cross-referencing issues

Non-compliant references (e.g. to websites or unclear sections) were observed.

Climate-related targets

Inconsistent interpretation, entities must include targets required by law/regulation (e.g. Safeguard Mechanism).

ASIC expectations for 30 June 2026 reporters include:

• use ‘reasonable and supportable’ information, including forward-looking data
• ensure clear, proximate disclosure of key judgements and uncertainties
• maintain discipline on materiality and clarity, avoiding clutter
• ensure strict compliance with AASB S2 and RG 280, particularly for cross-referencing.

How SW can help

Whether you are just starting your sustainability reporting journey or preparing for assurance, we can support your team with:

• materiality assessments, including the identification and evaluation of climate-related risks and opportunities
• facilitated workshops that engage management and gather information, serving the dual purpose of capability building and supporting the reporting process
• greenhouse gas reporting and the drafting of sustainability reports
• preparing for assurance readiness
• targeted training for boards and management
• preparation of the internal documentation needed to support judgements and disclosures.

Contributors

Jimmy Cao

The post First-wave sustainability reporting in Australia: Practical lessons from ASIC and SW’s team of experts appeared first on SW Accountants & Advisors.

Our experts will provide you with topical content of relevance as well as an update on what’s new in financial reporting, including information about the following topics:

• Accounting standard changes  
• International Financial Reporting Interpretations Committee update  
• Key focus areas for 30 June reporting  
• ASIC update  
• Other regulatory changes
• Insights from the first sustainability reporting cycle

Financial Reporting update for 30 June 2026

Expert speakers

Tom Mullarkey
Partner
SW

René Muller 
Partner
SW

Jimmy Cao
Associate Director
SW

The post Financial Reporting webinar series appeared first on SW Accountants & Advisors.

Our experts will provide you with topical content of relevance as well as an update on what’s new in financial reporting, including information about the following topics:

• Accounting standard changes and EDs
• International Financial Reporting Interpretations Committee update
• Key focus areas for 30 June reporting
• ASIC update
• Sustainability standards
• Other regulatory changes

Please note that we will host two session this year, the details for both sessions are below.

Session 1 – Financial Reporting update for 30 June 2025

Session 2 – Financial Reporting update for 31 December 2025

Expert speakers

Tom Mullarkey
Partner
SW

René Muller 
Partner
SW

Brent Sheers
Partner
SW

Jimmy Cao
Associate Director
SW

The post Financial Reporting webinar series appeared first on SW Accountants & Advisors.

Introduction

Following the passage of the legislation by the Australian Parliament, the AASB approved two inaugural sustainability reporting standards modelled after international guidelines and incorporate local legislation.

Climate first approach

Unlike the International Sustainability Standards Board standards, Australian sustainability standards have adopted a climate-first approach by making AASB S2 Climate-related Disclosures mandatory. Companies with reporting obligations must disclose key climate-related areas, including:

• governance and strategies
• risks and opportunities
• metrics and targets concerning emissions, covering direct emissions (Scope 1), energy consumption (Scope 2), and value chain emissions (Scope 3).

Additionally, AASB S2 incorporates changes mandated by legislation, including enhanced scenario analysis. Entities must disclose scenario analysis using at least both of the following scenarios:

• low warming scenario: global average temperature increase is limited to no more than 1.5 degrees
• high warming scenario: global average temperature increase exceeds 2.5 degrees.

Voluntary sustainability disclosure for other topics

AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information covers various sustainability topics including biodiversity and human capital and remains a voluntary standard. This approach contrasts from the ISSB standards which phase  in additional issues from the second year after climate disclosures.

To assist companies in adopting the ISSB-based sustainability standards voluntarily, the IFRS Foundation has published guidance for preparers.

Audit requirements

With the publication of the accounting standards, we are one step closer to implementation. The first group of companies must start reporting for the financial year ending 31 December 2025. However, one key missing piece is the auditing standards, as the company’s financial auditor will audit the sustainability report. The Auditing Assurance Standards Board (AUASB) is currently consulting with stakeholders to determine the assurance rollout for climate-related disclosures. By 2030, all sustainability reports will be subject to audit.

Based on the most recent exposure draft, the proposed audit requirements will be phased in. In the first year of reporting, different content will be subject to varying assurance requirements:

• limited assurance over Scope 1 and 2 emissions for the first year, moving to reasonable assurance thereafter
• other areas of disclosure will gradually be subject to review or audit from the second year onwards.

