At its latest board meeting in June, the Australian Accounting Standards Board (AASB) made some key decisions that bring its proposed Australian Sustainability Reporting Standards (ASRSs) more closely in line with the standards issued by the International Sustainability Standards Board (ISSB).

This is in response to stakeholder feedback on draft versions of ASRS 1 General Requirements for Disclosure of Climate-related Financial Information and ASRS 2 Climate-related Financial Disclosures as exposed in Exposure Draft ED SR1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information issued for public comment in October last year.

Specific decisions taken by the AASB:

  • to issue a voluntary ASRS 1 that aligns with IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information to allow entities to make disclosures on sustainability-related topics beyond climate (and possibly state compliance with IFRS Sustainability Disclosure Standards);
  • to prepare a mandatory ASRS 2 that would incorporate the necessary requirements contained in ASRS 1 to enable ASRS 2 to operate as a standalone, climate-only standard. A subcommittee has been formed to accomplish this;
  • to align the following aspects of ASRS 2 with those of IFRS S2:
    i. scope – requiring the disclosure of all climate-related risks and opportunities and not only those related to climate change as originally proposed in ASRS 2;
    ii. cross-industry metrics – retaining the requirements regarding climate-related metrics and disclosures of internal carbon process, in alignment with IFRS S2;
    iii. measuring greenhouse gas (GHG) emissions – adopting the measurement hierarchy in IFRS S2, thereby prioritising the Greenhouse Gas Protocol (GHG Protocol) as opposed to the National Greenhouse and Energy Reporting (NGER) legislation as the default methodology to measure GHG emissions. NGER entities would still be permitted to apply NGER legislation
    methodologies based on the hierarchy;
    iv. definition of greenhouse gases – adopting the seven greenhouse gases as listed in the Kyoto Protocol, as originally proposed;
    v. CO2 equivalent conversion for GHG emissions – aligning the global warming potential (GWP) values with that of IFRS S2 as opposed to the NGER legislation;
    vi. Scope 2 GHG emissions – removing the requirement to disclose market-based Scope 2 emissions from the fourth year of reporting, and aligning with the requirements of IFRS S2 under which entities could choose to provide this information if considered useful to users and NGER reporters would disclose market-based emissions if required by legislation to do so;
    vii. Scope 3 GHG emissions categories – aligning with IFRS S2 when it comes to disclosing Scope 3 GHG emissions using the 15 categories in the GHG Protocol.

The decisions taken by the AASB are positive in that they limit differences between the ASRSs and their international counterparts. This helps minimise the reporting burden for those entities that operate in multiple jurisdictions.

There are still aspects that need to be discussed before the ASRSs can be finalised. The AASB has indicated it will hold additional meetings in July and August to address these matters.