Barry Li | Climate Reporting & Assurance

Insights on climate reporting, carbon markets, and sustainability assurance.

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Barry Li

PhD candidate in Accounting and Finance at the University of Newcastle, Australia, researching climate reporting, carbon markets, and sustainability assurance. An auditing practitioner with over 10 years’ experience, sharing insights at the intersection of academia and practice.

    • February 2026: Assurance Readiness, AASB S2 Amendments, and the Safeguard’s Credibility Test

      As we move through February 2026, Australia’s climate reporting landscape is shifting from preparation to implementation. Group 1 entities are now deep into their first mandatory reporting cycle, while Group 2 entities face a countdown to 1 July 2026. Meanwhile, two significant developments demand attention: the AASB’s December 2025 amendments that simplify emissions reporting, and the upcoming Safeguard Mechanism review that will test Australia’s industrial decarbonisation credibility.

      This post captures the key developments emerging in early 2026, focusing on assurance readiness, recent standard amendments, and the policy signals that practitioners and preparers should be tracking.

      The Deep Dive: Key Developments

      1. AASB S2025-1: Amendments That Simplify GHG Reporting

      Source: AASB S2025-1 Amendments to Greenhouse Gas Emissions Disclosures (December 2025)

      In December 2025, the AASB issued significant amendments to AASB S2 Climate-related Disclosures. Rather than adding complexity, these changes provide targeted relief for Australian organisations navigating their first mandatory reports.

      Key Amendments:

      • Scope 3 Category 15 (Financed Emissions): Organisations can now limit disclosure to financed emissions only, removing the need to include emissions from underwriting and investment banking activities. This is particularly relevant for insurance companies and commercial banks.
      • Industry Classification Flexibility: Entities are no longer required to use the Global Industry Classification Standard (GICS). Any classification system that best explains climate-related transition risks is now acceptable.
      • Jurisdictional Relief for NGER: Australian organisations can use NGER methods for Scope 1 and 2 emissions without conflicting with global standards.
      • Global Warming Potential (GWP) Relief: Organisations reporting under NGER can continue using Australian National Greenhouse Account Factors, even where based on older GWP figures.

      Practitioner Note: Amendments #3 and #4 confirm that compliance with NGER requirements satisfies AASB S2 without complex recalculations—a significant practical relief.

      2. Assurance Readiness: What Auditors Will Look For

      Source: BDO – Ensuring Your Mandatory Sustainability Report is Assurance-Ready (February 2026)

      The first year of mandatory reporting is a transition period. While full sustainability reports must be prepared, only selected parts will be subject to limited assurance in Year One. This phased approach provides time to develop systems and documentation before moving to full limited assurance in Years Two and Three.

      Auditor Focus Areas:

      • Governance: Board and management roles clearly defined; active committees dealing with climate matters; supporting documentation in place
      • Climate Risks & Opportunities: Clear identification and assessment process; evidence that assessments inform disclosures across all pillars
      • GHG Emissions (Scope 1 & 2): Documented boundary policy; comprehensive Basis of Preparation; activity data reconciled to general ledger

      Critical Insight: ASIC’s position is clear—if an activity, assessment or process is not documented, auditors should treat it as incomplete. The mantra: “Not documented, not done.”

      3. Safeguard Mechanism 2026: Australia’s Credibility Test

      Source: Energy Insights – Safeguard Mechanism 2026: Australia’s credibility test (February 2026)

      The Safeguard Mechanism (SGM) review scheduled for 2026–27 will be a defining moment for Australia’s industrial climate policy. With declining baselines biting harder and compliance demand rising, the review will determine whether the mechanism continues to drive genuine abatement or whether its impact plateaus.

      Key Tensions:

      • Baseline Decline Rates: The indicative post-2030 rate of 3.285% falls well short of what’s required. Independent analysis suggests annual declines of 4.8%–6.9% are needed to align with Australia’s 2035 ambition.
      • Facility Performance: Covered emissions fell only ~4.3% over two years, while exceedance volumes increased by more than 50%—indicating facilities are not decarbonising fast enough.
      • Offset Integrity: As baselines tighten, the scheme’s credibility becomes tied directly to ACCU supply and integrity—itself under review in 2026.

      Expert View: Tony Wood (Grattan Institute): “This will be an important test of the government’s commitment to meeting its targets.”

