Core content (AASBS1_09-24)

Unless another Australian Sustainability Reporting Standard permits or requires otherwise in specified circumstances, an entity shall provide disclosures about:

(a) governance—the governance processes, controls and procedures the entity uses to monitor and manage sustainability-related risks and opportunities (see paragraphs 26–27);

(b) strategy—the approach the entity uses to manage sustainability-related risks and opportunities (see paragraphs 28–42);

(c) risk management—the processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities (see paragraphs 43–44); and

(d) metrics and targets—the entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation (see paragraphs 45–53).

The objective of sustainability-related financial disclosures on governance is to enable users of general purpose financial reports to understand the governance processes, controls and procedures an entity uses to monitor, manage and oversee sustainability-related risks and opportunities.

To achieve this objective, an entity shall disclose information about:

(a) the governance body(s) (which can include a board, committee or equivalent body charged with governance) or individual(s) responsible for oversight of sustainability-related risks and opportunities. Specifically, the entity shall identify that body(s) or individual(s) and disclose information about:

(i) how responsibilities for sustainability-related risks and opportunities are reflected in the terms of reference, mandates, role descriptions and other related policies applicable to that body(s) or individual(s);

(ii) how the body(s) or individual(s) determines whether appropriate skills and competencies are available or will be developed to oversee strategies designed to respond to sustainability-related risks and opportunities;

(iii) how and how often the body(s) or individual(s) is informed about sustainability-related risks and opportunities;

(iv) how the body(s) or individual(s) takes into account sustainability-related risks and opportunities when overseeing the entity’s strategy, its decisions on major transactions and its risk management processes and related policies, including whether the body(s) or individual(s) has considered trade-offs associated with those risks and opportunities; and

(v) how the body(s) or individual(s) oversees the setting of targets related to sustainability-related risks and opportunities, and monitors progress towards those targets (see paragraph 51), including whether and how related performance metrics are included in remuneration policies.

(b) management’s role in the governance processes, controls and procedures used to monitor, manage and oversee sustainability-related risks and opportunities, including information about:

(i) whether the role is delegated to a specific management-level position or management-level committee and how oversight is exercised over that position or committee; and

(ii) whether management uses controls and procedures to support the oversight of sustainability-related risks and opportunities and, if so, how these controls and procedures are integrated with other internal functions.

The objective of sustainability-related financial disclosures on strategy is to enable users of general purpose financial reports to understand an entity’s strategy for managing sustainability-related risks and opportunities.

Specifically, an entity shall disclose information to enable users of general purpose financial reports to understand:

(a) the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects (see paragraphs 30–31);

(b) the current and anticipated effects of those sustainability-related risks and opportunities on the entity’s business model and value chain (see paragraph 32);

(c) the effects of those sustainability-related risks and opportunities on the entity’s strategy and decision-making (see paragraph 33);

(d) the effects of those sustainability-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period, and their anticipated effects on the entity’s financial position, financial performance and cash flows over the short, medium and long term, taking into consideration how those sustainability-related risks and opportunities have been factored into the entity’s financial planning (see paragraphs 34–40); and

(e) the resilience of the entity’s strategy and its business model to those sustainability-related risks (see paragraphs 41–42).

An entity shall disclose information that enables users of general purpose financial reports to understand the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects. Specifically, the entity shall:

(a) describe sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects;

(b) specify the time horizons—short, medium or long term—over which the effects of each of those sustainability-related risks and opportunities could reasonably be expected to occur; and

(c) explain how the entity defines ‘short term’, ‘medium term’ and ‘long term’ and how these definitions are linked to the planning horizons used by the entity for strategic decision-making.

Short-, medium- and long-term time horizons can vary between entities and depend on many factors, including industry-specific characteristics, such as cash flow, investment and business cycles, the planning horizons typically used in an entity’s industry for strategic decision-making and capital allocation plans, and the time horizons over which users of general purpose financial reports conduct their assessments of entities in that industry.

