What does the board have to sign?

The directors' declaration in the sustainability report. For financial years commencing between 1 January 2025 and 31 December 2027, directors declare they have taken reasonable steps to ensure the report complies with the Corporations Act. From financial years commencing 1 January 2028, they declare their opinion that it does comply.

What does AASB S2 compliance cost?

There are three separate costs and conflating them is why quotes look incomparable: preparation of the report, assurance as a separate engagement with a separate provider, and your own internal time. Preparation cost moves on the number of entities and sites, whether Scope 3 is in scope, and how retrievable your activity data already is. Assurance cost moves mostly on the quality of your working papers.

Glossary›AASB S2 disclosure requirements / AASB S2 mechanics›Internal carbon price

Glossary term

Cluster C · C25

Tier 1 · differentiator

Internal carbon price

Definition

An internal carbon price is a monetary value an entity assigns to a tonne of its own greenhouse gas emissions and applies in business decisions. AASB S2 requires disclosure of whether the entity applies one, how it is applied in decision-making, and the price used per tonne of CO2-e. An entity that does not use one discloses that.

AASB S2

· paragraph 29(f), cross-industry metric ·

In force

On this page

In practice
What the assurer does with it
Commonly confused with
Sources
Related terms
Related questions

Cluster

C · AASB S2 disclosure requirements / AASB S2 mechanics, 25 terms

In practice

Two forms exist and the distinction changes what has to be evidenced.

A shadow price is notional. No money moves. The price is applied in investment appraisal, so a capital project’s emissions are converted to a dollar figure and included in the business case alongside the cash flows. It changes which projects clear the hurdle.

An internal fee is real. Business units are charged for their emissions and the money accumulates in a central pool, typically funding abatement projects. Money moves between cost centres, which means it appears in the management accounts.

The disclosure requirement has three limbs: whether a price is used, how it is applied, and what the price is. The second limb is the one that is usually thin. Stating a price of $60 per tonne without saying which decisions it enters, which parts of the business it covers, and what happens to a project that fails the test, does not answer paragraph 29(f).

For a private business, the honest position in year one is usually that no internal carbon price is used, and that is a complete answer to 29(f). Disclosing “the entity does not currently apply an internal carbon price” satisfies the requirement. The error to avoid is adopting a price shortly before reporting in order to have something to disclose, because a price that exists on paper and influences no decision is a disclosure the assurer will test and the entity will struggle to support.

What the assurer does with it

The assurer tests the “how it is applied” limb harder than the price itself, because the price is a stated number and the application is a claim about behaviour. They ask for the policy document, the approval that set the price, and a sample of business cases or investment papers from the reporting period showing the price actually applied.

They accept a documented policy with evidence of application in real decisions during the period, and a stated coverage boundary naming what is in and out. They reject a price disclosed with no policy behind it, a policy approved after year end and described as though it operated during the year, and a price whose disclosed value differs from the value in the investment papers. Where an internal fee is used, they will also trace the charge through the management accounts, because a fee that is disclosed but never charged is a misstatement. A negative disclosure is tested too, but lightly: the assurer confirms with management and looks for any contrary evidence in board papers.

Commonly confused with

The market price of Australian Carbon Credit Units, and a carbon tax. An internal carbon price is set by the entity for its own use. It need not match any market and Australia has no economy-wide carbon tax. Also confused with the cost of carbon credits the entity actually buys, which is a real expenditure and a different disclosure.