      4. GHG Protocol Releases Land Sector and Removals Standard

      Source: GHG Protocol – Land Sector and Removals Standard (30 January 2026)

      The GHG Protocol has released its first-ever global standard for corporate accounting of land-sector emissions and removals. Published 30 January 2026, the LSR Standard establishes how companies should account for:

      • GHG emissions from agricultural land use
      • CO₂ removals from land-based activities
      • Emerging carbon dioxide removal (CDR) technologies

      Key Details:

      • Effective Date: 1 January 2027
      • Review Date: 2030
      • Guidance Document: Expected Q2 2026

      Why This Matters: For Australian entities in mining, agriculture, land management, and natural resources, this standard will influence future disclosure expectations.

      Practical Takeaway: What to Do in February 2026

      For Group 1 Entities:

      • Review December 2025 AASB S2 amendments—they may simplify your GHG reporting
      • Ensure governance documentation is complete before year-end
      • Reconcile all Scope 1 and 2 activity data to your general ledger

      For Group 2 Entities (1 July 2026 start):

      • You have 4+ months—use them for a gap analysis against AASB S2
      • Start documenting climate risk and opportunity assessments now
      • Consider a “dry run” sustainability report in Q1–Q2

      For Assurance Practitioners:

      For Safeguard Facilities:

      • Monitor ACCU pricing and supply signals ahead of the 2026–27 review
      • Baseline decline rates for 2030–35 will be set by July 2027

      Sources

    • Bridging the Credibility Gap: IFLM Modularity, ASRS Readiness, and the New Assurance Frontier

      As we move through February 2026, the Australian sustainability landscape is no longer in a “waiting room.” For the first wave of Group 1 entities, the reporting cycle is actively underway, and for Group 2, the July 1 deadline is no longer a distant milestone. For those of us at the intersection of practice and academia, this week’s developments underscore a shift from defining the standards to operationalising them.

      We are moving beyond the “what” of AASB S2 and into the “how” of verifiable, high-integrity data. From the modular evolution of carbon credits to the rigorous expectations of scenario analysis, the infrastructure of auditability is being built in real-time.

      The Deep Dive: Key Technical Updates

      1. The IFLM Method: A Modular Leap for Carbon Integrity

      The Clean Energy Regulator (CER) is currently in the final stages of consultation (closing 23 February 2026) for the Integrated Farm and Land Management (IFLM) method. (See the IFLM Explanatory Material.)

      The Innovation: This is Australia’s first truly “modular” carbon crediting framework. It allows landholders to combine multiple abatement activities—such as native forest regeneration and environmental plantings—within a single project area.

      The Audit Challenge: For auditors, this increases complexity significantly. We must now assure “stacked” abatement without double-counting. This requires a robust understanding of the new Unit and Certificate Registry and enhanced spatial data verification. It is a prime example of what I call “Calculative Technologies” in action—where the methodology itself must be as resilient as the sequestration it measures.

      2. ASRS 2026: From Data Architecture to Scenario Reality

      New insights from early 2026 adopters (Group 1) suggest that while “data plumbing” (systems for Scope 1 and 2) is stabilising, Scenario Analysis remains a significant hurdle for board-level approval.

      AASB S2 Requirements: Remember that Australian standards mandate at least two scenarios: a 1.5°C pathway and a “high-warming” scenario exceeding 2°C (typically 2.5°C+).

      The Practitioner’s Friction: There is a growing “literacy gap” in the boardroom. Directors are not just required to disclose these scenarios; they must demonstrate how these insights inform strategic capital allocation. The risk of “regulator-only” protected statements is fading, and the focus is shifting toward the auditability of these qualitative judgments.

      3. Safeguard Transformation: The $321M Decarbonisation Push

      On 4 February 2026, the Australian Government announced $321 million in funding specifically for trade-exposed facilities under the Safeguard Mechanism.

      Impact on Reporting: This funding—aimed at industrial decarbonisation—will directly influence “Transition Plans” disclosed under AASB S2. Practitioners should look for these grants in client disclosures as evidence of “resilience” and “planned capital expenditure.” It bridges the gap between a high-level climate commitment and a funded, operational reality.

      Practical Takeaway: What to Do This Week

      For Auditors: If your clients are involved in land-based carbon projects, review the IFLM Draft Method. Assess whether your current sampling and spatial verification tools can handle modular abatement stacking.

      For CFOs: Evaluate your “Transition Plan” narrative. If you are receiving Safeguard Transformation funding or similar grants, ensure the financial effects are clearly linked to your climate-related opportunities in your sustainability report.

      For Everyone: Re-read the AASB S2 “Proportionality Guidance.” As Group 2 prepares to start on 1 July 2026, the board has made it clear: you must use “all reasonable and supportable information” available without undue cost or effort. Don’t let the pursuit of perfect data paralyse the start of the reporting journey.

