What should your sustainability report contain?
Under s296A(1) of the Corporations Act 2001 (Corporations Act), the sustainability report for a financial year consists of:
- the climate statements for the year
- any notes to the climate statements, and
- the directors� declaration about the statements and notes.
Climate statements
Climate statements must comply with the Corporations Act and AASB S2 Climate-related disclosures (AASB S2). AASB S2 has been made by the Australian Accounting Standards Board (AASB) under s 336A(1) of the Corporations Act.
Section 296D of the Corporations Act requires (among other things) that the climate statements for a financial year must disclose:
- the entity’s material financial risks or opportunities relating to climate
- the entity’s metrics and targets for the financial year relating to climate that are required to be disclosed by AASB S2, including in relation to scope 1, 2 and 3 greenhouse gas emissions, and
- any information about the entity’s governance, strategy, or risk management in relation to these risks, opportunities, metrics and targets.
These specific disclosures required in the climate statements are to be determined in accordance with AASB S2, subject to s296B.
An entity must also disclose information about its climate resilience, as assessed under at least two possible future states (called ‘climate-related scenario analysisâ€�). The Corporations Act requires climate-related scenario analysis to be carried out using at least two scenarios referable to temperature increases set out in subparagraphs 3(a)(i) and 3(a)(ii) of the Climate Change Act 2022. The two mandated scenarios are currently: Â
- increase in global average temperature of 1.5°C above pre-industrial levels, and
- increase in global average temperature well exceeding 2°C above pre-industrial levels.
Notes to the climate statements
The sustainability report for a financial year consists of (among other things) the notes to the climate statements. However, we do not expect that reporting entities will need to include notes to the climate statements in a sustainability report. For further guidance on this point, see Section C of Regulatory Guide 280 Sustainability reporting (RG 280).
Directors� declaration
A sustainability report must include a directors� declaration which is a declaration by the directors of their opinion on whether the contents of the sustainability report are in accordance with the Corporations Act, including that the sustainability report complies with AASB S2.
However, for the financial years commencing between 1 January 2025 and 31 December 2027, this obligation is modified such that directors of reporting entities are required to declare that, in their opinion, the entity has taken reasonable steps to ensure that the sustainability report (other than the directors� declaration) is in accordance with the Corporations Act and AASB S2.
For further guidance on this point, see Section B of RG 280.
Climate statements for entities with no material financial risks or opportunities relating to climate
For some entities that are required to prepare a sustainability report, the climate statements in the sustainability report are:
- a statement that there are no material financial risks or opportunities relating to climate for the entity, and
- a statement explaining how the entity determined that it has no material financial risks or opportunities relating to climate: see s296B of the Corporations Act.
These entities may prepare these climate statements under s296B(1), if they determine that there are no material financial risks or opportunities relating to climate for a financial year and they are in the third reporting cohort whose obligations are being phased in (i.e. they are only required to prepare a sustainability report for the first time for annual reporting periods commencing on or from 1 July 2027).
The question of whether there are any ‘material financial risks or opportunities relating to climate� is to be determined in accordance with AASB S2. For more detailed guidance on these types of climate statements, and who may prepare them, see Section C of RG 280.
More information
For more information see Regulatory Guide 280 Sustainability reporting (RG 280).