AASB S2 Reporting: What you need to know on Assurance

As mandatory sustainability reporting becomes a reality for many Australian businesses under the Australian Sustainability Reporting Standards (ASRS), a new challenge is emerging: assurance.

Specifically, many companies are being required to obtain limited assurance over emissions data. But what does “limited assurance” actually mean, and how does it apply to climate change disclosures?

Let’s break down the first principles of assurance, illustrate them with real-world examples, and connect the dots to the requirements of AASB S2.

What is Assurance?

Assurance is an independent evaluation by a third party (such as an audit or assurance firm) to determine whether a company’s reported information is accurate, complete, and free from significant error or misstatement. This process helps provide confidence to stakeholders that the information is presented fairly and reliably for decision-making purposes.

Reasonable vs. Limited Assurance

Example:

At a high-level, think of reasonable assurance like getting a full medical examination where your doctor runs detailed tests, takes blood samples, and reviews your medical history to thoroughly assess your well-being. Whereas limited assurance is less invasive and more akin to a quick check-up where the doctor asks a few questions and does a basic examination to see if there’s anything obviously wrong.

Limited Assurance in the Context of AASB S2 Emissions Reporting

AASB S2 requires entities to disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions data. The Auditing and Assurance Standards Board (AUASB) has established a phased timeline for mandatory assurance of these disclosures. The phased approach to GHG emissions data assurance can be summarised as follows:

It’s important to recognise that the phased assurance timeline isn’t one-size-fits-all. Instead, it’s tailored to the scale and capacity of different organisations. The specific reporting requirements may vary depending on the nature of the entity and its emissions sources. In fact, the level and type of reporting depends on factors such as the entity’s activities, the types of carbon emissions generated, and organisational structure. Group 1 entities are required to lead the way, commencing reporting and assurance obligations first, while Group 2 and Group 3 entities follow on a staggered schedule. This approach recognises that larger or more complex organisations typically have greater resources and readiness to implement robust systems and controls, whereas smaller entities are given more time to prepare. As a result, each Group has its own defined starting period for Year 1.

Example:

This phased approach isn’t just a regulatory formality; it’s a thoughtful recognition of the practical realities that companies and auditors face. By gradually increasing assurance requirements, the standard-setters are giving everyone involved the breathing room to build out the right systems, refine data processes, and strengthen controls, rather than rushing to meet demanding new expectations overnight. In other words, it’s about setting the stage for meaningful, reliable reporting, rather than box-ticking compliance. Over time, this allows assurance to truly add value, supporting greater trust and confidence in sustainability disclosures.

What Does the Assurance Provider Do for Limited Assurance?

• Process Interviews: Interview key personnel responsible for collecting and reporting emissions data to understand processes, controls, and methodologies. Inquire about any significant changes in calculation methods or data sources during the reporting period.
• Methodology Review: Review the carbon emissions calculation methodology and associated documentation and verify that it aligns with relevant standards (e.g., GHG Protocol and NGER Regulations).
• Analytical Review: Perform trend analysis and compare reported carbon emissions against prior periods or expected ranges. Inquire about any unusual or significant changes.

Example:

An assurance practitioner reviews a company’s reported Scope 3 business travel emissions, noting a 32% increase in 2024 compared to prior year (from 4,700 to 6,200 tCO₂e), most notably, there was a significant increase from October 2023, with further spikes in January and February 2024. Since this is much higher than the usual 10% annual fluctuation, the practitioner inquires with management, who explains the rise is due to:

"In October 2023, our company merged with a subsidiary in another country, resulting in increased international business travel. Additionally, several global conferences resumed post-pandemic, leading to higher travel activity in January and February 2024."

Considering management’s explanation and the absence of other discrepancies, the assurance practitioner can conclude that the reported emissions are plausible given the circumstances, and that nothing has come to their attention to suggest that the increase is not sufficiently explained.

How to Prepare for Limited Assurance over AASB S2 Disclosures

• Engage Stakeholders Early: Adopt a multidisciplinary approach by engaging procurement, finance, and sustainability teams, and clearly define responsibilities to ensure buy-in and effective collaboration.
• Strengthen Data Quality: Ensure that all emissions data is complete, accurate, and thoroughly documented. Prepare a comprehensive basis of preparation that outlines your methodology, detailing each step of your reporting process from data collection to reporting. This should also specify data sources and provide justification for any key assumptions or judgments made.
• Practice Runs: Engage an assurance provider early to conduct a gap assessment or pre-assurance review, allowing you to identify and address potential issues before the official assurance process begins.

Limitations and Considerations

• Preparation is Key: Reliable disclosures start with strong data collection and solid internal controls. Without them, messy or incomplete data can derail your efforts, even during a lighter touch assurance engagement.
• Not Absolute Certainty:  As previously mentioned, limited assurance engagements rely more on information provided by management and involve less hands-on testing by auditors. For AASB S2 sustainability disclosures, which often involve forecasts, estimates, and management judgments, this means that some misstatements or inaccuracies, particularly in complex areas, may not always be picked up.
• Expectation Gap: There’s often a disconnect between what stakeholders think limited assurance delivers and what it actually means in practice. Being transparent about what procedures were performed, and where the boundaries of the engagement lie, helps ensure users understand the level of comfort provided and can trust the assurance process as sustainability reporting matures.

Conclusion

Starting with limited assurance just makes sense for where Australia is on its sustainability reporting journey. It strikes a balance: offering that crucial external check and building stakeholder confidence, while giving companies space to strengthen their reporting without being overwhelmed by the rigour and cost of full reasonable assurance from day one. The key is to get ahead of the curve, really understand the underlying principles, and start preparing early. As companies improve their reporting and assurance processes, emissions are expected to fall over time, contributing to better environmental outcomes. That way, when the requirements ramp up, organisations will be ready to meet them confidently and can turn compliance into a genuine opportunity for growth and credibility.

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