    • Stepping into 2026: A New Era of Mandatory Climate Disclosure and Assurance in Australia

      As we step into February 2026, Australia’s climate reporting landscape has officially entered a new phase. Group 1 entities—our largest listed companies and financial institutions—have now been operating under mandatory AASB S1 and S2 requirements since 1 January 2025, while Group 2 entities are counting down to their 1 July 2026 commencement date. For those of us working at the intersection of climate reporting and assurance, this is no longer a preparation exercise—it’s implementation reality.

      This opening post of 2026 captures the key regulatory developments that have emerged since late 2025, focusing on assurance standards, disclosure proportionality, and the tools being developed to support practitioners and preparers alike.

      The Deep Dive: Key Developments

      1. AUASB Issues ASSA 2025-10: Assurance on Voluntary Sustainability Reports

      Source: AUASB – ASSA 2025-10 (21 January 2026)

      In a significant move, the Auditing and Assurance Standards Board (AUASB) has issued ASSA 2025-10, which establishes the phasing in of assurance requirements for Group 1, 2 and 3 entities preparing voluntary sustainability reports under the Corporations Act 2001.

      Key Points:

      • The standard bridges the gap between mandatory and voluntary reporting regimes
      • Provides clarity for entities that wish to obtain assurance on sustainability reports before their mandatory commencement date
      • Aligns the assurance framework with the broader ASSA 5000 suite

      Practitioner Note: This is particularly relevant for Group 2 and 3 entities wanting to “dry run” their sustainability reports with assurance before mandatory requirements kick in.

      2. AASB S2 Scenario Analysis Workshops – March 2026

      Source: AASB Reporting Roundup December 2025 (17 December 2025)

      The Australian Accounting Standards Board has announced AASB S2 Scenario Analysis Workshops scheduled for March 2026. This is a direct response to one of the most challenging requirements of AASB S2: the climate-related scenario analysis.

      Why This Matters:

      • Scenario analysis under AASB S2 requires entities to assess climate resilience under different futures (including a 1.5°C pathway)
      • Many preparers have flagged this as a significant capability gap
      • The AASB’s workshops signal recognition that hands-on guidance is needed beyond written standards

      3. Proportionality Mechanisms in AASB S2

      Source: AASB – Proportionality Mechanisms in AASB S2 (9 September 2025)

      The AASB has published guidance on proportionality mechanisms embedded within AASB S2. These mechanisms are designed to support disclosures involving significant judgement or uncertainties.

      Key Proportionality Features:

      • Allowance for qualitative disclosures where quantification is not yet feasible
      • Recognition that smaller entities (within Group 1) may have less sophisticated data systems
      • Emphasis on “reasonable and supportable” information rather than perfect precision

      Practitioner Note: This guidance is essential reading for auditors and preparers navigating the first year of mandatory reporting.

      4. Safeguard Mechanism: 2024-25 Compliance Cycle Complete

      Source: Clean Energy Regulator – Safeguard Mechanism

      The Safeguard Mechanism continues to operate in parallel to the sustainability reporting regime. With the 2024-25 compliance cycle now complete:

      • 135.9 million tonnes CO2-e covered emissions reported
      • 7.3 million ACCUs surrendered
      • 1.4 million SMCs surrendered

      Looking Ahead: The CER’s Unit and Certificate Registry is now the single source of truth for ACCU and SMC holdings.

      Practical Takeaway: What to Do in February 2026

      1. For Group 1 Entities: Your first mandatory sustainability reports are due with your next annual report. Ensure your scenario analysis methodology is documented and defensible. Consider attending the AASB S2 workshops in March.
      2. For Group 2 Entities (July 2026 start): Now is the time to conduct a gap analysis against AASB S1/S2. Consider voluntary assurance under ASSA 2025-10 as a practice run.
      3. For Assurance Practitioners: Familiarise yourself with ASSA 2025-10 and the illustrative auditor’s reports under ASSA 5000.
      4. For Safeguard Facilities: Verify your ANREU/Registry holdings before the SMC application window closes.

      Sources

    • Building Capability for a Low-Carbon Future: Reflections from Recent Climate Training

      It’s been a big month of learning. Across the public and private sectors, climate-related reporting and assurance training has accelerated — a clear sign that Australia is moving from policy design to practical delivery. I was fortunate to take part in several technical programs recently, which deepened my understanding of both greenhouse gas (GHG) assurance and climate-risk assessment.

      Without sharing any confidential content, I want to reflect at a high level on what stood out — and why it matters.

      1. Climate risk is now a governance issue, not a niche

      A recurring theme across all programs was that climate risk is no longer an environmental add-on. It’s being embedded into enterprise risk management, financial planning and audit oversight. Public agencies and listed entities alike are being trained to treat climate risk using the same rigour as other strategic risks — complete with defined responsibilities, accountability structures and periodic reviews.

