Q&A: AASB S2 Reporting in the Mining Sector Explained

1. What are AASB S1 and S2, and how will they affect mining companies in practice?

The Australian Accounting Standards Board (AASB) has issued two new sustainability reporting standards:

• AASB S1 is a voluntary standard that sets out requirements for disclosing general sustainability-related risks and opportunities that could reasonably impact an entity’s cash flows, access to finance, or cost of capital over the short, medium, or long term.

• AASB S2, on the other hand, is a mandatory standard under the Corporations Act 2001 (Cth) that focuses specifically on climate-related disclosures. As a result, many companies are prioritising AASB S2 as it is now a matter of compliance.

A three-year phased approach, where companies are categorised by total greenhouse gas emissions, employee count, gross assets and revenue, sets group one to commence reporting from 1 January, 2025.

2. What specific climate disclosures are mining companies now expected to provide, and how do tools like scenario analysis and scope three emissions reporting fit into that?

Disclosures under AASB S2 centre on four core themes: governance, strategy, risk management, and metrics and targets. To prepare for this, companies need to conduct a climate risk assessment and determine what their mitigation plans for these risks are.

In doing this climate risk assessment, the Corporations Act 2001 (Cth) mandates the use of at least two climate scenarios – one limiting global warming to 1.5 °C, and another where it well exceeds 2 °C. In disclosing metrics and targets companies need to disclosure their scope one, two and three emissions.

With scope three disclosure soon becoming mandatory, companies can use this process to:

• Reduce scope three emissions;

• Validate Scope one and two decarbonisation gains;

• Lower future costs; and

• Identify external dependencies that may be phased out over time.

3. Greenbase has conducted many climate risk assessments. What recurring risks are emerging across the mining sector?

Water consistently emerges as a key risk in nearly every risk assessment we have conducted – ranging from flooding, dewatering, erosion and water scarcity to salinity and rehabilitation. However, many of the water management processes we observe are not based on measurements that are robust and disclosure-ready.

When water is identified as a material risk, the natural follow-up question becomes: how are companies managing it? Businesses should consider whether, if water efficiency programs were implemented, they would have the confidence and the data quality needed to disclose their effectiveness.

4. Is the current NGER (National Greenhouse and Energy Reporting) scheme sufficient to meet AASB S2 requirements, and what can companies do now to improve audit-readiness?

Companies may have to look beyond NGER reporting and adopt the GHG Protocol, which captures all emissions regardless of their location or classification under local law. Relying solely on NGER data risks omitting material scope one emissions, for example from onsite landfills or non-Australian operations.

We recommend assessing any non-NGER scope one emissions before your first year of reporting. As with report preparers, some auditors are still familiarising themselves with the new legislation. To support a smoother audit process, companies should focus on:

• Maintaining clear and thorough documentation;

• Providing relevant information to auditors early; and

• Referencing previously supplied material when responding to auditor queries.

5. Many companies are still unsure who should lead AASB S2 compliance internally. What practical steps can help get people aligned and moving?

In some companies there’s a real risk that no one is clearly accountable for driving the AASB S2 disclosure process. In organisations without dedicated sustainability teams, responsibility often falls into a grey area – environmental and finance teams may find themselves looking to each other to take the lead.

To address this, boards and executive teams should actively incentivise staff to step up and take ownership. Organisations that place importance on this reporting will find that their staff see opportunity in reporting well and see career incentive in doing so.

Climate risk assessment workshops are an effective way to bring cross-functional teams together, fostering collaboration and shared understanding. We’ve seen great outcomes not only in advancing climate disclosures, but also in surfacing and addressing broader organisational risks.

6. How does Greenbase support mining companies in preparing for AASB S2?

Greenbase’s role is to bridge the gap between climate science and its potential impacts on financial statements within the mining sector. We provide a full AASB S2 service from climate change modelling to writing disclosures, including support through the assurance process.

We recommend that companies be proactive and start preparing early for these disclosures. This may include understanding when the reporting requirements may apply to you, conducting a gap analysis, building internal capability, bridging finance and sustainability functions together and creating a roadmap to continuously improve reporting.

Greenbase provides end-to-end support across all aspects of AASB S2, including readiness assessments, gap analysis, GHG emissions estimates, climate change modelling, scenario analysis and much more.

Contact us today to find out how we can support you through your reporting journey.

---

Greenbase. Makes Sense.