Navigating Australia’s New Sustainability Standards: How Viable Pathway Can Help You Comply with AASB S2

As Australia sharpens its focus on climate transparency, businesses are preparing for the introduction of the country’s first sustainability reporting standards. Finalised by the Australian Accounting Standards Board (AASB), these standards represent a pivotal shift in how companies will be required to report on their environmental impact. With the new Australian Sustainability Reporting Standards (ASRS) set to take effect on 1 January 2025, firms are facing a complex set of requirements that will place climate-related disclosures at the heart of corporate governance and strategy.

The standards, aligned with international frameworks, will make Australia one of the latest countries to formalise its approach to sustainability reporting. AASB S1, the voluntary standard, focuses on general sustainability-related financial information, while AASB S2—the mandatory climate-related disclosure standard—will require businesses to disclose a broad array of metrics across governance, strategy, risk management, and targets. For many companies, this marks a profound departure from the status quo. But amidst the complexity, solutions like Viable Pathway are poised to help firms navigate these new requirements with precision and foresight.

What Does AASB S2 Require?

AASB S2 demands a high level of disclosure from businesses in relation to their climate-related risks and opportunities. These disclosures are organised into four pillars: governance, strategy, risk management, and metrics and targets. Firms will be expected to outline their governance structures for managing climate risks, articulate how climate change impacts their overall strategy, and provide detailed insights into their risk management processes.

One of the most critical elements is the requirement to conduct scenario analyses, which assess how businesses would fare under various climate futures, including both transition risks (such as policy changes or shifts in market demand) and physical risks (such as extreme weather events). Additionally, companies will need to provide transparency around greenhouse gas (GHG) emissions, particularly Scope 1 and Scope 2 emissions. While Scope 3 emissions—those that occur across the value chain—are voluntary in the first year, they are nonetheless encouraged and will likely become essential in subsequent reports.

The metrics and targets section of AASB S2 adds further complexity. All firms must disclose seven key metrics, including their GHG emissions (Scope 1, 2, and, eventually, 3), the proportion of their assets exposed to transition and physical risks, and their capital deployment towards climate-related initiatives. Companies must also be transparent about any internal carbon pricing mechanisms and the extent to which executive remuneration is linked to climate-related goals.

How Viable Pathway Eases the Burden of Compliance

While AASB S2 is essential for increasing corporate accountability, the level of detail required—and the speed with which firms must comply—poses a significant challenge. This is where Viable Pathway can play a transformative role, offering businesses a clear and structured way to manage their climate-related disclosures.

1. Comprehensive Emissions Tracking: One of the central pillars of AASB S2 is the disclosure of GHG emissions across Scope 1, 2, and 3. Viable Pathway simplifies this process by providing companies with accurate, benchmark-based estimates of their emissions, even when comprehensive data is lacking. By leveraging industry-specific benchmarks, firms can start with reliable emissions estimates and gradually refine them over time as more detailed data becomes available.

2. Scenario Analysis and Risk Assessment: Conducting climate resilience assessments is no small task, particularly when businesses must model different climate scenarios. Viable Pathway offers forward-looking modeling capabilities that allow firms to simulate how different regulatory, economic, and environmental changes will impact their operations. This feature helps companies comply with AASB S2’s requirements for scenario analysis and enables them to test their climate strategies in various futures, providing deeper insights into their resilience.

3. Metrics and Targets Alignment: The metrics and targets required under AASB S2 are broad, covering everything from GHG emissions to capital expenditure on climate-related projects. Viable Pathway provides a streamlined way to track these metrics, ensuring that businesses can report accurately on their transition and physical risks, as well as the opportunities they are pursuing in the climate space. The tool’s ability to project these metrics into the future also helps companies set meaningful targets that are aligned with Australia’s broader sustainability goals.

4. Flexibility in GHG Reporting: While the GHG Protocol is the default methodology for emissions reporting under AASB S2, the standard allows for the use of alternative methods if required by Australian legislation, such as the NGER Scheme. Viable Pathway is built with this flexibility in mind, allowing businesses to choose the methodology that best suits their reporting needs without compromising on compliance.

5. Continuous Improvement: AASB S2 is not a one-time exercise; it requires continuous engagement and improvement. As businesses refine their data collection processes and gain more insight into their climate impacts, Viable Pathway allows for dynamic updates to emissions estimates and scenario analyses. This ensures that companies can continuously improve their sustainability reporting, staying ahead of regulatory requirements and aligning their strategies with best practices.

Preparing for 2025 and Beyond

The introduction of the ASRS marks a new era for corporate transparency in Australia. While the obligations under AASB S2 may seem onerous, they are a necessary step in the transition to a low-carbon economy. Firms that are proactive in meeting these requirements will not only avoid regulatory penalties but also position themselves as leaders in the sustainable business space.

For sustainability managers tasked with navigating this complex landscape, Viable Pathway offers an invaluable resource. By simplifying the process of emissions tracking, scenario analysis, and metrics reporting, the tool empowers businesses to comply with the new standards while setting themselves up for long-term success in an increasingly climate-conscious world.

Conclusion: A Clear Pathway to Compliance

As the clock ticks towards the 2025 implementation date, the pressure on businesses to meet the new sustainability reporting standards is growing. Yet, rather than viewing these requirements as a burden, firms should see them as an opportunity to future-proof their operations and align with global best practices. Viable Pathway provides the tools necessary to make compliance not only achievable but strategic, enabling companies to lead the charge towards a more sustainable future.

By embracing the capabilities of Viable Pathway, Australian companies can confidently navigate the complexities of AASB S2 and set a clear course toward climate resilience and regulatory compliance.