IESBA Sustainability Ethics Standards

In January 2025, the IESBA released two final pronouncements on ethics standards for sustainability reporting and assurance:

• International Ethics Standards for Sustainability Assurance (IESSA) and related revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards), setting a global benchmark for ethical behaviour and independence in sustainability reporting and assurance.
• Revisions to the Code on the Using the Work of an External Expert, establishing an ethical framework for evaluating the competence, capabilities and objectivity of external experts used by professional accountants and sustainability assurance practitioners.

To support the final pronouncements, the IESBA also released supporting resources on the standards:

– Sustainability:  Basis for Conclusions, Factsheet and Technical Overview.

– Use of External Experts: Basis for Conclusions, Factsheet and Technical Overview.

The pronouncements will be effective from 15 December 2026, except for the provisions applicable to value chain components, which will be effective from 1 July 2028. There is a transitional provision for sustainability assurance engagements that involve assurance performed at a value chain entity for periods beginning prior to 1 July 2028. Early adoption is permitted and encouraged.

Read the IESBA Media Release.

IESBA Sustainability Exposure Drafts

The comment period for the Use of External Experts ED closed on 30 April 2024, and Sustainability ED closed on 10 May 2024.

Read APESB submissions on the IESBA Using the Work of an External Expert ED and International Ethics Standards for Sustainability Assurance ED.

IESBA Sustainability Reference Group

On 30 June 2023, the IESBA announced the establishment of the Sustainability Reference Group (SRG) to support the work of its Sustainability Task Force. The SRG members will serve as a “sounding board” to the Sustainability Taskforce, providing insights, expertise and guidance in the development of worldwide ethics and independence standards for sustainability reporting and assurance. APESB CEO and IESBA Board Member Mr. Channa Wijesinghe will chair the SRG. Read the IESBA Media Release.

The Treasury of Australia have conducted three consultations and released proposed legislation on climate-related financial disclosure in Australia.

In response to the first consultation which sought initial views on key considerations for the design and implementation of standardised, internationally‑aligned requirements for disclosure of climate‑related financial risks and opportunities in Australia, APESB submission highlighted its role in developing and maintaining a robust ethical framework to underpin Australia’s reporting and assurance activities.

APESB’s submission to the second consultation was supportive of the proposed positions, however, it raised a concern that the framework for professional and ethical standards was not explicitly mentioned or considered.  APESB recommended the Treasury consider the comprehensive requirements in the Code, which could be applied to all those preparing and presenting climate-related information and the related assurance reports.

The third consultation was on proposed amendments to the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 (Cth) to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities.

On 27 March 2024, the climate-related financial disclosures Treasury Bill – Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (the Bill) was introduced into the House of Representatives. Further information on the Bill can be found on the Parliament website.

In September 2024, amendments were made to Chapter 2M of the Corporations Act 2001 as part of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (the Act).  The Act establishes mandatory climate-related reporting requirements for Australian entities, which require large entities that prepare and lodge financial reports under Chapter 2M to prepare a sustainability report and lodge the report with ASIC. The sustainability report is lodged with the entity’s financial report and directors’ report as part of the annual report.

On 30 March 2023, APESB and CPA Australia held a joint interactive panel event in Sydney on global developments in ethics and assurance for sustainability. The discussion was moderated by APESB CEO and IESBA Member Channa Wijesinghe and included the following distinguished panellists:

– Mark Babington – Executive Director of Regulatory Standards at the Financial Reporting Council UK and IESBA Member

– Bill Edge – Chair of the Australian Auditing and Assurance Standards Board (AUASB) and Member of the International Auditing and Assurance Standards Board (IAASB)

– Doug Niven – Chief Accountant, Australian Securities and Investments Commission (ASIC)

– Marje Russ – Chair of the New Zealand Auditing and Assurance Standards Board (NZAuASB)

In November 2024, the IAASB issued the International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. In jurisdictions that adopt it, ISSA 5000 is effective for periods beginning on or after 15 December 2026

ISSA 5000 will serve as a comprehensive, stand-alone standard suitable for any sustainability assurance engagements. It will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks. ISSA 5000 is also profession agnostic, supporting its use by both professional accountant and non-accountant assurance practitioners.

