Ensuring your mandatory sustainability report is assurance-ready

As Australian organisations move into their first year of mandatory sustainability reporting, many are focused on what needs to be disclosed, instead of how the information is prepared. This is important because a large portion of the reporting will be subject to independent assurance.

Recent updates to the sustainability reporting standards change how organisations approach measurement and disclosure of greenhouse gas (GHG) emissions.

To help you understand and apply the new requirements, BDO has released an Illustrative Sustainability Report and the ASSB has approved the final amendments to AASB S2 Climate-related disclosures, providing clarity and relief as Australian organisations prepare their first mandatory disclosures.

For a broader overview of who must report when, read BDO’s explainer article.

Important new amendments that change how you report

Recent amendments approved by the International Sustainability Standards Board (ISSB) and the Australian Accounting Standards Board (AASB) are a big win for Australian organisations. Rather than adding complexity, the changes are designed to address practical challenges organisations have faced in implementing AASB S2, particularly around GHG emissions reporting. The amendments provide targeted relief and flexibility, reducing unnecessary reporting burden. They simplify reporting requirements and clarify how global standards can be applied in an Australian context. In particular, the changes allow greater flexibility in the classification and measurement of GHG emissions, including how financed emissions are defined, categorised and reported.

There are four amendments that are important for every Australian organisation to understand:

Amendment #1 – Scope 3 Category 15 (financed emissions)

Organisations can now limit their disclosure of Scope 3 Category 15 emissions to financed emissions only, removing the need to include emissions from other financial activities, such as underwriting and investment banking. This change is particularly relevant for insurance companies and commercial banks.

Amendment #2 – Flexibility in industry classification

Organisations are no longer required to use a single industry classification system. Previously, the Global Industry Classification Standard (GICS) had to be used. Now, you can choose any industry classification system that best explains where your climate-related transition risks sit, making disclosures more accessible. This flexibility allows financial entities to tailor their reporting to better reflect their climate-related transition risks, making disclosures clearer and more relevant.

Amendment #3 – Jurisdictional relief (important for Australia)

If local rules require a different method for calculating emissions (such as Australia’s NGER system for Scope 1 and 2), organisations can use that approach. Other parts of the organisation can continue using the GHG Protocol as required.

This amendment is particularly important for Australian organisations because it confirms they can comply with NGER requirements without conflicting with global standards.

Amendment #4 – Relief for Global Warming Potential (GWP) values

This amendment allows organisations that report under NGER to continue using Australian National Greenhouse Account Factors, even where they are based on older GWP figures. For Australian organisations, this avoids the need for complicated recalculations.

Amendments #3 and #4 offer significant relief for Australian organisations navigating local compliance requirements. If you haven’t already, it’s recommended you review your reporting processes now to ensure compliance and take advantage of these simplifications. For a walkthrough on how to align NGER and AASB S2, BDO’s article on Approved changes to climate-related disclosure requirements in Australia provides further guidance.

How sustainability assurance will be phased in

Think of the first year of mandatory reporting as a transition period: you still must prepare the full sustainability report (with the exception of Scope 3 emissions), but only selected parts will be subject to limited assurance in the first year you report. This staged approach is designed to give organisations time to develop systems, documentation and governance processes, before moving to limited assurance over the full sustainability report in the second and third year you report.

Sustainability assurance will be introduced in stages. For Group 1 entities, special rules apply depending on when their financial year begins.

Audit expectations: What your auditor will look for

Auditors will expect clear documentation showing how you prepared your disclosures. Their focus will be on three main areas:

• Governance
• Identification and description of climate-related risks and opportunities
• Measurement of Scope 1 and Scope 2 Greenhouse gas (GHG) emissions.

Assurance of governance requirements

Governance disclosures need to be supported by clear documentation that is in place before the end of the reporting period. Auditors will check:

• Whether the Board and any management roles for overseeing climate-related matters are clearly defined.
• Whether governance structures or committees are active and dealing with climate-related matters.
• Whether there is sufficient supporting information to back up what has been disclosed.

For many organisations, this means updating committee charters, Board papers and role descriptions so responsibilities are clearly reflected.

Assurance of climate-related risk and opportunities

Climate-related risks and opportunities form the foundation of AASB S2 and inform the rest of the sustainability report. From an assurance perspective, auditors will look for:

• Clear identification and assessment of climate-related risks and opportunities, and
• Evidence that these assessments provide the basis for climate-related disclosures across governance, strategy, risk management, and metric and targets.

Auditors will expect a well-documented, comprehensive process that considers the full value chain and integrates with your risk management framework.

Assurance of GHG emissions (Scope 1 & 2)

GHG emissions are one of the most detailed and evidence-heavy parts of the sustainability report. The biggest challenge for organisations is ensuring the completeness of activity data. Every figure, from petrol use to electricity and gas consumption, must be fully reconciled to the general ledger. This reconciliation is the main way organisations can show that nothing has been overlooked.

Auditors will expect to see clear and well-supported documentation, including:

• A documented boundary setting policy explaining which parts of the business are included and why
• A comprehensive Basis of Preparation that clearly shows how the organisation follows the requirements of AASB S2, as well as NGER and the GHG Protocol (where they do not conflict with AASB S2)
• Reconciled activity data that ties directly back to the general ledger
• Records of emission factors used, including the rationale for their use
• Accurate and transparent emission calculations.

 

Assurance readiness check

Before your next reporting cycle, check whether your climate-related risks and opportunities are assurance-ready by:

• Assessing physical and transition risks
• Putting a documented climate risk and opportunity assessment in place
• Applying and documenting a clear methodology
• Integrating the process into your risk management framework and register
• Ensuring you have considered current climate science and policy
• Considering the full value chain.

 

If you need to strengthen your scenario analysis for climate resilience, this guide outlines how to do this effectively.

New standards coming in early 2026

Looking ahead, new standards are expected to influence sustainability reporting in 2026. Staying aware of these changes is important, as they may influence future disclosures or assurance expectations. These two standards are worth noting:

• A new Land Sector and Removals Standard from the GHG Protocol was released on 30 January 2026, which impacts industries such as mining, agriculture, land management, and natural resources.
• The International Energy Agency (IEA) has released updated global climate and energy scenarios. These are especially relevant for businesses in oil, gas, and energy generation that rely on scenario analysis in their climate disclosures.

What organisations should be doing now

To be assurance-ready, focus on:

• Finalising Scope 1 and 2 data and reconciling it to financial records
• Reviewing governance roles, updating Board and management documents
• Completing your climate risk and opportunity assessment
• Preparing supporting evidence for all disclosures, even those not subject to assurance in Year One
• Staying across upcoming standards, especially if you operate in land-related sectors.

Mandatory sustainability reporting is a big shift, but recent amendments and clarifications are designed to make the transition smoother - particularly for Australian businesses. The key is to start early, document everything, and align your sustainability reporting with your financial reporting processes.

How BDO can help

Our National sustainability reporting team is leading the way in helping Australian organisations prepare for mandatory sustainability reporting. Get in touch to discuss how we can support your first assurance-ready sustainability report.

Prefer to learn more first? Watch our December webinar on the latest AASB S2 amendments, the phased introduction of sustainability assurance, and the steps you should take now.

You can also register for BDO’s monthly insights newsletter and the 2026 Sustainability webinars to stay across upcoming changes.