An entity shall disclose information that enables users of general purpose financial reports to understand the current and anticipated effects of sustainability-related risks and opportunities on the entity’s business model and value chain. Specifically, the entity shall disclose:

(a) a description of the current and anticipated effects of sustainability-related risks and opportunities on the entity’s business model and value chain; and

(b) a description of where in the entity’s business model and value chain sustainability-related risks and opportunities are concentrated (for example, geographical areas, facilities and types of assets).

An entity shall disclose information that enables users of general purpose financial reports to understand the effects of sustainability-related risks and opportunities on its strategy and decision-making. Specifically, the entity shall disclose information about:

(a) how the entity has responded to, and plans to respond to, sustainability-related risks and opportunities in its strategy and decision-making;

(b) the progress against plans the entity has disclosed in previous reporting periods, including quantitative and qualitative information; and

(c) trade-offs between sustainability-related risks and opportunities that the entity considered (for example, in making a decision on the location of new operations, an entity might have considered the environmental impacts of those operations and the employment opportunities they would create in a community).

An entity shall disclose information that enables users of general purpose financial reports to understand:

(a) the effects of sustainability-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period (current financial effects); and

(b) the anticipated effects of sustainability-related risks and opportunities on the entity’s financial position, financial performance and cash flows over the short, medium and long term, taking into consideration how sustainability-related risks and opportunities are included in the entity’s financial planning (anticipated financial effects).

Specifically, an entity shall disclose quantitative and qualitative information about:

(a) how sustainability-related risks and opportunities have affected its financial position, financial performance and cash flows for the reporting period;

(b) the sustainability-related risks and opportunities identified in paragraph 35(a) for which there is a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements;

(c) how the entity expects its financial position to change over the short, medium and long term, given its strategy to manage sustainability-related risks and opportunities, taking into consideration:

(i) its investment and disposal plans (for example, plans for capital expenditure, major acquisitions and divestments, joint ventures, business transformation, innovation, new business areas, and asset retirements), including plans the entity is not contractually committed to; and

(ii) its planned sources of funding to implement its strategy; and

(d) how the entity expects its financial performance and cash flows to change over the short, medium and long term, given its strategy to manage sustainability-related risks and opportunities.

In providing quantitative information, an entity may disclose a single amount or a range.

In preparing disclosures about the anticipated financial effects of a sustainability-related risk or opportunity, an entity shall:

(a) use all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort (see paragraphs B8–B10); and

(b) use an approach that is commensurate with the skills, capabilities and resources that are available to the entity for preparing those disclosures.

An entity need not provide quantitative information about the current or anticipated financial effects of a sustainability-related risk or opportunity if the entity determines that:

(a) those effects are not separately identifiable; or

(b) the level of measurement uncertainty involved in estimating those effects is so high that the resulting quantitative information would not be useful (see paragraphs 77–82).

In addition, an entity need not provide quantitative information about the anticipated financial effects of a sustainability-related risk or opportunity if the entity does not have the skills, capabilities or resources to provide that quantitative information.

If an entity determines that it need not provide quantitative information about the current or anticipated financial effects of a sustainability-related risk or opportunity applying the criteria set out in paragraphs 38–39, the entity shall:

(a) explain why it has not provided quantitative information;

(b) provide qualitative information about those financial effects, including identifying line items, totals and subtotals within the related financial statements that are likely to be affected, or have been affected, by that sustainability-related risk or opportunity; and

(c) provide quantitative information about the combined financial effects of that sustainability-related risk or opportunity with other sustainability-related risks or opportunities and other factors unless the entity determines that quantitative information about the combined financial effects would not be useful.

An entity shall disclose information that enables users of general purpose financial reports to understand its capacity to adjust to the uncertainties arising from sustainability-related risks. An entity shall disclose a qualitative and, if applicable, quantitative assessment of the resilience of its strategy and business model in relation to its sustainability-related risks, including information about how the assessment was carried out and its time horizon. When providing quantitative information, an entity may disclose a single amount or a range.

