ASRS: How to determine what's material

With the new Australian Sustainability Reporting Standards, AASB S1 & S2, being reported on for the first time this year, WolfPeak’s senior sustainability consultants Jess Davis and Giorgia Fornari have spent the last few months hosting practical workshop sessions across Australia to inform and prepare organisations for the new climate disclosures. We have gathered some of the most asked questions about readiness, strategy and reporting and will attempt to answer them one by one.

Their first attempt at doing so relates to a question about materiality.

Materiality is the key filter under ASRS 

 Materiality determines what sustainability and climate information must be disclosed under AASB S1 and AASB S2. Information is material if “omitting, misstating, or obscuring it could reasonably influence decisions made by primary users of your financial reports.” 

ASRS applies a financial materiality lens 

 The focus is on sustainability‑ and climate‑related risks and opportunities that could affect an organisation’s prospects over time, including future cash flows, access to finance and cost of capital. Disclosure of environmental or climate impacts is required where those impacts to climate‑related risks or opportunities that may reasonably influence the decisions of investors, lenders and other capital providers. 

Materiality becomes especially important for Scope 3 emissions.  

Not all 15 categories will be relevant for every organisation, but you need to be able to clearly justify what is (and isn’t) included.

That means:

• Judgements must be robust, documented and defensible

• Methods, assumptions and data sources need to be clearly articulated

• Decisions should stand up to scrutiny from auditors and stakeholders

In practice 

• Materiality isn’t just about size: smaller emission sources can be material if linked to major transition, regulatory or pricing risk.
• Qualitative factors matter - reputation, contracts, regulation and customer expectations.
• Materiality can change over time and must be reassessed regularly as policies, markets and business models evolve.
• Climate disclosures must connect with financial statements: assumptions used in climate scenarios should align with those in financial planning.

Understanding materiality is foundational to credible ASRS reporting.

Get in touch with our Sustainability & ESG team if you have any further questions.