Mandatory climate-related financial disclosure has reshaped how Australian businesses and investors are approaching climate reporting. Scenario analysis, a core requirement under Australian Accounting Standards Board (AASB) S2, plays a critical role in leveraging reporting obligations for more transformative sustainability reporting practices in Australia. With the introduction of standards such as AASB S2, businesses are now expected to provide clearer insights into how climate risks and opportunities may affect their financial performance, strategy and long-term prospects. 

The blog considers how emerging climate reporting trends, evolving methodologies and regulatory expectations are prompting organisations to integrate climate considerations into strategy, risk management and operational planning. Often organisations approach these requirements from a compliance perspective. Sustainability reporting is increasingly recognised as a tool that can support more informed organisational decision-making, ultimately supporting transformative sustainability reporting practices in Australia. 

What is scenario analysis? 

Scenario analysis, as explained by International Financial Reporting Standards (IFRS) S2, is the disclosure of information that enables an understanding of business models and strategy resilience within the context of “climate-related changes, developments and uncertainties.” By encouraging businesses to explore how different climate futures may influence operations, markets and value chains, scenario analysis moves reporting beyond historical disclosure towards forward-looking strategic thinking. This shift highlights the growing potential for sustainability reporting to improve transparency while strengthening organisational resilience and decision-making. 

Looking ahead- scenario analysis and resilience 

Scenario analysis requires organisations to assess how plausible climate futures such as accelerated decarbonisation or intensified physical risks may affect their business models and financial outcomes. Unlike traditional risk assessments that focus on current exposures, scenario analysis encourages organisations to test the robustness of strategy across multiple time horizons. 

In practice, scenario analysis is not a standardised exercise. Organisations must apply judgement in selecting relevant climate futures and interpreting their implications for strategy and risk. This flexibility can create variation in disclosure approaches, particularly as organisations undertake scenario analysis for the first time.  

For many organisations, scenario analysis remains an emerging capability, requiring new data processes, governance coordination and analytical skills. At the same time, it can enable deeper strategic reflection. Businesses may identify risks related to regulatory change, asset obsolescence or shifting customer demand, while also recognising opportunities linked to innovation, new markets and transition-aligned investments. 

By integrating these insights into planning processes, organisations can strengthen resilience and make more informed capital allocation decisions. In more mature organisations, scenario insights are also beginning to influence investment prioritisation and transition planning pathways. In this way, scenario analysis can move beyond a reporting requirement to become a strategic discipline shaping how organisations prepare for uncertainty. 

Reporting practices are still evolving 

Early observations of climate disclosures suggest that sustainability reporting practices in Australia are still developing. Differences in how organisations conduct scenario analysis, including qualitative versus quantitative approaches and varying levels of engagement with climate risks across the value chain reflect the broader transition underway in the reporting landscape. 

Recent Australian research by the AASB and Auditing and Assurance Standards Board (AUASB), which analyses ASX-listed annual reports, found that overall climate-related disclosures increased from approximately 48% in 2023 to 67% in 2024, indicating growing preparedness for mandatory reporting. However, more advanced forward-looking disclosures such as scenario analysis remain less widespread, highlighting ongoing capability development across organisations. 

Reporting for transformation 

As disclosure expectations increase, organisations are refining governance structures, improving data systems and embedding climate considerations into enterprise risk frameworks. The process of preparing scenario-based disclosures can itself prompt operational change, as collaboration between finance, sustainability and risk teams helps identify data gaps, supply chain vulnerabilities and opportunities for clearer target-setting. 

Over time, these developments can contribute to more transparent and decision-useful reporting. As organisations move from viewing sustainability disclosures as compliance obligations to recognising their strategic value, scenario analysis can support broader transformation in how climate risk and opportunity are managed. 

As organisations increasingly embed scenario insights into strategic planning, sustainability reporting has the potential to move from a disclosure exercise to a catalyst for more resilient and adaptive business models. 

Conclusion 

As Australia continues to phase in mandatory climate reporting, scenario analysis is emerging as an important mechanism for linking improved transparency with more informed strategic adaptation. While methodologies and practices continue to evolve, the requirement to assess resilience across different climate futures is encouraging organisations to rethink strategy, strengthen governance and engage more deeply with their value chains. By approaching scenario analysis proactively, businesses can move beyond compliance and use sustainability reporting transformationally – as a structured lens for long-term value creation and strategic adaptation in a changing economic environment. 

*Authors: Pooja Talekar, Environment and Climate Change Intern;  Dr. Evan Center, Head of Environment and Climate Change; Jeremy Williams, Analyst, Environment and Climate Change. 

UNiting Business LIVE Australia 2026 

Come join us this 13 & 14 May in Sydney for our deep-dive session at UNiting Business LIVE, titled: Transparency & transformation: Leveraging sustainability reporting for impact.  

Australia has a chance to lead the world through some of the most impactful reporting practices. “Strengthening transparency and accountability is essential to unlocking the full economic potential of climate action, here in Australia and all around the world,” remarked United Nations Framework Convention on Climate Change (UNFCCC) Executive Secretary Simon Stiell in his recent mission to Australia.

This deep dive session explores how businesses are leveraging sustainability reporting frameworks to drive transparency, accountability, and strategic transformation. Drawing from the success of the Sustainability Reporting Community of Practice, done in partnership with ASX and Chartered Accountants Australia and New Zealand, this session dives into what businesses are learning from first reporters; how they are using reporting practices to clarify related risks and opportunities; key trends and issues from global reporting regulations, frameworks and technological advancements in AI; and the messaging required to internally leverage impactful reporting for good governance.

Opening remarks:

• Karen McWilliams FCA, Board Director and Chair of Finance Audit and Risk Committee, UN Global Compact Network Australia; Sustainability and Business Reform Leader, Chartered Accountants Australia and New Zealand (CAANZ)

Panel:

• Jack Bisset, Climate Implementation Lead, Australian Accounting Standards Board (AASB)
• Lachlan Feggans, Senior Director, Sustainability, ESG and Regeneration, Brambles
• Rebecca Gunn, Senior Manager ESG, AIA
• Samantha Sing Key, Partner, Sustainability Reporting Advisory, Grant Thornton Australia
• Joan Ko, Global Climate and Sustainability Leader, Arup (Moderator)

In a milestone year, with Australia holding the Presidency for Negotiations at the UN Climate Change Conference (COP31), UNiting Business LIVE Australia 2026 will serve as a key moment on the global sustainability calendar. The conference will unite Australian business leaders to showcase sustainability leadership and strengthen Australia’s voice on the global stage. 

Featuring international addresses, keynote talks, fireside chats and deep‑dive discussions, this year’s program brings together some of Australia and the world’s leading voices in climate and nature risks, First Nations engagement, climate governance, ESG reporting, supply chains and sustainable business transformation. 

 👉  Discover our full program and speaker lineup. 

UNGCNA Sustainability Reporting Community of Practice 

If you are a Group 1, 2 or 3 reporting entity, come join our Sustainability Reporting Community of Practice (SRCoP). With over 100 Australian corporates already in the fold, the SRCoP provides monthly sessions that offer valuable resources, insights, solutions, trends, and support for reporting entities. 

UNGCNA participants are eligible for 2 free places. Find out more about the SRCoP and strengthen your capabilities in sustainability reporting. 

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