How SW can help

To make sure you are prepared, SW can conduct a gap analysis and create a road map to guide you on your sustainability journey.

Our audit and advisory experts are well-versed in sustainability accounting standards and will guide your business through any Australian reporting developments.  

Keep an eye out for our alerts on the finalisation of the sustainability reporting assurance standard. 

Contributors

Jimmy Cao

The post From legislation to action: Australia’s sustainability reporting standards finalised appeared first on SW Accountants & Advisors.

Every month, our experts will provide insights and actionable knowledge that will empower your organisation to navigate the evolving landscape of sustainability reporting.

Some key topics include:

• Australian Sustainability Standards requirements
• Sustainability reporting materiality assessment
• Financial modelling
• Climate scenario analysis
• Identification or material climate risks and opportunities

Webinar details

Session 1 – Getting started on your sustainability reporting journey

Session 2 – Climate reporting materiality assessment

Session 3 – Identification of climate risks and opportunities

Session 4 – Compiling your carbon inventory

Session 5 – Climate scenario analysis

Session 6 – Governance and policies

Session 7 – Risk management

Session 8 – Systems and processes

Session 9 – Climate-related metrics and targets

Session 10 – Disclosure requirements of AASB S2

Expert speakers

Tom Mullarkey
Partner
SW

Matthew Paull
Associate Director
SW

René Muller 
Partner
SW

Jimmy Cao
Associate Director
SW

John Dorazio
Director
SW

The post Sustainability Reporting webinar series 2025 appeared first on SW Accountants & Advisors.

Introduction

To enhance the transparency and accountability of climate-related matters, on 9 September 2024, the Australian Parliament passed Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024.  

This highly anticipated bill mandates that large entities adhere to the new sustainability reporting standards issued by the AASB, which align with international standards. The first group of entities will be required to submit their sustainability reports from annual reporting periods beginning 1 January 2025, with smaller entities being phased in over the following years.  

New reporting requirements

A new sustainability reporting requirement has been introduced for disclosing information on climate-related matters. When applicable, the sustainability report must be prepared alongside the annual report. This report will adhere to sustainability reporting standards issued by the Australian Accounting Standards Board, which are closely aligned with international standards.

This alignment will ensure much-needed comparability across companies. The Australian equivalent standards propose making climate reporting mandatory, while other sustainability topics, such as biodiversity and human capital, remain optional.

Additionally, the final bill mandates further scenario analysis based on feedback from Parliament. Entities must disclose scenario analysis using at least both of the following scenarios:

• Low warming scenario: global average temperature increase is limited to no more than 1.5 degrees and
• High warming scenario: global average temperature increase exceeds 2.5 degrees

Who has to prepare annual sustainability reports and when

The government proposes a phased approach based on the size of the entities. The table below sets out the details of the threshold and date for the implementation.

The above Table is summarised from Explanatory memorandum of the bill

Group 3 entities are required to make climate disclosure if they have material risks or opportunities.

What happens to the sustainability standards?

Following the consultation feedback, the AASB has decided to revise the titles and numbering of the sustainability standards to align with IFRS S1 and S2. The new titles will be AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information and AASB S2 Climate-related Disclosures. AASB S1, which covers broader sustainability topics, will be a voluntary standard, while AASB S2, focusing on climate, will be mandatory. The standards are expected to be issued in the coming weeks.

What do companies need to report?

The disclosures will need to follow the stainability standards issued by the AASB. The key areas of disclosure include: 

• governance and strategies for climate-related matters
• risks and opportunities associated with climate change
• metrics and targets associated with emissions. This includes direct emissions by the company and from energy consumption (Scope 1 and 2 emissions) and emissions in the value chain (known as Scope 3 emission).

In addition to a qualitative description of the risks and opportunities, the company is also required to disclose quantitative scenario analysis. There are several reliefs proposed by the government in relation to more complex disclosure of Scope 3 emission and quantitative analysis.

The above disclosure will need to be included in a new annual sustainability report. The structure and content of the sustainability report consists:

• the climate statements for the year
• any notes to the climate statements
• any statements required by other legislative instruments to include matters concerning environmental sustainability.
• the directors’ declaration about the statements and the notes.

The annual sustainability report will be presented together with the financial report.

