Navigating ASRS: A Sustainability Guide for Australian Companies

Australia is stepping up its commitment to environmental, social, and governance (ESG) factors with the introduction of the Australian Sustainability Reporting Standards (ASRS).

This guide provides an overview of the ASRS, and covers the following:

• Mandatory Climate-Related Financial Disclosures in Australia
• What is ASRS? Australia’s Equivalent to CSRD
• ASRS and its Alignment with Global Standards
• Australia’s ASRS Timeline
• Who Is Subject to the ASRS reporting?
• How to Prepare for ASRS?

Mandatory Climate-Related Financial Disclosures in Australia

Australia now has mandatory ESG reporting requirements, specifically focused on climate-related financial disclosures. This is achieved through the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, which mandates relevant entities to disclose their climate-related plans, risks, and opportunities. This act is a significant step towards aligning Australia with global sustainability reporting trends.

Schedule 4 of this Act, concerning Climate-related financial disclosure, requires certain entities to disclose information about climate-related risks and opportunities in their annual financial reports, in accordance with the ASRS. This legislation directly relates to the ASRS, as it provides the legal framework for the standards developed by the Australian Accounting Standards Board (AASB).

What is ASRS? Australia’s Equivalent to CSRD

The ASRS provides a structured framework for companies to report their ESG performance. While not a direct equivalent to the European Union’s Corporate Sustainability Reporting Directive (CSRD), the ASRS similarly aims to improve the transparency and comparability of sustainability information. By providing investors and stakeholders with consistent and reliable information to assess companies’ sustainability performance and risks.

ASRS and its Alignment with Global Standards

The Australian Sustainability Reporting Standards (ASRS) align closely with established global sustainability frameworks, enabling Australian businesses to compete effectively in a globalised market.

Key Features of ASRS

• AASB S1: A voluntary standard that outlines general requirements for disclosing sustainability-related financial information, aligned with IFRS S1.
• AASB S2: A mandatory standard focused on climate-related disclosures, requiring entities to report on climate risks and opportunities, aligned with IFRS S2.

This alignment with the International Financial Reporting Standards (IFRS) ensures international comparability and reduces reporting burdens for companies operating across borders, which is particularly relevant for aviation stakeholders familiar with global reporting practices.

Australia’s ASRS Timeline

• Early September 2024: The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 receives Royal Assent.
• September 2024: The AASB issues AASB S1 and AASB S2.
• January 2025: The AUASB approves ASSA 5000 and ASSA 5010.
• January 1, 2025: Mandatory reporting begins for Group 1 entities (annual reporting periods).
• July 1, 2026: Mandatory reporting begins for Group 2 entities (annual reporting periods).
• July 1, 2027: Mandatory reporting begins for Group 3 entities (annual reporting periods).
• July 1, 2030: ‘End state’ of reasonable assurance of all climate disclosures.

Who Is Subject to the ASRS reporting?

The ASRS applies to entities required to lodge financial reports under Chapter 2M of the Corporations Act 2001 and meeting the thresholds outlined below.

This includes many companies within the aviation sector, given their significant revenue, asset holdings, and employee numbers.

Even entities exempt from lodging a financial report under Chapter 2M (e.g., those registered with the ACNC or exempt by ASIC class order relief) are not required to prepare a sustainability report.

• Group 1 (Starting January 1, 2025):

Entities meeting two of the following three criteria:

• • Consolidated gross revenue of AU$500 million or more
  • Consolidated assets of AU$1 billion or more
  • More than 500 employees
  • Also includes National Greenhouse and Energy Reporting (NGER) reporters above the publication threshold.
• Group 2 (Starting July 1, 2026):

Entities meeting two of the following three criteria:

• • Consolidated gross revenue of AU$200 million or more
  • Consolidated assets of AU$500 million or more
  • More than 250 employees
  • Includes all other NGER reporters and asset owners with AU$5 billion or more in assets under management.
• Group 3 (Starting July 1, 2027):

Entities meeting two of the following three criteria:

• • Consolidated gross revenue of AU$50 million or more
  • Consolidated assets of AU$25 million or more
  • More than 100 employees

Specific considerations for aviation stakeholders:

The aviation industry is under increasing pressure to reduce its carbon footprint. Compliance with ASRS sustainability reporting standards will require detailed reporting of Scope 1, 2, and 3 emissions.

Airlines will need to account for emissions from fuel consumption, while airports must consider emissions from operations, ground transportation, and energy usage.

PACE can help by providing accurate aircraft emissions calculations, enabling aviation stakeholders to meet carbon emissions reporting requirements

How to Prepare for ASRS?

Preparing for ASRS compliance requires a proactive and strategic approach:

1. Understand the Requirements: Familiarise yourself with AASB S1 and S2, and any related guidance issued by ASIC.
2. Assess Materiality: Identify climate-related risks and opportunities that are material to your business. Group 3 entities with no material climate-related financial risks or opportunities only need to include a statement to that effect, explaining their conclusion.
3. Gather Data: Collect and analyse data on greenhouse gas emissions, energy consumption, and other relevant sustainability metrics. Aviation stakeholders may need to invest in new data collection systems to accurately track emissions across their operations.
4. Conduct Scenario Analysis: Use climate scenario analysis to assess the potential impacts of climate change on your business. Disclose information derived from climate scenario analysis carried out using at least two specified scenarios.
5. Develop a Sustainability Report: Prepare a sustainability report that complies with the ASRS requirements, including a directors’ declaration about the compliance of the statements with the relevant sustainability standards. The sustainability report is required to be included within the annual report.
6. Seek Assurance: Engage an independent assurance provider to obtain limited or reasonable assurance on your climate-related disclosures, in accordance with the phased assurance requirements.
7. Monitor and Improve: Continuously monitor your sustainability performance and identify opportunities for improvement.

 Conclusion

The introduction of ASRS marks a significant step towards greater transparency and accountability in sustainability reporting in Australia. By understanding the requirements and taking proactive steps to prepare, companies, including aviation stakeholders, can effectively navigate the new reporting landscape and demonstrate their commitment to a sustainable future.