      The message: governance drives credibility. Board and executive oversight of climate-related risks is becoming mandatory, not optional.

      2. Greenhouse gas reporting is becoming standard audit territory

      Training in GHG accounting underscored how much attention is shifting to data quality, boundary setting, and assurance readiness.
      Even at a conceptual level, it’s clear that the next few years will see rapid growth in sustainability assurance — from limited to reasonable assurance engagements under ASSA 5000, mirroring financial audit practice.

      For practitioners, the implications are practical: learning to interpret activity data, apply emission factors correctly, and understand materiality in the context of non-financial reporting. For entities, it’s about building systems robust enough to withstand audit testing.

      3. Proportionality and scalability are key

      Not every organisation has the same exposure, resources, or data maturity. Training discussions emphasised the concept of proportionality — ensuring that climate-related disclosures and assurance work are scaled appropriately to entity size and complexity, while still meeting the spirit of the standard.

      This idea will help smaller organisations participate meaningfully without being overwhelmed, and help auditors focus effort where the greatest risks lie.

      4. Adaptation and resilience are gaining attention

      Beyond emissions and compliance, climate-risk practitioners are talking more about adaptation pathways — structured, staged approaches to resilience planning. Rather than one-off assessments, entities are encouraged to design “pathways” that trigger action as new information or thresholds are reached. This type of forward-looking planning connects sustainability reporting with long-term service continuity and asset resilience.

      Why this matters

      For both the public and private sectors, these capability-building efforts mark a shift from awareness to competence. Climate risk and emissions assurance are no longer theoretical — they are becoming day-to-day professional responsibilities.

      As auditors, accountants and analysts, we’re being asked to translate complex environmental data into reliable, decision-useful information. That requires not just technical skill but judgement, scepticism and ethical awareness — the same principles that define our profession.

      The work ahead is challenging, but it’s meaningful. Every training session, every new framework, brings us closer to a profession that can help navigate Australia’s low-carbon transition with integrity and confidence.

    • When Life Reminds Us Why Climate Work Matters

      I’m a little late with this week’s post. A close family member has just been diagnosed with cancer — and we’ve been told there may not be much time left. It’s hard news to process. Moments like this make you stop and think about time, purpose, and what difference we really make in the brief years we have.

      As I sat with this, I couldn’t help but reflect on how often human activity has been described as a kind of cancer on the planet — consuming, spreading, and disrupting the natural systems that sustain life. But I don’t actually believe the Earth itself will die from climate change or any other human-made crisis. The planet is far more resilient than we are. Over billions of years it has survived impacts, ice ages, and extinctions. What is truly at risk is us — and the millions of other living creatures that share this moment in Earth’s long story.

      That realisation changes the way I think about climate work. The point is not to “save the planet” in some abstract sense; it’s to make life on this planet endurable and ethical for those who are here now and for those who come after.

      Even in technical fields like accounting and auditing, our choices shape that future. The systems we design to measure, disclose, and assure environmental impacts are not just compliance tools — they are moral and social instruments. They define what counts, what matters, and what is seen as progress.

      Some people cause damage and never get the chance to repair it. The rest of us, while we can, should do the best we can — whether that means challenging flawed metrics, strengthening climate reporting, or ensuring integrity in the information societies rely on to act.

      I don’t know if my loved one will live to see a more sustainable world. But I do know that our professional work — the patient, evidence-based, sometimes invisible work of building trustworthy systems — can help bring it a little closer.

    • Climate Disclosure Countdown: Key October 2025 Milestones for Australian Reporting

      1. ACCU Scheme review consultation opens

      On 20 October 2025, the Climate Change Authority (CCA) formally opened its public consultation for its statutory review of the Carbon Credits (Carbon Farming Initiative) Act 2011—the legislative foundation for Australia’s ACCU Scheme. The consultation invites feedback on the Scheme’s operation and broader role in a decarbonising economy. Submissions close at 5 pm AEDT on 8 December 2025.

      📘 For more details see: CCA ACCU Scheme Reviews (Climate Change Authority)

      This consultation arrives at a critical juncture: Australia’s new 2035 emissions-reduction target (-62 to -70 % below 2005 levels) places greater expectations on the ACCU Scheme to deliver credible abatement. The questions posed by the CCA—covering methodology governance, supply/demand dynamics, and market integrity—signal that the regulatory eye is shifting from voluntary offsets to mandatory disclosure and verification.

