Navigating Climate & Sustainability Reporting: What Australian Businesses Need to Know

A New Era of Reporting

From 1 January 2025, Australia’s mandatory climate reporting regime began rolling out for large entities, with further phases bringing more organisations into scope over time.

At the centre of this is AASB S2 Climate-related Disclosures, which requires businesses to disclose information about climate-related risks and opportunities that could affect cash flows, access to finance, or cost of capital.
These disclosures sit alongside the financial statements as part of an entity’s annual reporting suite and are subject to increasing levels of scrutiny and assurance over time.

Importantly, this is not just a compliance exercise. The intent is to provide decision-useful information to investors and stakeholders about how climate factors influence business value.

Who is Affected and Why Others Should Be Prepared

While the initial focus is on larger organisations, the impact is much broader.

Although some entities may not be directly required to prepare a sustainability report, here are the reasons why you should be ready:

• Supply chain pressure is increasing – larger reporting entities need data from suppliers to meet Scope 3 (indirect emissions across their value chain, such as purchased goods and services) reporting requirements that banks and investors are incorporating into climate risk decisions
• Tendering and procurement processes are evolving

As a result, many SMEs and not-for-profits are being indirectly drawn into the reporting ecosystem.  They are being, or soon will be, asked questions that they haven’t traditionally had to answer:

• What are your emissions?
• How exposed are you to climate risks?
• What is your transition plan?

What Are Larger Organisations Being Asked to Disclose?

At its core, climate reporting under AASB S2 aligns with four key pillars:

• Governance – how climate risks are overseen by the board and management
• Strategy – how climate impacts the business model and future plans
• Risk management – how climate risks are identified and managed
• Metrics and targets – the data used to track performance (e.g. emissions)

This structure is based on the global International Sustainability Standards Board (ISSB) framework and is designed to create consistency and comparability across markets.

For many businesses, the biggest shift is linking this information back to financial outcomes.

Where Businesses Are Getting It Wrong

From our experience, there are some common pitfalls.

Treating sustainability as a reporting exercise

Many organisations focus on producing a report, rather than embedding sustainability into strategy. This can result in disclosures that look polished but lack substance.

Poor data quality and ownership

Sustainability data often sits across different parts of the business and lacks clear ownership, leading to inconsistencies and reliability issues.

Ignoring the value chain

emissions remain one of the most complex areas, with many businesses underestimating or excluding supply chain impacts.

Underestimating the effort involved

Implementing robust processes, controls and governance frameworks takes significantly more time and coordination than many initially expect.

Why This Matters Beyond Compliance

While compliance is the immediate driver, there are broader implications:

Better risk management

Climate risks, both physical (e.g. extreme weather) and transition-related (e.g. regulation, changing customer sentiment), are increasingly impacting operations and financial performance.

Access to capital

Investors and lenders are using climate disclosures to assess risk and allocate capital e.g. “green” loans.

 Competitive advantage

Organisations that can clearly articulate their sustainability position are often better placed in tenders.

Stronger governance

The requirement to disclose governance processes is driving more robust oversight and accountability at board level.

Where to Start

For organisations at the early stages, the key is to avoid overcomplicating the first steps.

A practical approach often includes:

1. Understanding applicability and timing
2. Identifying key climate risks and opportunities
3. Assessing current data availability and gaps
4. Establishing governance and ownership
5. Developing a roadmap rather than aiming for perfection

Starting early is critical, both to manage compliance risk and to embed sustainability into decision-making.

Final Thoughts

Climate and sustainability reporting is not just another regulatory requirement; it reflects a broader shift in how businesses are assessed and valued.

Those that approach it as a strategic opportunity, rather than a compliance burden, are likely to be better positioned in the years ahead.

How We Can Help

Navigating climate and sustainability reporting can feel complex, particularly as requirements continue to evolve and expectations increase across regulators, investors and stakeholders.

If you’re unsure where to start, or want to sense check your current approach, we’re here to help.

Nick Bromell and Fiona Gordon, Audit Directors at Perks, both have experience with supporting organisations across a range of industries as they prepare for and respond to climate-related disclosure requirements. Nick and Fiona hold the Certificate in Climate-related Disclosures issued by Chartered Accountants Australia & New Zealand, providing a strong technical foundation combined with practical, audit-driven insight.

If you have any questions or would like to discuss how these changes may impact your organisation, please feel free to reach out to Nick or Fiona.