Governance is one of the most crucial yet underdeveloped pillars in climate reporting. Under the Australian Sustainability Reporting Standards (ASRS), particularly AASB S2 Climate-related Disclosures, governance isn’t just about setting the tone at the top—it’s about making sure the entire organisation is equipped to act.
This blog explores the essential role of management in operationalising climate governance. We’ll unpack what AASB S2 expects, how organisations can report on management roles and responsibilities, and why embedding climate into everyday operations makes all the difference. Whether you're a sustainability professional, ESG consultant, or corporate executive, this guide will help you translate top-down climate ambition into real-world implementation.
1. Understanding Governance in AASB S2
The AASB S2 standard defines governance as more than just board-level oversight. It requires clearly defined responsibilities across the business for managing climate-related risks and opportunities. Disclosures must demonstrate that organisations are not only acknowledging climate risk, but also equipping individuals at every level to act.
Management plays a critical role in this. While the board sets strategy, it’s up to managers to operationalise it—allocating resources, embedding systems, and tracking progress. Effective ESG management software and robust internal communication are key enablers of this process.
2. Key Management Roles in Climate Governance
To comply with AASB S2 and meet the expectations of investors and regulators, organisations must show how climate responsibility is delegated. This includes naming specific roles, outlining their responsibilities, and ensuring those roles have influence, resourcing, and authority.
Common management roles include:
- CEO: Ensures climate is embedded in core strategy and values.
- CFO: Oversees climate-related financial risk and signs off disclosures.
- Chief Sustainability Officer (CSO): Coordinates climate strategy, stakeholder engagement, and ESG disclosures.
- Chief Risk Officer (CRO): Integrates climate risks into the enterprise risk management framework.
- Chief Compliance Officer (CCO): Aligns climate with legal and regulatory requirements.
- Chief Operating Officer (COO): Embeds sustainability into operational planning.
- Head of ESG or Sustainable Finance: Evaluates climate risk in capital projects and sustainable financing.
Organisations must also show how these roles work together, for example, the CSO preparing climate reports for the ESG committee, or the CFO integrating carbon pricing into financial models.
3. Operationalising Climate Governance Across the Business
Management’s responsibility doesn’t stop at setting goals. Climate action must be operationalised. This means embedding climate-related considerations into daily decisions, processes, and systems across departments:
- Procurement: Prioritising low-emissions suppliers
- Finance: Including internal carbon pricing in budgets
- HR: Recruiting and training for climate competencies
- Marketing: Avoiding greenwashing and communicating verified sustainability efforts
- Investment Planning: Aligning capital expenditure with emissions reduction pathways
Transurban, for example, has successfully embedded an internal carbon price into their infrastructure investment models, ensuring sustainability influences all levels of decision-making.
4. Communication Between Management and the Board
AASB S2 requires transparency in how management communicates with the board. This means establishing regular and evidence-based reporting mechanisms. While these processes don’t need to be complicated, they must be clear and documented.
Examples include:
- Monthly or quarterly sustainability reports
- Excel-based dashboards showing climate performance
- Summary briefings before board meetings
The goal is to ensure that the board is not only informed but actively engaged in climate oversight, a key expectation under AASB S2 and TCFD-aligned governance reporting.
5. Documentation and Evidence-Based Reporting
Credible climate reporting demands documentation. Sustainability disclosures should be evidence-backed, similar to compliance audits. This includes:
- Governance structures and job descriptions
- Decision logs for climate strategy and risk assessments
- Evidence of internal meetings or workshops
- Performance tracking tools and emissions data
Documentation creates an audit trail and reinforces that climate governance is embedded and effective.
6. Risk Management and Internal Controls
Management must integrate climate risk into the broader enterprise risk management (ERM) system. This includes identifying, assessing, and prioritising physical and transition risks over short-, medium-, and long-term timeframes.
To ensure accurate reporting:
- Use internal audits or peer reviews of sustainability data
- Apply controls for validating emissions calculations
- Integrate climate metrics into existing risk dashboards
These controls help mitigate compliance and reputational risks, making the organisation more resilient.
7. Upskilling and Demonstrating Competence
Under AASB S2, organisations must show that people responsible for climate matters are competent. This includes:
- Executive training in climate science and financial risk
- Sustainability workshops for business units
- A documented skills matrix for internal audits or assurance
Claiming to be climate-aware isn’t enough. Disclosures must prove that individuals have the skills and understanding to manage complex climate issues.
8. Aligning Incentives with Climate Outcomes
Progressive companies are aligning executive remuneration with climate targets. This could mean tying bonuses to emissions reductions, implementation of climate plans, or ESG metrics.
Doing so signals that climate risk is a core business issue, not just a side project. It also boosts accountability and ensures that sustainability isn’t siloed to a single department.
9. Strategic Benefits of Embedded Climate Governance
Integrating climate governance into operations and leadership brings strategic advantages:
- Stronger resilience to physical and transition risks
- Increased investor confidence through transparent governance disclosures
- Greater ability to meet ESG expectations and regulatory requirements
- Long-term value creation through sustainable innovation
Ultimately, the goal is not just to comply with AASB S2, but to position climate action as a strategic business enabler.
Conclusion
The success of climate reporting under AASB S2 hinges on how well organisations operationalise governance. That means clearly assigning management roles, embedding climate into daily operations, communicating with the board, and documenting every step. It also means investing in people and systems that can drive real change.
In the eyes of investors, regulators, and customers, strong climate governance is no longer optional. It’s part of your license to operate.
For more expert insights, download NetNada’s License to Operate Report and discover how organisations in Australia struggle and solve challenges and opportunities.