Audit requirements

The company’s financial auditor will audit the sustainability report. The auditing standards setter, AuASB, is currently consulting with stakeholders to determine the required level of assurance for climate-related disclosures.

Based on the most recent exposure draft, we understand the proposed audit requirement will also be phased in. We expect that in the first year of reporting, different content will be subject to different assurance requirements as below:

• limited assurance over scope 1 and 2 emissions for the first year and moving to reasonable assurance thereafter
• Other area’s disclosures will be gradually subject to review or audit from the second year onwards. 

What are the next steps?

• Start preparing now!
• Familiarise yourself with the content of the proposed standards and how it affects you
• Perform a gap analysis to identify data/capability requirements
• reach out to your SW contact to help you get started

How SW can help

We can conduct gap analysis and prepare a road map to guide you on your journey.

Our team of audit and advisory experts are fully informed of the requirements of the sustainability accounting standards and can assist with providing guidance for your business, as well as keeping you abreast of developments from an Australian reporting context.

Keep an eye out for further alerts from us in respect of the finalisation of the sustainability standards by the AASB which is expected in the next few weeks, the sustainability reporting assurance standard under development by the AuASB and any announcements from ASIC on this new area.

Contributors

Jimmy Cao

The post Australian Parliament passes mandatory climate reporting legislation appeared first on SW Accountants & Advisors.

Draft guidelines unveiled in February mandate sustainability reporting for companies listed on the Shanghai, Shenzhen, and Beijing Stock Exchanges. This move aligns with global trends as jurisdictions worldwide increasingly require sustainability and climate related reporting.

Guideline areas

The guidelines will encompass areas such as:

• Emissions
• Climate impact
• Governance
• Strategy
• Risk management

What does this mean for Australian Businesses?

• Australian businesses with connections to Chinese entities must prepare for heightened scrutiny regarding carbon emissions and adherence to international reporting standards.
• Chinese entities listed on the mentioned exchanges will be expected to disclose comprehensive sustainability reports, drawing on both domestic and international standards.

Globally, many jurisdictions have now released draft or final standards, draft or final legislation and rollout plans for companies to implement mandatory sustainability reporting. In Australia some entities are already including mandatory climate disclosures under the NGER legislation, and many more large companies in Australia are expected to need to comply with sustainability disclosure standards in the coming years. China mandating sustainability disclosures is in-line with what is happening in other jurisdictions and evidence of the current global trend. There is also significant focus in China on reducing emissions.

How can SW help?

In response to this shift, SW offers support to companies through gap analyses and readiness assessments for mandatory sustainability reporting. SW Partners, Rene Muller, John Dorazio, Tom Mullarkey, and Associate Director Jimmy Cao are available to provide guidance and assistance throughout this transition.

Reach out to your SW contacts or the key contacts here for a conversation.

Contributors

Jimmy Cao

The post China proposes mandatory Sustainability reporting for listed companies appeared first on SW Accountants & Advisors.

Introduction

To improve the disclosure and accountability of climate-related matters the Australian government’s final Policy statement proposes to mandate certain entities follow the new sustainability reporting standards issued by the AASB. This is consistent with the international sustainability standards.

The first group entities would need to prepare their sustainability report for annual reporting periods commencing on 1 July 2024, subject to submission feedback on a 6 month deferral, with smaller entities phased in over the next few years.

What are the changes?

New reporting requirements

There is a new sustainability reporting requirement for reporting information on climate-related matters. If applicable, the sustainability report will need to be prepared together with the annual report.

The report will follow the new sustainability reporting standard issued by the Australian Accounting Standards Board, which is closely aligned with the international sustainability standard. This will provide much-needed comparability across the companies.

The requirement will be subject to the passing of the bill.

Who has to prepare annual sustainability reports and when

The government proposed a phased approach based on the size of the entities. The table below sets out the details of the threshold and date for the implementation.

The above table is extracted from Treasury Policy Statement

The smaller Group 3 (current Large Pty threshold) are only required to make climate disclosure if the entity has material risks or opportunities.

What do companies need to report?

The disclosure will need to follow the new stainability standards issued by AASB. The key areas of disclosure include:  

• governance and strategies for climate-related matters
• risks and opportunities associated with climate change
• metrics and targets associated with emissions. This includes the current emissions by the company and from the electricity consumption (Scope 1 and 2 emissions) and the emission in the value chain (known as Scope 3 emission).