      2. New ACCU method-development process launched

      In mid-October, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) published an update on how the ACCU Scheme is evolving its methodology development processes. The new “proponent-led” route replaces earlier government-only prioritisation and invites industry ideas for innovative abatement methods.

      📘 See: Developing new ACCU Scheme methods – DCCEEW (DCCEEW)

      Key points:

      • Several methods (for soil carbon, milking-cow feed additives, industrial waste-gas reductions) are now being fast-tracked.
      • Projects under older methods nearing expiration must plan for continuity or transition.
      • The message to smaller practitioners is clear: the Scheme is opening—and so are the risks of being left behind.

      For auditors and reporting teams, this is a signal that methodological risk (i.e., which carbon credit method a project uses) could matter for disclosures, especially when credits are referenced or retired in climate-related financial statements.

      3. National Climate Risk Assessment Report released

      October also saw the release of Australia’s first National Climate Risk Assessment Report, paired with the new National Adaptation Plan, addressing ten priority hazards—including flooding, bushfires, drought and ocean warming—across multiple time horizons (+1.5 °C, +2 °C, +3 °C).

      📘 Source: Australia’s first National Climate Risk Assessment Report (Clayton Utz)

      While this is more adaptation-than-disclosure focused, the report feeds directly into the climate strategy and risk-management pillar of AASB S2. For reporting entities, the implication is clear: climate-risks are no longer theoretical or long-term—they’ll need to be disclosed in financial statements under the new regime. It also raises questions for auditors about how advised scenario-analysis, sensitivity testing and disclosures should respond to such national-level evidence.

      Practical take-aways for preparers & auditors

      • If you’re involved with ACCUs or offsets, the consultation from the CCA is your chance to influence future policy—but also your signal to review any exposure now (method choice, expiry risk, documentation).
      • Audit & assurance teams should start factoring in method-risk assessment for carbon-credit-related disclosures: which method, who approved it, what documentation supports it?
      • Smaller entities not yet in scope for full climate disclosure should still track these developments: adaptation-risk reporting cue-cards and offsets market reforms hint at future expectations.
      • Boards and audit committees should ensure minutes reflect discussion around scenario-analysis and adaptation risks, especially as national assessment data becomes publicly available and integrates with disclosures.

      Final thoughts

      October 2025 reaffirmed that the intersection of mandatory climate disclosure (via AASB S2) and carbon-credit markets (via the ACCU Scheme) is becoming increasingly integrated. For reporting entities and assurance practitioners, this means moving beyond “Would we need it?” to “How do we prepare now?” The policy signals are unmistakable: method integrity, transparency, market dynamics and adaptation risk are now part of the disclosure and assurance agenda.

      As always, stay tuned for next month’s update—more developments are already in motion.

      🔗 Further reading:

      Note: This article reflects my interpretation of public information and does not constitute professional or financial advice.

    • ACCU Scheme Review Kicks Off: What Australia’s 2026 Consultation Means

      The Climate Change Authority (CCA) has opened its public consultation for the 2026 review of the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) — the legislation that underpins the Australian Carbon Credit Unit (ACCU) Scheme.
      Submissions are open until 5 pm AEDT, 8 December 2025 via the CCA Consultation Hub 💬.

      This review marks a pivotal moment for Australia’s climate policy architecture. It’s the first comprehensive review since the Safeguard Mechanism reforms, and comes as the nation ramps up ambition toward a 62–70 % reduction in emissions by 2035.
      The consultation paper — Enhancing the ACCU Scheme to Support Australia’s 2035 Emissions Reduction Target — asks how the scheme can evolve to maintain integrity, scalability, and credibility in a decarbonising economy.

      What’s in focus

      1. Strengthening the scheme’s role in meeting the 2035 target

      The CCA’s framing is clear: the ACCU Scheme remains a “high-integrity, high-impact tool,” but it must now deliver abatement at a scale that supports net-zero alignment.
      As Australia’s industrial emitters rely more heavily on offsets through the Safeguard Mechanism, the review will examine whether the supply of high-quality credits can keep pace — without discouraging direct decarbonisation.
      📘 Official source: CCA Issues Paper (October 2025, PDF)

      2. Methodologies – the engine room of the scheme

      Methodologies determine how carbon projects earn ACCUs — from soil carbon and environmental plantings to energy efficiency and landfill gas conversion.
      The CCA notes that several methods expired in 2025 and more will lapse in 2026, creating potential supply constraints. Four new methods are being developed, and a proponent-led method process is underway to accelerate innovation.

      However, the consultation flags three persistent challenges:

      • Slow method approval due to technical complexity and governance bottlenecks.
      • Transparency in how methods are reviewed and endorsed.
      • Scalability barriers for smaller or regional proponents.

