Climate disclosure for Commonwealth bodies

Commonwealth bodies are significant actors in the economy and play an important policy leadership role in helping Australia achieve its net zero targets.[1] The Australian Government has committed to achieve net zero in government operations by 2030[2] and integral to this is disclosure of climate-related information under the Commonwealth Climate Disclosure policy (CCD).[3]

As Australia co-hosts pre-COP 31 with Fiji this week,[4] we survey the reporting requirements and consider some practical points officials should consider.

Development of the climate-related disclosure standard

The release of the mandatory Climate-Related Disclosure Standard S2 by the International Sustainability Standards Board (ISSB) in 2023 (IFRS S2) set a global standard to drive convergence in the analysis of climate risks amongst globalised capital markets. The standard sets out disclosure requirements for climate-related risks, and opportunities, that could be expected to affect the entity’s cash flows, access to finance or cost of capital.

Australia was an early adopter of IFRS S2, with the Australian Accounting Standards Board (AASB) issuing Australian Sustainability Reporting Standard - S2 in September 2024 (AASB S2). So far around 35 counties have adopted IFRS S2.[5]

AASB S2 applies to corporate and not-for-profit entities who are required to report under s 292A of the Corporations Act 2001 (Cth) (Corporations Act) for reporting periods beginning on or after 1 January 2025,[6] meaning the first reports are due throughout 2026.

Overview of Commonwealth Climate Disclosure 

The CCD requires many Commonwealth Departments and corporatised entities to provide annual climate reporting aligned with AASB S2. The Department of Finance issued Resource Management Guide (RMG) 140[7] in July 2026 to guide agencies in complying with CCD. This is separate to the emissions reporting requirements for agencies under s 516A of the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

Who is covered?

Commonwealth entities and companies are subject to different climate reporting obligations depending on their type, size and profile, divided into two streams.

Stream 1 entities are large Commonwealth companies that are required to comply with AASB S2 in preparing sustainability reports under the Corporations Act.  

Stream 2 comprises non-corporate Commonwealth entities (NCE), Corporate Commonwealth Entities (CCE) and Commonwealth companies that are not required to provide a sustainability report under the Corporations Act and is divided into the following tranches:

• Tranche 1 comprising Departments of State, larger Commonwealth entities and various other entities including those with responsibility for climate change
• Tranche 2 comprising medium-sized Commonwealth entities, and
• Tranche 3 comprising all other Commonwealth entities and companies.

There is an exclusion from CCD reporting for Stream 2 entities with fewer than 20 employees who have no material exposure to climate risks and opportunities.

Reporting for Stream 2 entities follows a staggered implementation over three years.

• Tranche 1 entities commenced Year 1 reporting from FY 2024-25, with full implementation due this year.
• Tranche 2 entities commenced Year 1 reporting in FY 2025-26 and so will need to soon publish its report, progressing to full implementation in FY 2027-28
• Tranche 3 entities commence Year 1 reporting this year, progressing to full implementation in FY 2027-28, in each case on a simplified basis.

What do entities need to disclose?

Disclosures is structured around four pillars, which align with the core content of AASB S2:

• Governance
• Strategy
• Risk Management
• Metrics and Targets.

The governance pillar focuses on accountability, oversight and organisational responsibility for climate-related risks and opportunities, including information flows and procedures.

The strategy pillar considers how climate-related risks and opportunities may affect an entity's operations, objectives and long-term outlook, including:

• identifying material physical and transition risks and opportunities
• assessing the current and anticipated impacts of climate-related risks and opportunities on operations and identifying where those impacts are concentrated
• considering how climate-related risks and opportunities may affect the entity's ability to achieve or deliver public policy outcomes
• evaluating how climate-related considerations influence organisational strategy, planning and decision-making
• assessing the likely impact of climate-related risks and opportunities on the entity's financial outlook across the short, medium and long term (not for Tranche 3), and
• explaining the scenarios used, assumptions applied and the approach undertaken to assess climate-related impacts.

The risk management pillar focuses on how climate-related risks and opportunities are identified, assessed and managed within broader organisational risk management processes, including:

• outlining how risks are identified, assessed, prioritised, monitored and managed, including the inputs, assumptions and parameters used
• explaining how climate-related opportunities are identified, assessed, prioritised, managed and monitored, and
• demonstrating how climate-related risk and opportunity processes are incorporated into the entity's overall risk management framework.

The metrics and targets pillar requires the disclosure of climate-related performance measures, greenhouse gas emissions and emissions reduction targets.

Key metrics and targets considerations include:

• Reporting climate-related performance measures, including Scope 1, Scope 2 and Scope 3 greenhouse gas emissions – in summary:[8]
  • Scope 1 – direct emissions from sources owned / controlled by entity
  • Scope 2 – indirect emissions from power, heating, cooling consumed by entity
  • Scope 3 – other indirect emissions arising from entity value chain.
• Measuring and disclosing progress against climate-related targets, together with explanations of significant trends and results.
• Outlining emissions reduction targets and goals established by legislation, regulation, policy or the entity itself.
• Explaining how targets are developed, measured, reviewed and monitored over time.

Implementation challenges

A key objective of the framework is to encourage organisations to incorporate climate-related risks and opportunities into broader planning and governance processes. This requires a shift from a compliance reporting focus to using climate analysis as an input to entity decision-making, which will require change to internal policy and procedure.

The reporting of risks and opportunities presented by climate change on a particular entity requires a forward-looking analysis which will often be based on models that are highly sensitive to assumptions used and the quality of the data used. Entities may need to collect data from multiple internal systems and external sources which requires due diligence.

Obtaining reliable emissions data, particularly for Scope 3 emissions, can be difficult. As reporting frameworks mature, entities may need to strengthen data governance, assurance and verification processes to support confidence in reported information.

Conclusion

Implementing the CCD will require early engagement and sustained investment by Commonwealth entities and companies, particularly smaller ones, in technical modelling and data and a shift in management mindset from ‘mere’ compliance to embedding climate change into operational and strategic decision-making. In doing so Commonwealth entities and companies will help support achieving Australia’s net-zero targets.

[1] Australia’s 2035 Nationally Determined Contribution (2025) [Link]

[2] Australia’s Nationally Determined Contribution Communication (2022) [Link]

[3] Commonwealth Climate Disclosure policy [Link]

[4] Australia-Pacific Partnership for COP 31 [Link]

[5] Use of IFRS Sustainability Disclosure Standards by jurisdiction [Link]

[6] AASB S2 - Climate-related Disclosures [Link]

[7] Department of Finance, Commonwealth Climate Disclosure RMG 140 [Link]

[8] Department of Finance, Emissions Reporting Framework 2025-2026 Reporting Period [Link]