Other Australian Sustainability Reporting Standards may specify the type of information an entity is required to disclose about its resilience to specific sustainability-related risks and how to prepare those disclosures, including whether a scenario analysis is required.

The objective of sustainability-related financial disclosures on risk management is to enable users of general purpose financial reports:

(a) to understand an entity’s processes to identify, assess, prioritise and monitor sustainability-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process; and

(b) to assess the entity’s overall risk profile and its overall risk management process.

To achieve this objective, an entity shall disclose information about:

(a) the processes and related policies the entity uses to identify, assess, prioritise and monitor sustainability-related risks, including information about:

(i) the inputs and parameters the entity uses (for example, information about data sources and the scope of operations covered in the processes);

(ii) whether and how the entity uses scenario analysis to inform its identification of sustainability-related risks;

(iii) how the entity assesses the nature, likelihood and magnitude of the effects of those risks (for example, whether the entity considers qualitative factors, quantitative thresholds or other criteria);

(iv) whether and how the entity prioritises sustainability-related risks relative to other types of risk;

(v) how the entity monitors sustainability-related risks; and

(vi) whether and how the entity has changed the processes it uses compared with the previous reporting period;

(b) the processes the entity uses to identify, assess, prioritise and monitor sustainability-related opportunities; and

(c) the extent to which, and how, the processes for identifying, assessing, prioritising and monitoring sustainability-related risks and opportunities are integrated into and inform the entity’s overall risk management process.

The objective of sustainability-related financial disclosures on metrics and targets is to enable users of general purpose financial reports to understand an entity’s performance in relation to its sustainability-related risks and opportunities, including progress towards any targets the entity has set, and any targets it is required to meet by law or regulation.

An entity shall disclose, for each sustainability-related risk and opportunity that could reasonably be expected to affect the entity’s prospects:

(a) metrics required by an applicable Australian Sustainability Reporting Standard; and

(b) metrics the entity uses to measure and monitor:

(i) that sustainability-related risk or opportunity; and

(ii) its performance in relation to that sustainability-related risk or opportunity, including progress towards any targets the entity has set, and any targets it is required to meet by law or regulation.

In the absence of an Australian Sustainability Reporting Standard that specifically applies to a sustainability-related risk or opportunity, an entity shall apply paragraphs 57–58 to identify applicable metrics.

Metrics disclosed by an entity applying paragraphs 45–46 shall include metrics associated with particular business models, activities or other common features that characterise participation in an industry.

If an entity discloses a metric taken from a source other than Australian Sustainability Reporting Standards, the entity shall identify the source and the metric taken.

If a metric has been developed by an entity, the entity shall disclose information about:

(a) how the metric is defined, including whether it is derived by adjusting a metric taken from a source other than Australian Sustainability Reporting Standards and, if so, which source and how the metric disclosed by the entity differs from the metric specified in that source;

(b) whether the metric is an absolute measure, a measure expressed in relation to another metric or a qualitative measure (such as a red, amber, green—or RAG—status);

(c) whether the metric is validated by a third party and, if so, which party; and

(d) the method used to calculate the metric and the inputs to the calculation, including the limitations of the method used and the significant assumptions made.

An entity shall disclose information about the targets it has set to monitor progress towards achieving its strategic goals, and any targets it is required to meet by law or regulation. For each target, the entity shall disclose:

(a) the metric used to set the target and to monitor progress towards reaching the target;

(b) the specific quantitative or qualitative target the entity has set or is required to meet;

(c) the period over which the target applies;

(d) the base period from which progress is measured;

(e) any milestones and interim targets;

(f) performance against each target and an analysis of trends or changes in the entity’s performance; and

(g) any revisions to the target and an explanation for those revisions.

The definition and calculation of metrics, including metrics used to set the entity’s targets and monitor progress towards reaching them, shall be consistent over time. If a metric is redefined or replaced, an entity shall apply paragraph B52.

An entity shall label and define metrics and targets using meaningful, clear and precise names and descriptions.