Boardroom readiness for AASB S2 climate disclosures

Australia’s new AASB S2 Climate-related Disclosures standard marks a significant shift in the governance landscape, placing climate reporting squarely on the boardroom agenda. For directors, this is no longer a niche or technical concern; it’s a core responsibility, directly linked to fiduciary duties and stakeholder expectations. 

As regulatory scrutiny intensifies and the risks of inadequate disclosure grow, boards are taking steps to have the oversight, skills and processes in place to meet these new requirements. Directors are expected not only to understand what AASB S2 demands, but also to lead the organisation’s response by challenging management, integrating climate considerations into strategy and assessing the robustness and auditability ofdisclosures.

To support directors, BDO’s Sustainability Reporting team has developed a practical AASB S2 Climate-related Disclosures checklist. This resource is designed to help boards assess their organisation’s readiness, identify gaps and facilitate meaningful boardroom discussions, empowering directors to fulfil their governance responsibilities with confidence.

Key learnings from the first year of climate reporting

Australia’s mandatory climate-related disclosure regime took effect from 1 January 2025 for the largest emitters and corporations and many organisations are preparing to lodge their first sustainability reports. Early experiences — both from those already reporting and from boardroom preparations underway — have surfaced important lessons for directors.

1. The complexity and resource demands were underestimated
   Many boards initially viewed climate reporting as an extension of existing risk and compliance processes. However, the breadth and depth of AASB S2 requirements quickly became apparent. Directors found that meaningful disclosure demands robust data, cross-functional collaboration, and significant investment in systems and expertise.
2. Early engagement with management and assurance providers was critical
   Boards that engaged early with management, sustainability teams and assurance providers were better positioned to identify gaps and address them proactively. This collaborative approach enabled more informed boardroom discussions and helped establish whether disclosures were both accurate and audit-ready.
3. Gaps in board skills and climate literacy emerge
   The new standards highlighted the importance of climate literacy at the board level. Some boards identified a need to upskill directors or seek external expertise to effectively oversee climate-related risks and opportunities. This has prompted many organisations to review board composition and ongoing director education. AICD has a number of resources and courses (outlined below) to help build board skills on climate and meet rising expectations.
4. Integrating climate risk into strategy and remuneration remains challenging
   Directors reported that embedding climate considerations into core strategy, risk management frameworks, and executive remuneration structures was more complex than anticipated. The more proactive boards are approaching this as an ongoing governance priority, not a one-off compliance exercise.
5. Market and regulator expectations are evolving rapidly
   The first year has also highlighted the pace at which stakeholder and regulator expectations are shifting. Directors noted increased scrutiny from investors, regulators and the broader community, not just on the completeness of disclosures but on the quality of governance and the credibility of climate commitments.

Translating insights into board-level considerations

For directors, these early lessons highlight the importance of active oversight and strategic engagement with climate reporting. As boards prepare for their first AASB S2 disclosures, it’s worth considering:

• Does the board have access to the right information and expertise to oversee climate-related risks and opportunities?
• Are climate considerations meaningfully integrated into our organisation’s strategy, risk management, and executive incentives?
• Are we confident that our disclosures will meet both regulatory requirements and stakeholder expectations?

While management will lead much of the technical work, directors are responsible for ensuring governance standards are met and that climate reporting remains a standing boardroom priority.

Using the AASB S2 checklist as a governance tool

The AASB S2 Climate-related Disclosures checklist is designed to support directors in fulfilling their governance responsibilities under the new standard. Structured around the four key pillars—governance, strategy, risk management and metrics and targets — the checklist provides a comprehensive framework for board-level oversight.

Also incorporating the general requirements from AASB S1, the checklist enables boards to assess their organisation’s climate reporting readiness in depth. With 150 total disclosure requirements, it prompts meaningful boardroom discussions, highlights areas requiring attention and supports directors in identifying and addressing gaps before disclosures are finalised.

Rather than serving as a compliance tick-box, the checklist is intended to facilitate robust governance conversations. Directors have a unique opportunity to set expectations, drive accountability, and position their organisations for long-term success. Used effectively, it empowers boards to lead on climate reporting and demonstrate accountability to stakeholders.