Every hour, climate change drains $16 million USD from the global economy – an unstoppable force reshaping financial risks and corporate responsibility (World Economic Forum 2023). Australia stepped up in 2016, ratifying the Paris Agreement to confront this growing threat. Fast forward to 2024, and the government is raising the stakes: starting in 2025, large businesses and financial institutions must disclose climate-related financial risks, with voluntary sustainability reporting as an option. The Australian Accounting Standards Board (AASB), a government body, has crafted the Australian Sustainability Reporting Standards, synced with the International Financial Reporting Standards (IFRS), to steer companies toward clear, actionable reporting.
These standards set practical expectations for businesses facing a warming world:
- AASB S1 lays the groundwork, requiring disclosures on how sustainability shapes financial health—consider how a shift to electric vehicles might boost a manufacturer’s bottom line.
- AASB S2 dives into climate specifics, demanding reports on risks like heatwaves slashing crop yields or opportunities like solar farms powering new revenue, all tied to cash flows, loans, or borrowing costs over time.
Companies must deliver transparent details on governance, strategy, risk management, and metrics—including scenario analyses of events like a 1.5°C temperature spike or a carbon price jolt—to ensure credibility and sidestep greenwashing. Fun fact: Australia’s 2022 floods cost insurers AUD 5.5 billion, a stark reminder of what’s at stake.
The government is rolling this out in three phases, aligned with AASB S2, giving businesses breathing room to sharpen their tools: stronger governance, smarter strategies, better systems, and skilled teams. This isn’t just compliance—it’s a chance to turn risks into rewards. Research shows that companies with sustainability woven into their core cut climate risks and boost long-term value. AASB S2 digs into the nitty-gritty: board expertise (did you know 70% of Aussie directors now list climate as a top priority?), roles, and mandates, plus how managers embed climate oversight into daily operations.
Realigning Governance for a Climate-Ready Future
This isn’t a quick fix—realigning takes three to five years, with solid progress in one to two. Board Benchmarking’s ESG Transformation Plan Framework, built to match IFRS and AASB standards, guides companies to nail AASB S1 and S2 disclosures. It’s about delivering hard-hitting financial insights on governance and management to investors, dodging greenwashing along the way—check out Board Benchmarking’s ESG whitepaper for the full playbook.
Board Benchmarking has included several sustainability related resources on its website including access to expert advice and surveys to measure and improve ESG Maturity, ESG Capability and to achieve sustainability related and climate-related Best Practice.
Dr Sugumar Mariappanadar PhD, MAPS CAHR, Senior Sustainability Advisor, Insync, Board Benchmarking and Board Surveys.
