Mandatory Climate Reporting: How public sector entities are responding to new requirements
Mandatory climate-related financial disclosures under AASB-S2 are gaining momentum and while the focus has been on the private sector, public sector agencies are also taking action. Across Australia, Federal and State governments are initiating climate reporting for public entities – an evolution that will influence both policy and procurement across sectors.
Several jurisdictions are already progressing. The Commonwealth is coordinating a four-year rollout involving five key agencies. New South Wales’ top 20 entities are preparing their first-year reports. Queensland has identified nine public entities that will begin reporting from 2025-26, in line with AASB-S2, while South Australia is finalising its implementation strategy.
One of the early movers is Hunter Water, a state-owned corporation in New South Wales. Working with Pangolin Associates, Hunter Water is among the first to finalise its first-year sustainability report under the NSW regime. This case study outlines their approach—from identifying data gaps to embedding governance structures that align with AASB-S2 expectations.
Enhancing Climate Resilience: Hunter Water’s Journey to AASB-S2 Compliance
In a strategic move to enhance climate resilience and align with evolving financial disclosure standards, Hunter Water, a State-Owned Corporation in New South Wales, collaborated with Pangolin Associates to implement the AASB-S2 climate-related financial disclosure framework. This initiative has positioned Hunter Water as a leader in climate-related financial reporting within the state and the broader water sector.
The Role of Pangolin Associates
Pangolin Associates led a two-stage process to guide Hunter Water through its first year of climate disclosure reporting. The approach involved an initial Stage 1 Gap Assessment, followed by a Stage 2 Implementation Roadmap, ensuring a structured and actionable transition toward compliance.
Stage 1: Gap Assessment against AASB-S2
The first stage of the initiative involved a comprehensive assessment of Hunter Water’s existing processes and capabilities against the four pillars and 103 disclosure requirements of the AASB-S2 standard. Key activities included:
- evaluating current capabilities and assigning a maturity rating based on a four-level scale;
- identifying priority areas for capability enhancement and estimating the effort required to implement necessary changes;
- providing best practice examples to facilitate capability building and Year 1 disclosure reporting.
Stage 2: Year 1 Disclosure Reporting implementation roadmap
The second stage focused on embedding Climate Disclosure Reporting (CDR) activities within existing corporate processes, ensuring a practical and actionable approach. Notable elements included:
- integrating CDR activities into current workflows rather than creating a separate program.
- setting up a new CDR governance structure with strong executive leadership.
- engaging stakeholders not typically involved on sustainability matters including Finance, Risk Management, and IT executives.
- facilitating a stakeholder mobilisation and kick-off session.
- establishing 10 key priorities for the first 30 days.
- developing the year 1 report through an iterative process.
Key Learnings from Year 1 Implementation
One year into the program, Hunter Water is completing its first climate disclosure report. The experience provided valuable insights into effective implementation strategies, including:
- Governance is Crucial – Strong leadership from executive and board levels was key to successful integration.
- Cross-Functional Engagement – Involving Finance, Planning & Engineering, Assets, and Risk teams was essential for this cross-organisation topic.
- Overcoming Challenges – Managing competing priorities and overcoming resistance to change required persistent multi-channel communication and engagement.
- Effective Communication – Internal newsletters, roadshows, and in-person interactions proved instrumental in securing stakeholder buy-in.
- Embedding Change – Integrating climate risk considerations into existing corporate processes, such as risk management, helped ensure long-term sustainability.
- Demonstrating Value – Highlighting tangible benefits and compliance advantages helped build momentum and executive support.
Leading the Water Industry Towards Resilience and Compliance
Through strategic planning and cross-functional collaboration, Hunter Water has positioned itself as a leader in climate-related financial disclosure. Partnering with Pangolin Associates has strengthened Hunter Water’s ability to meet regulatory requirements while also building long-term climate resilience.
Recognising the value of industry-wide collaboration, Pangolin Associates and Hunter Water presented key insights and best practices at a Water Services Association of Australia (WSAA) webinar in October 2024. This initiative aimed to inform other water organisations on their progress towards climate resilience and regulatory compliance.
Getting ahead of the curve
Now is the time for public entities to assess what’s happening in their sector. Industry bodies such as the Water Services Association of Australia (WSAA) and Australasian Campuses Towards Sustainability (ACTS) are already galvanising coordinated responses. Early action will help organisations build internal capability, address climate risk concern and set clear pathways for cross-functional implementation.
Understanding the scope and impacts of AASB-S2 and starting early will place organisations in a stronger position. We hope Hunter Water’s story provides practical insights and a valuable starting point for your own journey.
Questions?