      📘 See more: Clean Energy Regulator – ACCU methods list

      3. Market dynamics and price signals

      As the government steps back from being the main buyer, Safeguard Mechanism entities now dominate demand for ACCUs.
      Prices remain below the cost-containment threshold of $82.68 per tonne (for 2025/26), but analysts expect demand — and price — to rise steadily through the 2030s.
      Interestingly, the market is showing price differentiation: ACCUs with biodiversity or community co-benefits often attract premiums, while generic industrial offsets trade lower.

      📈 Market data: Reputex ACCU Market Dashboard and Jarden Carbon Market Report.

      The CCA is inviting comment on how to design the right incentives:

      • What role should government still play in purchasing or guaranteeing demand?
      • How can co-benefits (biodiversity, social impact, durability) be priced in fairly?

      My take: the assurance and legitimacy angle

      From an audit and assurance perspective, this consultation is fascinating.
      It signals that the integrity architecture of the carbon market — methodologies, monitoring, and verification — is under as much scrutiny as the credits themselves.
      For auditors, this raises several implications:

      • Auditability of carbon credits: When corporates include ACCUs in climate disclosures or offset statements under AASB S2, assurance practitioners will need to understand how each credit’s integrity is established.
      • Legitimacy through accounting: The consultation’s focus on transparency and public confidence echoes what I explore in my research — how assurance practices make markets legitimate by defining what counts as “real” abatement.
      • Future overlap with S2 assurance: As sustainability audits mature under ASSA 5000, ACCU verification processes may evolve toward shared assurance principles.

      Put simply: this review isn’t just about carbon farming — it’s about who gets to define credible carbon accounting in Australia’s next policy era.

      What businesses and auditors should do now

      • Engage early: If your organisation buys, sells, or reports on ACCUs, consider making a submission through the CCA’s Consultation Hub.
      • Map exposure: Identify which of your decarbonisation or reporting strategies rely on offsets — and which methodologies those credits come from.
      • Track method updates: Projects using soon-to-expire methods should plan for transition or re-registration.
      • Prepare for enhanced scrutiny: As integrity and transparency reforms advance, expect more robust documentation and assurance expectations in future reporting cycles.

      Final thoughts

      The ACCU Scheme has always been a cornerstone of Australia’s climate policy — but it’s also been controversial.
      This fifth review gives policymakers, industry, and auditors a chance to strengthen trust in the system before it scales further.
      By participating in the consultation, stakeholders can help shape a scheme that balances integrity, efficiency, and inclusiveness — one that rewards genuine abatement rather than paperwork.

      🔗 Further reading:

      This post reflects my interpretation of public documents and does not constitute professional or financial advice.

    • Scaling Climate Disclosure: How AASB’s Proportionality Guidance Helps Smaller Entities

      In September 2025, the AASB published a guidance note titled “Proportionality Mechanisms in AASB S2” (9 September), clarifying how entities should apply judgement so that climate disclosures are scaled sensibly to size, complexity, and capacity.
      This move helps signal that while the standard is mandatory in scope, not every disclosure has to be equally elaborate.

      What the proportionality guidance says (in practice)

      • The mechanisms allow entities to use reasonable and supportable information available at the reporting date — without undue cost or effort. (ESG Broadcast)
      • Entities can adopt more scaled-back approaches in areas like scenario analysis, methodologies, or quantification when full technical work is impracticable given their resources. (ESG Broadcast)
      • Importantly, proportionality does not remove disclosure obligations. Entities must still meet all core objectives of AASB S2, but can manage how deeply or quantitatively to go in each section. (ESG Broadcast)
      • The guidance identifies which parts of the standard are more amenable to proportional judgment (governance, risk identification, value-chain scoping, financial effect estimates, scenario work). (ESG Broadcast)

      This clarification is a strong signal: the Board expects flexibility, but wants clear documentation of judgments, method limitations, and rationale.

      Why this matters (especially for smaller or mid-tier entities)

      • Many organisations fear that compliance with S2 will require heavy modeling, climate science expertise, or third-party consultants. The proportionality guidance offers breathing room.
      • It helps bridge a capability gap: firms with limited data, technical staff, or budget can still comply meaningfully without being penalised for not doing everything at “Big 4 level.”
      • The guidance supports the phased rollout to Group 2 and 3 reporters in 2026–27 by setting expectations of scalability rather than uniformity.
      • However, the flipside: those who adopt minimal disclosures too early risk being judged harshly by auditors, regulators, or stakeholders if their rationale is opaque.

