How finance teams can streamline sustainability reporting and build scalable systems ahead of Group 2 and 3 requirements

I've spoken to many finance leaders since Australia's first AASB S2 reports landed. Most said the same thing: the process took longer than anyone expected, cost more than anyone budgeted, and still left people feeling uncertain at sign-off. The reason it costs more than it should? Finance arrived too late. And ultimately, organisations that treated AASB S2 as a sustainability project paid more for it, while those that treated it as a finance process generally had a smoother path.

What the first-year reports revealed

PwC's March 2026 analysis of 22 Group 1 December reporters found that the shortest AASB S2 report was 7 pages and the longest was 82. Same standard, wildly different scope.

The analysis showed that one in three reporters did not clearly quantify the financial impact of climate risks on their business, with many citing measurement uncertainty – an area ASIC has now flagged as a focus.

A consistent pattern emerged: sustainability teams often built the narrative, while finance teams were brought in late to validate figures and assumptions under time pressure. The difference between organisations that struggled and those that managed the process effectively was structural preparation, not technical capability.

Finance teams were handed the keys

AASB S2 is not a sustainability report that finance reviews. It is a financial disclosure standard that requires the disclosure of climate-related risks and opportunities, including their expected impacts on assets, liabilities, revenues, and cash flows. The financial picture is the point.

As a CFO, what strikes me most is how familiar the underlying challenge actually is. AASB S2 introduces new subject matter, but the discipline required is largely the same: estimates, assumptions, controls, audit scrutiny and judgement. The challenge is not learning a new reporting process but understanding how climate-related risks and opportunities affect financial outcomes.

The subject matter looks different depending on where you sit. Whether it is a mining finance team assessing water scarcity and carbon pricing or a construction CFO quantifying extreme weather exposure on project delivery timelines, the task is the same: identify what is financially material and build defensible evidence around it.

What ASIC is focused on

ASIC’s focus is on entity-specific judgement and evidence-backed disclosure. Boilerplate or unsupported statements are unlikely to meet expectations, particularly where financial impacts are asserted without a clear methodology.

Boards sign these disclosures, and accountability ultimately sits with directors.

The three mistakes that drove up unnecessary time and cost

Three recurring mistakes drove unnecessary time and cost in the first reporting cycle:

1. Collecting everything before determining materiality
2. Treating AASB S2 as an extension of sustainability reporting rather than a financial disclosure standard
3. Leaving evidence gathering until year-end

A practical approach

The organisations that managed AASB S2 most effectively treated it as a structured business process with clear ownership, governance and ongoing evidence gathering.

1. Get ownership right

Finance should own the reporting framework and accountability as AASB S2 ultimately requires assessment of financial impact. Sustainability teams play a supporting role, but finance must lead the materiality and judgement.

2. Bring the board and executive team in early

AASB S2 is designed to help organisations understand risks and opportunities that could materially affect enterprise value. It should surface not only risks, but also operational and strategic opportunities.

3. Start with materiality

Materiality allows organisations to focus only on what could influence financial performance and provides an auditable basis for inclusion and exclusion decisions.

4. Build the evidence trail throughout the year

The most expensive approach is treating AASB S2 as a year-end disclosure exercise. Risk and opportunity assessments, governance decisions and assumptions should be documented as they occur, not reconstructed at year-end. This turns reporting into validation rather than rebuilding.

A more effective approach is to establish a repeatable process that runs year-round. Risk and opportunity assessments should be reviewed periodically. Governance decisions should be documented when they are made. Supporting evidence, policies, scenario analysis and key assumptions should be captured and maintained as part of normal business operations.

When organisations do this, Year 2 becomes a refinement exercise rather than a rebuild. The evidence trail already exists, governance discussions are documented, and prior-year judgements provide a clear starting point for future reporting cycles.

Ultimately, the first reporting cycle taught organisations what AASB S2 requires. The second will separate those who treat it as a compliance burden from those who treat it as a financial discipline.

The organisations that will spend less time and money on reporting in Year 2 are unlikely to be those with the largest sustainability teams or the most consultants. They will be the ones that have established clear ownership, board engagement, materiality-driven decision making and repeatable reporting processes.

More importantly, they are more likely to identify strategic risks and opportunities that would otherwise remain hidden. That is ultimately why the standard exists.

The standard does not reward the most elaborate disclosure. It rewards the most defensible one.

I have yet to meet a CFO who said they started too early.

Rachel Riley is co-founder and chief financial officer at Drova.