Proposed timeline for assurance over your sustainability report

Legislation to mandate sustainability reporting received Royal Assent on 17 September 2024, ushering in a new era of sustainability reports accompanying the financial reports of many entities lodging financial statements with the Australian Securities and Investments Commission (ASIC). Our decision tree will help you determine if your entity is subject to mandatory sustainability reporting, and when.

The legislation starts on 1 January 2025, so Group 1 entities don’t have much time to get ready. Their first sustainability report must cover years ending 31 December 2025 onwards, and the question on everyone’s minds is, will this sustainability information have to be audited, and when?

Is an audit required for the sustainability report?

Section 301A of the Corporations Act 2001 (Act) requires the sustainability report to be audited in accordance with the auditing standards (this will be an Australian version of the International Auditing and Assurance Standards Board (IAASB’s) ISSA 5000 General Requirements for Sustainability Assurance Engagements). The Act also requires the Australian Auditing and Assurance Standards Board (AUASB) to make standards to specify the extent of and provide for the audit and review of sustainability reports for financial years beginning on or before 30 June 2030.

While the whole sustainability report must be audited for financial years beginning on or after 1 July 2030, there will be a phase-in period during which some sections will be subject to different levels of assurance. A review engagement will result in the auditor providing limited assurance, and an audit engagement will result in reasonable assurance on the sustainability disclosures.

AUASB proposed timeline

On 17 September, the AUASB released its proposed timeline for reviewing and auditing disclosures contained in the sustainability report. This phase-in model, which will be formally outlined in the proposed ASSA 5010, considers the likely maturity of an entity’s systems and processes, the demands for assurance over climate disclosures, and the capacity and capabilities of auditors and their experts during the initial years of reporting.

Key proposals

Scope 1 and Scope 2 emissions will be subject to limited assurance (review) in the first year of reporting, and reasonable assurance (audit) in the second year.

Governance and strategy disclosures (risks and opportunities) will also be subject to limited assurance in the first year, but reasonable assurance is only required in the fourth year.

Limited assurance must be provided by the auditor for all other disclosures from the second year, stepping up to reasonable assurance in the fourth year.

The first, second, third and fourth year of reporting

The proposed timeline explains the first, second, third, and fourth years of reporting, detailing what information needs to be audited or reviewed, and when. Understanding these terms is crucial, as the gap between reporting years isn’t always a straightforward one-year interval. The table below shows how an entity’s start date determines the relevant year for assurance purposes.

Group	First year - financial year commencing	Second year - financial year commencing	Third year - financial year commencing	Fourth year - financial year commencing
Group 1	1 January 2025 to 30 June 2026	1 July 2026 to 30 June 2027	1 July 2027 to 30 June 2028	1 July 2028 onwards
Group 2	1 July 2026 to 30 June 2027	1 July 2027 to 30 June 2028	1 July 2028 to 30 June 2029	1 July 2029 onwards
Group 3	1 July 2027 to 30 June 2028	1 July 2028 onwards	1 July 2029 to 30 June 2030	1 July 2030 onwards

For Group 2 and Group 3 entities, there is a one-year gap between the first, second, third and fourth years, regardless of whether the financial year starts on 1 January or 1 July. The same applies to Group 1 entities whose financial year starts on 1 July. However, Group 1 entities with a financial year starting on 1 January will have two ‘first years’ because both the financial years commencing 1 January 2025 and 1 January 2026 fall into the ‘first year’. This effectively extends the phase-in period for assurance to five years for these entities.

Group 1 entity - Financial year commences 1 January
First year for assurance	First year for assurance	Second year for assurance	Third year for assurance	Fourth year for assurance
Year beginning 1 January 2025	Year beginning 1 January 2026	Year beginning 1 January 2027	Year beginning 1 January 2028	Year beginning 1 January 2029
Year ending 31 December 2025	Year ending 31 December 2026	Year ending 31 December 2027	Year ending 31 December 2028	Year ending 31 December 2029
Example: Scope 1 and 2 emissions (limited assurance)	Example: Scope 1 and 2 emissions (limited assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)

Group 1 entities whose financial year starts 1 January effectively receive a six-month grace period. For example, the first audit required on their Scope 1 and Scope 2 emissions is for the year ending 31 December 2027, compared to the year ending 30 June 2027 for those with financial years starting on 1 July.

Group 1 entity – Financial year commences 1 July
First year for assurance	Second year for assurance	Third year for assurance	Fourth year for assurance
Year beginning 1 July 2025	Year beginning 1 July 2026	Year beginning 1 July 2027	Year beginning 1 July 2028
Year ending 30 June 2026	Year ending 30 June 2027	Year ending 30 June 2028	Year ending 30 June 2029
Example: Scope 1 and 2 emissions (limited assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)	Example: Scope 1 and 2 emissions (reasonable assurance)

Summary of proposals and timelines

Assuming a 30 June year-end for a Group 1 entity, the table below compares when various aspects of sustainability reporting are subject to assurance, and when.

	First year	Second year	Third year	Fourth year	Fifth year	Sixth year
Sustainability disclosures	Ending 30 June 2026	Ending 30 June 2027	Ending 30 June 2028	Ending 30 June 2029	Ending 30 June 2030	Ending 30 June 2031
Governance	Limited	Limited	Limited	Reasonable	Reasonable	Reasonable
Strategy – Risks and opportunities	Limited	Limited	Limited	Reasonable	Reasonable	Reasonable
Climate resilience/scenario analysis	None	Limited	Limited	Reasonable	Reasonable	Reasonable
Transition plans	None	Limited	Limited	Reasonable	Reasonable	Reasonable
Risk management	None	Limited	Limited	Reasonable	Reasonable	Reasonable
Scope 1 and Scope 2 emissions	Limited	Reasonable	Reasonable	Reasonable	Reasonable	Reasonable
Scope 3 emissions	N/A (transition exemption defers disclosure to second year)	Limited	Limited	Reasonable	Reasonable	Reasonable
Climate-related metrics and targets	None	Limited	Limited	Reasonable	Reasonable	Reasonable

For Group 2 and 3 entities with 30 June reporting dates, the dates merely shift by one year. For Group 3 entities, the fourth year is the year ending 30 June 2031, by which time all sustainability disclosures must be audited.

How BDO can help

Our sustainability reporting experts can help you navigate the complex sustainability reporting and assurance requirements, and our sustainability roadmaps can help you plan your sustainability reporting journey, ensuring priority for disclosures subject to limited assurance.