      What preparers and auditors should do now

      • Map out which portions of S2 you will scale back (e.g. limited scenario modelling, qualitative risk impact descriptions) and document why you adopted those choices.
      • Use the proportionality guidance to defend judgment calls if auditors query your methodological shortcuts.
      • Don’t over-simplify: even scaled disclosures must still respond to all four pillars (governance, strategy, risk management, metrics/targets).
      • Prepare for future benchmarking: as more entities disclose, the bar for minimal acceptable practice will evolve, so build your disclosure capability progressively.
      • Audit teams should treat proportional disclosures as red-flag areas — check whether the judgment is defensible, transparent, and consistent with your entity’s context.

      Closing (my take)

      This proportionality guidance is a smart, necessary balancing act. It signals that AASB expects inclusivity — letting smaller or less sophisticated entities comply in ways that match their capacity — while preserving the core disclosure goals.

      However, not all practitioners will interpret “proportionate” the same way. The real test will lie in assurance practice, regulator reviews, and peer benchmarking. In my upcoming research, I’ll be watching how proportionality is implemented, challenged, and rationalised — especially where scaled approaches verge on minimalism.

      📘 Source: AASB Proportionality Mechanisms in AASB S2 (9 Sept 2025) (AASB)
      Additional contextual reporting framework: KPMG’s summary of Australia’s sustainability reporting regime (KPMG)

    • Climate Disclosure Countdown: The September 2025 Milestones for Australian Reporting

      September was a busy month for Australia’s evolving climate reporting landscape. With the first mandatory disclosures under AASB S2 Climate-related Financial Disclosures due from 1 January 2025, regulators and standard-setters spent the month issuing guidance, educational materials and reminders to help companies and auditors get ready.

      Below is a concise recap of what changed or was clarified in September 2025—and what it means for reporting entities as the regime moves from policy to practice.

      1. AASB guidance on proportionality: scaling S2 for smaller entities

      On 9 September 2025, the Australian Accounting Standards Board (AASB) released guidance explaining how the “proportionality mechanism” in AASB S2 should work.
      The document outlines how entities can apply judgement to make their disclosures commensurate with size, complexity and climate exposure.

      The message is clear: the standard applies to everyone in scope, but not every disclosure needs to look the same. Smaller or less complex entities may use simplified scenario analysis or more qualitative data—so long as they still meet S2’s disclosure objectives.

      For practitioners, this guidance provides welcome clarity. It reinforces that “one size fits all” reporting was never the intent. Instead, scalability is built in, supporting the phased rollout for Group 2 and Group 3 reporters in 2026–27.

      📘 Source: AASB Proportionality Mechanism in AASB S2 (9 Sept 2025).

      2. Educational material on greenhouse gas (GHG) disclosures

      Earlier in the month, the AASB issued educational guidance on GHG emissions disclosure under S2 (2 September 2025).
      This resource supports preparers facing the technical challenge of measuring and reporting emissions consistently with S2 and the Greenhouse Gas Protocol.

      Key themes include:

      • Clarification of Scope 1, 2 and 3 boundaries (Scope 3 required from year two).
      • Emphasis on credible measurement methods and estimation techniques where data gaps exist.
      • Alignment between NGER data (for entities already reporting under the National Greenhouse and Energy Reporting Act) and the numbers disclosed in the financial report.
      • Encouragement to reference industry-based metrics (e.g. SASB or ISSB guidance) where relevant.

      The AASB also reiterated the transition relief on Scope 3 emissions: companies must describe their approach in year one but only disclose figures in year two.
      For auditors, this educational material is equally valuable—it clarifies what constitutes acceptable methodology and estimation uncertainty for assurance planning.

      📘 Source: AASB Educational Material on GHG Disclosures (2 Sept 2025).

      3. Implementation reminders, liability relief and director attestations

      Reinforcing the 2025 start date

      By September, Group 1 entities (large listed and financial sector companies) were entering final preparation mode.
      ASIC publicly reiterated that it expects “full, true and fair” climate disclosures aligned with AASB S2—and warned against selective reporting where risks appear in investor presentations but not in statutory reports.
      No new regulatory guide was issued, but ASIC’s long-standing RG 247 is effectively superseded by S2.

      “Modified liability” now in force

      A major September talking point was the temporary safe harbour protecting companies and directors from private litigation over forward-looking climate information—such as Scope 3 estimates, scenario analysis or transition plans—provided statements are made in good faith.
      The shield runs until 31 December 2027, though ASIC retains enforcement powers. The aim is to encourage frank, early disclosure while the market gains experience.

      Director declarations

      For the first three years, boards need only declare that they have “taken reasonable steps to ensure compliance” rather than that the Sustainability Report gives a “true and fair view.”
      This lighter attestation acknowledges that climate reporting is new territory while still demanding documented governance oversight.

