How to Prepare for ASRS: Report with Confidence and Clarity
How to Prepare for ASRS: Report with Confidence & Clarity
The Australian Sustainability Reporting Standards (ASRS) mark a transformative moment for corporate transparency and accountability in Australia. Taking effect on 1 January 2025, these new standards will require businesses to disclose critical sustainability-related financial information. Whether your company is directly subject to the ASRS or indirectly impacted through its value chain, preparation is key. Now is the time to understand the requirements, evaluate your compliance timeline, and take strategic steps to ensure your reporting meets the standards with confidence and clarity.
What is the ASRS?
The Australian Sustainability Reporting Standards (ASRS) are two standards, ASRS S1 and ASRS S2, that outline requirements for disclosing sustainability-related financial information. These standards are based on the IFRS Sustainability Disclosure Standards, a global standard developed by the International Sustainability Standards Board (ISSB).
ASRS S1 focuses on general requirements for disclosure of sustainability-related financial information across all environmental, social, and governance (ESG) topics. This standard is currently voluntary in Australia.
ASRS S2 specifically focuses on climate-related disclosures and is mandatory for certain entities in Australia.
Who needs to report under the ASRS?
The ASRS apply to entities in Australia that are required to lodge financial reports under Chapter 2M of the Corporations Act. This includes listed companies, large proprietary companies, and not-for-profit organizations.
Three groups of entities are subject to the mandatory climate-related disclosures of ASRS S2 based on different thresholds. However, even if your company does not fall within these three groups, you will likely be impacted by the ASRS. This is because companies that are required to report under the ASRS must consider their value chain. This means they will need to collect data on greenhouse gas emissions and climate-related risks and opportunities from their suppliers, customers, and other business partners. If your company is part of the value chain of a reporting company, you will likely be asked to provide data on your emissions and climate-related risks and opportunities as part of their own reporting.
How do I report under the ASRS?
The ASRS requires that sustainability-related financial information be disclosed in the general purpose financial report. This information can be included directly within the financial report or you can reference where the information is provided elsewhere, such as in a standalone sustainability report. If you choose to provide the information elsewhere, it's crucial to ensure that:
The separate report covers the same entity, operational boundaries, and reporting period as the financial statements.
Both reports are released at the same time.
There is a clear link between the two reports and the specific location of the information.
What are the key requirements of ASRS S2?
ASRS S2 builds on the framework of the Task Force on Climate-related Financial Disclosures (TCFD), which consists of four pillars: governance, strategy, risk management, and metrics and targets. Companies that have already been reporting under the TCFD framework will have a good foundation for meeting the requirements of ASRS S2. However, ASRS S2 does require more detailed information on financial performance and financial analysis compared to TCFD reporting.
ASRS S2 asks for the following information:
A description of each climate-related risk or opportunity, including the time horizon and whether it is a physical or transition risk.
The location of those risks and opportunities within the business model and value chain.
Current and anticipated effects on the business model and the value chain.
Current financial effects of those risks and opportunities on financial performance and position.
The company’s plans to respond to those risks and opportunities through strategy and decision-making.
How the company expects its financial position and performance to change over the short, medium, and long term.
The company's resilience to climate change.
Practical steps to prepare for ASRS reporting:
Engage early and educate your team and leadership: Start by understanding how the ASRS will impact your company, both directly and indirectly through your value chain.
Start carbon accounting: Even if you are not mandated to report, start accounting for your Scope 1, 2, and 3 emissions. This information will be crucial for meeting the requirements of ASRS S2 and responding to requests from your business partners and investors.
Complete a materiality assessment: Identify and prioritize the sustainability-related risks and opportunities that are most material to your business. This will ensure that your reporting focuses on the information that is most relevant to investors and other stakeholders.
Align your sustainability strategy with your business strategy: Integrate sustainability into your core business strategy and operations. This will help you move beyond a compliance-focused approach and create long-term value for your business.
Use Socialsuite’s ASRS Readiness Assessment: Take advantage of free resources, such as the ASRS Readiness Assessment developed by Socialsuite, to gauge your company's preparedness for reporting.
Key Takeaways:
The ASRS represents a significant shift in sustainability reporting in Australia. While meeting the requirements of these standards may seem daunting, the steps outlined above can help your company prepare for success. By engaging early, building internal capacity, and integrating sustainability into your core business strategy, you can turn the ASRS into an opportunity to create long-term value for your company and stakeholders.
