ESG Accountability in Australia: Are You Ready for ASRS & AASB S2?

Written by Steve Morgan, Head of Strategic Clients and ESG | 7 October 2025

For years, ESG has been a growing topic of conversation in boardrooms and with investors. But for many Australian companies, it has existed in a grey area between a public relations exercise, investor engagement and a core business function. That ambiguity is now over. The era of ESG accountability has arrived, driven by a powerful combination of regulation and deep market integration.

This was the central theme of our recent ESG breakfast, "Navigating the New Era of ESG Accountability". We gathered industry leaders to discuss the shift from ESG as a peripheral concept to a mandatory, board-level responsibility.

The message was clear: Businesses are in ESG integration and execution mode.

The landscape has shifted

Globally, the ESG landscape can seem complex. We see fragmentation, with political division in markets like the US contrasting sharply with the EU, which accounts for 85% of all sustainably invested funds. Investment flows can be volatile, with ups and downs from one quarter to the next.

However, looking past this noise reveals an undeniable structural change. In 2024, global investment in clean energy was double that of fossil fuels, and electric vehicles now represent 20% of worldwide car sales and rising.

Here in Australia, the responsible investment market is proving its resilient strength. It saw $300 million in inflows during the first quarter of 2025, even as global markets saw outflows. This resilience is built on a foundation of transparency and performance, with 86% of investment managers now having publicly disclosed ESG policies and responsible funds consistently outperforming market averages over the last decade.

This momentum is being accelerated by two key forces:

Regulation: The introduction of the Australian Sustainability Reporting Standards (ASRS), particularly the game-changing AASB S2 standard on climate-related disclosures, makes ESG reporting mandatory.
Integration: ESG is no longer the sole responsibility of a sustainability team. Ownership is shifting into core finance and corporate reporting functions, embedding it within business-as-usual processes and executive responsibilities.

Demystifying AASB S2: your critical path to compliance

The new AASB S2 standard has changed the game. For reporting periods beginning on or after 1 January 2025 for the largest companies , it requires entities to prepare an annual sustainability report as part of their main financial report. This isn't a glossy brochure; it's regulated corporate reporting subject to assurance, lodged with ASIC and requiring director declarations.

Compliance is structured around four core disclosure areas:

Governance: Disclosing the processes and controls your board and management use to monitor climate-related risks and opportunities. This means establishing clear governance structures, upskilling the board, and defining accountability.
Strategy: Detailing your approach to managing climate issues. This requires a formal climate risk assessment to identify financially material physical and transition risks and opportunities , and to understand their potential impact on your business model and financial position.
Risk management: Outlining the processes used to identify, assess, and manage those climate-related risks. The goal isn't to create a separate "climate risk" silo but to integrate these considerations into your overall enterprise risk management framework.
Metrics and targets: Reporting your performance, including Scope 1, 2, and 3 GHG emissions, and tracking progress towards any targets you have set. This quantitative data is essential for focusing efforts on your supply chain and demonstrating tangible progress.

At our event, a key question emerged from the audience: ‘This all sounds complex, but what does it actually mean for a business like ours, where climate risks aren't immediately obvious?’ It’s a challenge faced by many, from financial technology firms to service providers. The answer is that this new standard requires every entity to look deeper—into their supply chains, their client relationships, and their strategic resilience—to truly understand their exposure, risks and opportunities.

Navigating the legal tightrope and the journey forward

This new layer of regulated disclosure brings new legal risks. Directors must apply the same rigour to sustainability statements as all other corporate reporting. Protections under the modified liability framework are temporary and limited, meaning the safest assumption is that liability for sustainability reports is equal to that of financial reports.

This creates the twin risks of Greenwashing—making misleading environmental claims —and the emerging issue of Green-hushing, where companies deliberately under-report their credentials to avoid scrutiny. With ASIC actively targeting this area, the risk is real.

As our guest speaker Michelle Thang from Cuscal shared, the path forward can seem opaque. The key is a structured, methodical approach. At Automic ESG, our process is designed to provide clarity and a clear pathway to compliance.

We partner with clients to:

Educate key stakeholders on the requirements.
Identify gaps with a comprehensive current state assessment.
Develop a tailored action plan and compliance roadmap.
Provide ongoing support and execution to deliver robust data, disclosures, and strategy.

The era of accountability is here. Navigating it successfully requires a clear plan.

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