Australian Sustainability Reporting Standards (ASRS): What you need to know

Australia's commitment to addressing climate change has led to the implementation of mandatory climate-related financial disclosures, starting from January 1, 2025. The Australian Sustainability Reporting Standards (ASRS) requires large companies to report their greenhouse gas emissions and climate risks, aligning with the International Sustainability Standards Board (ISSB). The legislation signifies a pivotal shift in how companies assess and disclose climate-related risks and opportunities, while enhancing transparency for investors and stakeholders.

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Why has the ASRS been introduced?

Several factors have driven Australia's decision to introduce these climate regulations:

1. Economic risks of climate inaction

Research indicates that delaying the transition to renewable energy could result in significant economic losses for Australia. Estimates suggest potential losses of up to $6.8 trillion over the next 25 years due to climate change-induced extreme weather events. By implementing climate regulations, Australia aims to mitigate these risks and protect its economy.

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2. International commitments

Australia has pledged to reduce greenhouse gas emissions by 43% by 2030 and achieve net-zero emissions by 2050. Introducing mandatory climate disclosures is a step toward fulfilling these commitments and demonstrating global leadership in climate action.

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3. Investor demand for transparency

Investors are increasingly seeking clear information on companies' environmental, social and governance (ESG) practices. Mandatory disclosures ensure that businesses provide consistent and comparable data, facilitating informed investment decisions and promoting sustainable business practices.

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Who needs to comply with ASRS?

Understanding whether your business falls under the scope of the ASRS is critical for ensuring compliance. The framework primarily categorizes entities into three distinct groups based on revenue thresholds, employee counts or public interest significance.

Group 1 entities

• Large businesses with annual revenues exceeding $500 million.
• Organizations that have significant influence on market sectors, including listed companies and major financial institutions.

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Group 2 entities

• Medium-sized companies with annual revenues between $100 million and $500 million.
• Includes entities with moderate public interest, such as certain private firms or state-owned enterprises.

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Group 3 entities

• Smaller entities with revenues below $100 million, but identified as having specific environmental, social or governance (ESG) impacts.
• May include businesses operating in high-risk industries or those with substantial stakeholder engagement requirements.

It is essential for businesses to carefully assess these thresholds in conjunction with other criteria outlined by the regulators. Consulting legal or compliance experts can help clarify your entity's classification and responsibilities under ASRS. Adhering to the standards not only ensures regulatory compliance, but also future-proofs your organization's sustainability credentials. It's important to note that entities may be triggered by existing alignment with the National Greenhouse and Energy Reporting (NGER) threshold criteria.

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Reporting deadlines

While the ASRS came into effect from January 1, 2025, mandatory climate-related financial disclosures will be phased in over several years:

• Group 1 entities: The largest corporations in Australia will begin reporting for annual periods starting on or after January 1, 2025. For companies with a June 30 financial year-end, this means their first mandatory reports will be due by June 30, 2026.
• Group 2 entities: These companies will commence reporting from July 1, 2026.
• Group 3 entities: Reporting requirements for this group will start from July 1, 2027

This phased approach allows businesses of varying sizes to adapt to the new requirements and ensures a smooth transition toward comprehensive climate risk reporting.

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Understanding the scope of reporting requirements

ASRS mandates that companies submit a separate Sustainability Report alongside their Financial, Directors’ and Audit Reports. This report should align with standards set by the Australian Accounting Standards Board (AASB), developed from the ISSB framework.

Key focus areas for reporting include:

Climate risks and opportunities

• Assess and disclose risks related to climate change (eg., physical risks like extreme weather or transition risks such as regulatory changes).
• Highlight strategic opportunities stemming from sustainability transitions.

Scope 1, 2 and 3 carbon emission reporting

• Scope 1 and 2 emissions (direct and indirect energy use) must be accurately measured and documented.
• Significant effort is needed for Scope 3 emissions, which include supply chain and lifecycle emissions, often the most complex to calculate.

Governance and metrics

• Climate-related governance structures and decision-making involvement at the board level.
• Establish clear performance metrics and climate goals.

By thoroughly understanding these requirements, companies can align internal practices with regulatory expectations.

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Modified liability and assurance requirements

One unique feature of the ASRS is the three-year modified liability provision for Scope 3 emissions, scenario analysis and transition plans, offering businesses time to adapt without immediate legal repercussions. However, this phase-out only emphasizes the urgency to establish compliance systems quickly.

Post-2030, all disclosures need reasonable assurance, a standard akin to financial audits. This means complex datasets — especially emissions and scenario modeling — must be independently verifiable and meticulously accurate.

Proactively engaging with audit services now can help enterprises establish frameworks that meet these future requirements effectively.

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Ideagen's role in supporting compliance

In response to these regulatory changes, Ideagen has expanded its Carbon Accounting platform to serve Australian businesses. This AI-powered solution automates the carbon accounting process, allowing organizations to upload activity data in any format and receive audit-ready emissions reports instantly. By streamlining data collection and processing, Ideagen's platform reduces the workload associated with compliance, enabling companies to meet reporting requirements efficiently.

The platform's adaptability ensures that businesses can seamlessly integrate it into their existing systems, facilitating compliance with Australia's new climate disclosure mandates. This integration not only aids in regulatory adherence but also supports companies in making informed decisions to mitigate environmental impact.

As Australia enforces these mandatory climate disclosures, tools like Ideagen's Carbon Accounting platform become essential for businesses aiming to navigate the evolving regulatory landscape effectively. By adopting such solutions, companies can ensure compliance, enhance operational efficiency and contribute to global sustainability efforts.

Is your team ready to take the first step towards ASRS compliance? Book a demo with Ideagen Carbon Accounting today.

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