Climate reporting isn’t just a regulatory box to tick—it’s a test of board oversight, organisational resilience, and long-term credibility.
For many Australian companies, new climate disclosure requirements under AASB S2 mark a shift from voluntary reporting to mandatory accountability. But for directors, this isn’t just about meeting compliance obligations. It’s about fulfilling legal duties, protecting enterprise value, and strengthening the organisation’s ability to respond to a changing risk landscape.
While compliance alone won’t create short-term value, it does establish the foundations for better decision-making, improved stakeholder trust, and clearer signals to investors and insurers. Boards that approach this with clarity and care—not just minimal compliance—will be better positioned to shape a more resilient business in the face of climate and market disruption.
Understanding AASB S2 Governance Requirements
Under AASB S2, boards are expected to demonstrate clear oversight of climate-related risks and opportunities. This includes:
- Defining the governance structure overseeing climate risks.
- Integrating climate responsibilities into terms of reference, role descriptions, and policies.
- Ensuring the board has, or develops, the skills necessary to oversee climate strategies.
- Regularly informing the board about climate risks and opportunities.
- Monitoring the board’s role in setting and tracking climate-related targets.
- Disclosing how climate governance is integrated within management structures.
Compliance or Credibility? A Question for Boards
For boards, AASB S2 is more than a compliance exercise—it’s a test of credibility. Directors are required to act with care and diligence under the Corporations Act, and that now extends to understanding and overseeing climate risks. Weak or misleading disclosures can lead to legal exposure, damaged reputation, and lost stakeholder trust.
We’ve developed a short Director’s Guide to AASB S2 to support informed governance, outlining the key duties, assurance requirements, and oversight responsibilities boards need to be across as the new standards come into force.
Putting Governance into Action
Boards that take climate governance seriously can strengthen resilience, protect value, and maintain stakeholder confidence. To start:
- Assign sustainability-related roles and responsibilities within management.
- Set clear climate-related targets and ensure progress is monitored.
- Regularly review climate risks as part of board discussions.
- Maintain a clear understanding of directors’ legal duties under AASB S2.
There’s no shortcut to credible sustainability. But with clarity and care, boards can guide their organisations toward a more resilient future.
