As mandatory climate reporting becomes a reality for more Australian businesses, one area that often gets overlooked, but is absolutely critical, is governance. In Session 2 of NetNada’s Compliance Countdown series, we unpacked the governance pillar of the AASB S2 climate-related financial disclosures.
Here’s what we learned, and what every business needs to start thinking about now.
Why Governance Matters in Climate Reporting
Governance isn’t just a checkbox on the path to compliance. It’s the foundation for credibility, accountability, and action. In simple terms, climate governance means clearly defining who in your organisation is responsible for managing climate-related risks and opportunities, and ensuring they have the authority, skills, and resources to do the job.
For external users of your report, especially investors, governance builds trust. If they can see a clear structure with named individuals and documented responsibilities, they’ll have more confidence that your climate disclosures reflect real action, not just intentions.
1. Setting Up the Right Governance Structures
A solid governance structure looks different in every company, but it always starts with naming names.
- Who’s responsible for overseeing climate risk and strategy?
- Is it a board committee, a sustainability team, or both?
- Do they have decision-making power and budget authority?
The session made it clear: companies must identify specific individuals and committees in charge of climate issues, particularly at the board level. These roles should carry enough influence to drive change, and that means having the budget and mandate to take meaningful action.
Critically, senior leaders like CSOs and CFOs need to be upskilled. They’ll be making the calls on integrating climate into business decisions and signing off on disclosures. If they don’t understand the risks, the company is flying blind.
2. Climate Isn’t a Department, It’s Everyone’s Job
A major insight from the session was this: climate governance can’t live in isolation.
Instead of treating sustainability like a side project, it needs to be embedded across the entire organisation. That means:
- Procurement aligning sourcing with emissions targets
- HR considering climate competencies in hiring
- Marketing reflecting sustainability efforts transparently
- Finance integrating climate risks into budgeting and forecasting
To make this work, you need clear reporting lines. Climate data must flow efficiently from various departments up to decision-makers. If reporting lines are blurred or siloed, you risk making decisions on outdated or incomplete information.
3. Upskilling and Evidence of Competence
It’s one thing to say your board or executive team understands climate risk, it’s another to prove it.
Under AASB S2, you’ll need to demonstrate competence, not just claim it. That’s where upskilling comes in. This doesn’t always mean formal qualifications. On-the-job learning, workshops, or attending climate governance sessions can all count—if you can document it.
One helpful tip shared during the session? Create a skills matrix. This internal tool tracks who has been trained, in what area, and to what level. It’s a simple way to prepare for audits and show that your organisation is proactively building climate expertise.
4. Document Everything (Yes, Everything)
If there’s one piece of advice you take from this blog, let it be this: write everything down.
You’ll need to show evidence of:
- Job descriptions and reporting structures
- Governance responsibilities
- Upskilling and training activities
- Board meeting minutes where climate is discussed
- Decision-making processes around climate risks and targets
This documentation becomes your audit trail, and it’s what turns your climate reporting from a vague ambition into something credible and compliant.
5. Link Executive Pay to Climate Targets
One of the more forward-looking ideas discussed in Session 2 was linking climate targets to executive remuneration.
If your CEO or senior leadership team has performance bonuses, why not tie part of that to climate outcomes, like reducing Scope 1, 2, or even Scope 3 emissions?
This approach sends a clear message to internal and external stakeholders: climate isn’t optional, it’s core to our business success.
6. Governance as Strategy: A Real-World Example
Governance isn’t just about process, it’s about smart decision-making.
In the session, we discussed a real-life example from a resort. The board had to consider extreme weather risks when reviewing investment opportunities. Should they invest in a new development in a region prone to bushfires or floods?
By having climate risk embedded in their governance process, they were able to make a strategic call based on climate realities—not just financial projections.
This is what climate governance is ultimately about: future-proofing your business by aligning leadership, risk, and strategy with a changing world.
7. Start Early: Set Up Committees Now
If you’re in Group 2 or 3, the temptation might be to wait. But setting up governance structures and climate committees takes time.
You’ll need recurring meetings, action plans, and a track record of climate oversight long before disclosures are due. Start now so that when the time comes to report, you’ve already got systems in place, and a story to tell.
In Summary
The governance pillar of AASB S2 isn’t just paperwork. It’s about:
- Having the right people in place to lead on climate
- Making sure those people are equipped to make decisions
- Embedding climate responsibility across the whole business
- Creating a clear, documented structure that auditors (and investors) can trust
If you’re feeling behind, don’t worry. The good news is you don’t need to do it all at once. But you do need to start.
🎥 Want to see the full session?
Watch the Session 2 Recording to hear real-world examples, practical tips, and a full walkthrough of the governance pillar in AASB S2.
Let’s make climate reporting a leadership advantage, and not a compliance headache.
