Australian climate-related financial disclosures to align more closely with the baseline of IFRS® Sustainability Disclosure Standards

In good news for preparers of Australian climate-related financial disclosures, at its 6-7 June 2024 meeting, the Australian Accounting Standards Board (Board) decided not to proceed with proposals to deviate significantly from the requirements of IFRS Sustainability Disclosure Standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

Our previous article highlighted some of the challenges Australian companies would face if the Board proceeded with its approach outlined in ED SR 1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information. ED SR 1 included many areas where Australian climate reporting requirements would diverge from IFRS S1 and S2, resulting in Australian entities not being able to claim compliance with IFRS Sustainability Disclosure Standards.

ASRS 1 will not be mandatory

The Board initially proposed in ED SR 1 to make ASRS 1 (the equivalent of IFRS S1) a mandatory standard, but limit its scope to cover only climate-related information. This meant that the name of ASRS 1 would not be the same as that of IFRS S1.

At its latest meeting, the Board instead decided to prepare ASRS 1 as a non-mandatory (voluntary) standard to cover all sustainability-related financial disclosures. Entities wishing to voluntarily prepare disclosures on other sustainability topics could therefore apply the guidance in ASRS 1.

No cross-referencing between ASRS 2 and ASRS 1

Although reducing duplication between content in ASRS 1 and ASRS 2 Climate-related Financial Disclosures, ED SR 1 required the user to continually refer back to ASRS 1 to find disclosures incorporated by cross-reference (the ‘missing disclosures’). We saw this as a cumbersome and time-consuming process for users.

We are pleased to see that the Board has decided to incorporate all necessary disclosures within the body of ASRS 2.

ASRS 2 to align with the baseline of IFRS S2

The Board also decided to backtrack on various proposals in ED SR 1 which would have resulted in Australian entities applying different rules for measuring greenhouse gas (GHG) emissions to their international counterparts.

Instead, ASRS 2 will align with the baseline of IFRS S2 without modification with respect to the following:


There will be no additional scoping to highlight that the standard is limited to climate-related risks and opportunities related to climate change (i.e. proposed paragraph Aus 3.1 in ED SR 1 will not be included in the final draft).

Cross-industry metrics

The Board will retain the requirements set out in paragraphs 29(b)–29(f) of IFRS S2.

Measuring GHG emissions

Instead of requiring an entity to prioritise relevant methodologies in NGER Scheme legislation (as proposed in ED SR1), ASRS 2 will adopt the measurement hierarchy in IFRS S2. IFRS S2 permits an entity to use a different method to the GHG Protocol when required to do so by a jurisdictional authority or an exchange on which the entity is listed.

Definition of greenhouse gases

ASRS 2 will retain the IFRS S2 definition of greenhouse gases as the seven greenhouse gases listed in the Kyoto Protocol.

CO2 equivalent conversion for GHG emissions

ASRS 2 will incorporate the IFRS S2 requirement to use the global warming potential (GWP) values from the latest IPCC assessment available at the reporting date. This is instead of using the IPCC 5th assessment as proposed in ED SR1.

If an entity uses appropriate emission factors that have already converted the constituent gases into CO2 equivalent values (e.g. the Australian National Greenhouse Accounts Factors), the entity would not be required to recalculate the emission factors using GWP values from the latest IPCC assessment available at the reporting date.

Scope 2 GHG emissions

ASRS 2 will omit the proposed requirement for an entity to disclose its market-based Scope 2 GHG emissions from the fourth year of applying ASRS 2.

Under IFRS S2 (and ASRS 2), entities might provide information about their market-based Scope 2 GHG emissions:

  • If they consider it would be useful to the users of their climate-related financial disclosures
  • For NGER reporters - if NGER Scheme legislation requires reporting of market-based Scope 2 GHG emissions in future.

Scope 3 GHG emission categories

ASRS 2 will require an entity to disclose the sources of its Scope 3 GHG emissions using the 15 categories in the GHG Protocol, as set out in IFRS S2.


Next steps

The Board will continue to address other issues at future Board meetings.

How BDO can help

Climate reporting requirements in Australia continue to evolve. Understanding what is required, and then preparing your first climate report can seem overwhelming. Our sustainability reporting experts can help you understand what this might mean for your organisation.

Contact us today.