To complement this release, the Board also issued Basis for Conclusions, Fact Sheet, Frequently Asked Questions, Implementation Guide, Global Baseline Standards for Sustainability Assurance and Technology Position.

Further information on ISSA 5000 can be found on IAASB’s website.

IAASB Sustainability Exposure Draft

On 2 August 2023, the IAASB issued its Exposure Draft on the proposed ISSA 5000 for public consultation with comments due by 1 December 2023.

In July 2023, the ISSB released the first two IFRS Sustainability Disclosure Standards:

• IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information; and
• IFRS S2 Climate-related Disclosures.

The standards are effective from 1 January 2024, but individual jurisdictions may elect a different date for adoption.

In July 2023, the International Organization of Securities Commissions (IOSCO) announced its endorsement of the ISSB standards. The IOSCO have called on its 130 member jurisdictions to consider how they can incorporate the ISSB standards into their respective regulatory frameworks to deliver consistency and comparability of sustainability-related disclosures worldwide.

AASB Sustainability Reporting Standards

Following the introduction of the mandatory climate-related reporting requirements in September 2024, the AASB issued two Australian Sustainability Reporting Standards (ASRS):

• AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information (voluntary standard); and
• AASB S2 Climate-related Disclosures (mandatory standard).

AASB S1 and AASB S2 are effective for annual reporting periods beginning on or after 1 January 2025.

AASB S1 and AASB S2 are closely aligned with the standards developed by the ISSB’s IFRS S1 and IFRS S2.

An entity electing to voluntarily apply AASB S1 discloses information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.

AASB S2 requires disclosure of information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital over the short, medium or long term. This applies to climate-related physical risks, climate-related transition risks and climate-related opportunities.

Read the AASB Media Release.

AASB Sustainability Exposure Drafts

In October 2023, the AASB released an Exposure Draft ED SR1 which proposes climate-related financial disclosure requirements.

The public comment period for ED SR1 closed on 1 March 2024. The ED SR1 encompasses the following three draft ASRS Standards:

– Draft ASRS 1 General Requirements for Disclosure of Climate-related Financial Information.

– Draft ASRS 2 Climate-related Financial Disclosures.

– Draft ASRS 101 References in Australian Sustainability Reporting Standards.

On 28 January 2025, the AUASB approved two Australian Standards on Sustainability Assurance (ASSAs):

• ASSA 5000 General Requirements for Sustainability Assurance Engagements, which aligns to IAASB’s ISSA 5000; and
• ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports Under the Corporations Act 2001.

ASSA 5000 applies to sustainability assurance engagements for reporting periods beginning on or after 1 January 2025 and as at a specific date on or after 1 January 2025.

For mandatory climate reporting under the Corporations Act 2001, ASSA 5000 is subject to the phasing in of limited and reasonable assurance under ASSA 5010.

ASSA 5010 identifies the AASB S2 disclosures in sustainability reports that must be assured and/or reviewed for financial years commencing between 1 January 2025 and 30 June 2030. ASSA 5010 is aligned with the requirements of the Corporations Act 2001 for reasonable assurance of all climate disclosures, including Scope 3 emissions, from years commencing on or after 1 July 2030.

In relation to Scope 3 emissions, there is no assurance requirement in the first year of assurance (Year 1), with limited assurance starting in the entity’s second year of assurance (Year 2), as listed below for the groups:

– Group 1 entities – financial years beginning on or after 1 July 2026;
– Group 2 entities – financial years beginning on or after 1 July 2027; and
– Group 3 entities – financial years beginning on or after 1 July 2028.

The AUASB decided that the definition of ‘relevant ethical requirements’ in ASSA 5000 will temporarily refer to Parts 1 to 3 of APES 110 and Part 5 of the IESBA’s final pronouncement for sustainability assurance (IESSA). This definition will be revised when the APESB updates APES 110 later this year to include the new sustainability-related requirements. Further details are available in the AUASB’s Board Meeting Highlights.

AUASB standard ASAE 3410 Assurance Engagements on Greenhouse Gas Statements will continue to apply until reporting periods commencing 15 December 2026 for separate emissions reporting where required under Australia’s National Greenhouse and Energy Reporting Act 2007.

Further information can be found on the AUASB Media Release.