In addition to a qualitative description of the risks and opportunities, the company is also required to disclose a quantitative scenario analysis. There are several reliefs proposed by the government in relation to more complex disclosure on Scope 3 emission and quantitative analysis.

The above disclosure will need to be included in a new annual sustainability report. The structure and content of the sustainability report consists of:

• the climate statements for the year
• any notes to the climate statements
• any statements required by other legislative instruments to include matters concerning environmental sustainability and
• the directors’ declaration about the statements and the notes.

The annual sustainability report will be presented together with the financial report.

Audit requirements

The company’s financial auditor will also audit the sustainability report. The content subject to assurance will gradually move from Scope 1 and 2 emission data initially to the full report. The AuASB is currently consulting with stakeholders to develop the level of assurance required for climate related disclosures and will determine how assurance requirements will be phased in.

What your next steps should be

• Familiarise yourself with the content of the proposed standards and seek clarification on how you will be impacted
• Provide feedback to the AASB and Treasury regarding the content of the exposure draft. Consultation is open until the 9 February 2024.

How SW can help

Our team of audit and assurance experts are fully informed of the requirements of the sustainability accounting standards and can assist with providing guidance for your business, as well as keeping you abreast of developments from an Australian reporting context.

Reach out to your SW contacts or the key contacts here for a conversation.

Contributor

Jimmy Cao

The post Phased approach to mandatory climate reporting in Australia appeared first on SW Accountants & Advisors.

The exposure draft contains Australian Sustainability Reporting Standards (ASRS) 1 and 2, both of which focus on disclosure of climate-related financial information.

This approach contrasts with the approach taken by the International Sustainability Standards Board (ISSB) that issued a general sustainability standard (IFRS S1) and a climate standard (IFRS S2). Whilst the ISSB standards were used as the baseline, the proposed Australian standards in ED format contain a number of differences. The key differences between the proposed Australian standards and the international equivalent are as follows:

• limiting the required disclosure to climate-related financial disclosures only by replacing all references to ‘sustainability’ to ‘climate’
• edits to make the standards applicable to not-for-profit entities as well as for-profit
• edits to clarify certain technical matters around measurement and reporting of emissions
• some other edits to make the standard more applicable in the Australian context and to remove some duplication

The proposed standards will also be applicable to not-for-profit entities that meet the reporting criteria. However, the mandatory disclosure for not-for-profit entities will be less onerous than applies to for profit entities.

The Australian Parliament, rather the AASB, determined the entities scoped into the legislation. The AASB have included Treasury’s proposed roadmap, from its second consultation paper, for mandatory adoption of sustainability standards.

Treasury’s proposed roadmap for mandatory adoption includes:

Group 1 | 2024-25

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least two of the following:

• over 500 employees
• consolidated gross assets of $1bn or more
• consolidated revenue of $500m or more

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.

Group 2 | 2026-27

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least two of the following:

• over 250 employees
• consolidated gross assets at end of company’s financial year and any controlled entities is $500m or more
• consolidated revenue for company’s financial year and any controlled entities is $200m or more

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.

Group 3 | 2027-28

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least two of the following:

• over 100 employees
• consolidated gross assets at the end of the company’s financial year and controlled entities is $25 million or more
• consolidated revenue for the company’s financial and any controlled entities it $50m or more

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act.

ASRS Application Date

The AASB is proposing that ASRS 1, ASRS 2 and related references would be applied:

• for entities in Group 1 – in annual periods beginning on or after 1 July 2024
• for entities in Group 2 – in annual periods beginning on or after 1 July 2026
• for entities in Group 3 – in annual periods beginning on or after 1 July 2027

What we are advising our clients to do as next steps

• reach out to your SW contact to get more information
• familiarise yourself with the content of the proposed standards and seek clarification on how you will be impacted
• provide feedback to the AASB regarding the content of the exposure draft

You should also attend SW’s financial reporting webinar on Thursday 16 November to hear more about these proposed standards. Click here to register

How SW can help

Our team of audit and assurance experts are fully informed of the requirements of the sustainability accounting standards and can assist with providing guidance for your business, as well as keeping you abreast of developments from an Australian reporting context.

Reach out to your SW contacts or the key contacts here for a conversation.

Contributors

Jimmy Cao

James Serpell

The post Exposure Draft issued for Australia’s first Sustainability Reporting Standards appeared first on SW Accountants & Advisors.