      📘 Sources: Treasury Laws Amendment (Climate-related Financial Disclosures) Act 2024, ASIC climate reporting resources.

      4. Progress on assurance standards

      While no new assurance standard was finalised in September, the AUASB continued work on ASSA 5010, complementing ASSA 5000 (already approved earlier in 2025).
      Audit firms are now developing methodologies for limited assurance on climate disclosures for FY 2025 reports.

      Across the profession, pilot engagements and training programs ramped up—particularly within public-sector audit offices and major accounting networks. Even where assurance is not mandatory this year, many entities are seeking voluntary reviews to enhance credibility ahead of investor scrutiny.

      📘 Source: AUASB Sustainability Assurance Developments.

      5. Sector-specific observations

      No new sector exemptions or amendments were released, but regulators used September to reinforce expectations:

      • Financial institutions should be leaders in Scope 3 “financed emissions” reporting and scenario analysis for credit and investment portfolios. APRA’s Climate Vulnerability Assessment complements S2 objectives.
      • Energy and resources entities must integrate NGER emissions and TCFD-style scenario work directly into financial statements. ASIC has signalled it will look for consistency between climate disclosures and asset valuations.
      • Manufacturing and industrials should pay attention to proportionality guidance—qualitative disclosures may be acceptable initially, but planning for quantitative data is essential.
      • Real estate and agriculture are expected to highlight exposure to physical climate risks (e.g. floods, heat, drought) in line with S2’s risk-management pillar.

      Practical next steps for accountants and auditors

      1. Finalise readiness for FY 2025 reports.
      Ensure draft Sustainability Reports align with AASB S2’s structure—governance, strategy, risk management, and metrics/targets. Use the AASB Knowledge Hub as a checklist.

      2. Apply proportionality wisely.
      Smaller entities can scale disclosures but should still cover every major requirement qualitatively. Document the rationale for lighter treatment to show compliance intent.

      3. Strengthen board engagement.
      Directors must demonstrate those “reasonable steps.” Keep minutes, training records and climate discussions well documented for audit evidence.

      4. Prepare for assurance—even if limited.
      Gather calculation workbooks, emission factors, scenario models and control documentation early. These will support both internal review and external assurance under ASSA 5000.

      5. Monitor for further updates.
      Expect more FAQs and examples from Treasury, ASIC, and the professional bodies as Group 1 entities begin publishing.

      The bottom line

      By the end of September 2025, the climate-reporting framework in Australia had moved firmly from rule-making to implementation.
      The AASB provided practical tools, the AUASB advanced assurance infrastructure, and regulators made clear that high-quality disclosure—not mere compliance—will be the expectation.

      For preparers and auditors, this is the last stretch before go-live. Those who embrace the AASB’s September guidance on proportionality, emissions measurement and director accountability will be best positioned to produce credible, decision-useful climate information in 2025 and beyond.

      Further reading

    • Research Spotlight: Scope 4 Emissions and the Question of Legitimacy

      One recent paper that caught my attention is “Making things (that don’t exist) count: a study of Scope 4 emissions accounting claims” by Anna Young-Ferris, Arunima Malik, Victoria Calderbank, and Jubin Jacob-John, published in Accounting, Auditing & Accountability Journal (AAAJ).
      Read the abstract here.

      The paper examines so-called “Scope 4” emissions—avoided emissions resulting from energy efficiency initiatives or other actions that reduce emissions relative to a counterfactual. These claims are not part of the established Scopes 1, 2, and 3 framework, yet are increasingly referenced by firms and market actors.

      What I found especially interesting:

      • Scope 4 overlaps with some methodologies in the ACCU Scheme—such as avoided deforestation and energy efficiency projects.
      • The paper frames its analysis around legitimacy, noting how Scope 4 claims borrow the appearance of being part of the accepted emissions framework. Yet, it doesn’t explicitly invoke legitimacy theory. This shows how legitimacy is being performed through accounting even when not theorised directly.

      For my own work, this is a useful signal. I plan to explore how auditing contributes to the legitimisation of the ACCU scheme. This paper’s treatment of Scope 4 strengthens the case that audit plays a constitutive role in making contested things—such as offset credits—appear legitimate. It also reminds me to refine how I frame legitimacy in relation to assurance, market devices, and audit logics.

      The authors conclude with caution: Scope 4 claims risk distracting attention from the critical task of reducing absolute emissions. This resonates with wider debates about offsetting and greenwashing.

      In short: this is a sharp, thought-provoking study that opens space for further discussion of audit-made legitimacy in carbon markets.