Australia's Group 1 climate reports have landed. Six findings the auditors are already flagging.

Australia's mandatory climate reporting regime has produced its first filings. Group 1 entities with December 2025 year ends have lodged the country's first sustainability reports under AASB S2, ASIC has published its early observations, and the far larger June 2026 year-end cohort reports over the coming months. For Group 2, whose first reporting periods began on 1 July 2026, and Group 3 behind them, the first wave is a free preview of the exam.^1,3,4

Last updated 4 August 2026. Reflects ASIC's early observations of 18 May 2026, PwC's review of the first 22 Group 1 reports published to February 2026, and the AUASB's ASSA 5000/5010 assurance framework.

Who reports under AASB S2, and when?

The regime phases in by size over three years. The Corporations Act amendments passed in September 2024 require a sustainability report, with climate disclosures under AASB S2, from entities that meet at least two of three size thresholds, or that report under NGER, in three groups.^1,2,7

Mind the year-end convention. "From 1 January 2025" means financial years commencing on or after that date, so a December-balancing Group 1 entity reported on calendar 2025 and filed in early 2026, while the majority of Australian entities, balancing at 30 June, are reporting on FY2025–26 with reports landing from September 2026. The first wave analysed below is therefore the small, early cohort; the main event is imminent.^3,4

The sustainability report is part of the annual reporting package under Chapter 2M, lodged with ASIC alongside the financial report, and assured by the entity's financial statement auditor.^2,5

What did the first wave of Group 1 reports actually disclose?

The early evidence base is small but consistent. PwC's review of 22 December-2025 year-end Group 1 reports published by late February 2026, the first mandatory AASB S2 filings anywhere in Australia, found reports ranging from 7 to 82 pages (average 30), every one carrying an unqualified limited assurance opinion, and variability as "a defining feature" of almost everything else.³

Read the Scope 3 number carefully. Nearly every first-wave reporter used the transitional relief to omit mandatory Scope 3 disclosure, and just over half volunteered partial category data, roughly half of those adding voluntary limited assurance over it. That relief expires after year one: for December-balancing Group 1 entities, calendar 2026 is already a mandatory Scope 3 period, with the data being generated now. The single most common piece of unfinished business in the first wave is also the one with the longest data lead time.^3,5

Scenario analysis converged on recognised references. Most reporters anchored their required 1.5°C and higher-warming scenarios in NGFS, IPCC AR6 and IEA pathways. Where reports were weakest, per both PwC and ASIC, was in documenting the judgements: proportionality calls, methodology choices, assumptions and measurement uncertainties were often asserted rather than explained.^3,4

The six things ASIC flagged, explained

ASIC's 18 May 2026 observations are the closest thing Group 2 and 3 have to an examiner's report. Drawn from a review of listed-entity reports among the 259 lodged, they commend the overall lift in quality, then name six recurring problems:⁴

• Disclaimers that fight the statute. Some reports carried disclaimers purporting to limit reliance on the sustainability report in ways inconsistent with the Chapter 2M framework, language that risks misleading users and invites regulatory attention.
• Risk identification that ignores the file. Entities that had already suffered climate-related financial impacts sometimes failed to reflect that history when identifying risks; AASB S2's "reasonable and supportable information" test includes past events, not just forecasts.
• Judgements without transparency. Key assumptions, proportionality decisions and measurement uncertainties need clear disclosure close to the affected numbers, not buried or omitted.
• Voluntary content crowding out the mandatory. Additional climate information is welcome, but not where it obscures the material disclosures the standard actually requires.
• Vague cross-referencing. Material incorporated by reference must be precisely identified and meet AASB S2's conditions; "see our website" does not discharge a statutory disclosure.
• Climate targets defined too narrowly. The definition captures targets an entity is required to meet, including under the Safeguard Mechanism, not only voluntary net-zero commitments. Several reporters missed regulatory obligations from their target disclosures.

The pattern beneath all six is familiar from every first-year regime: assertions without an evidence trail. A judgement made but not documented, a target held but not disclosed, a risk experienced but not carried into the analysis. That is an infrastructure problem more than an ambition problem, and it is fixable before a first report rather than after a regulator's letter.

What does the assurance timeline demand next?

Assurance arrived with the first reports and only expands from here. The AUASB's framework pairs ASSA 5000, the Australian adoption of ISSA 5000, with ASSA 5010, which sets the phasing: limited assurance over Scope 1 and 2 emissions in an entity's first reporting year, scope expanding in subsequent years to take in Scope 3 and the other climate disclosures, and reasonable assurance, a full audit-level opinion on the climate report, required for financial years commencing on or after 1 July 2030. The assurance is provided by the entity's financial report auditor, and ASSA 5000 prohibits direct assistance from internal audit in the engagement.⁵

Assurance is retrospective, which is the trap. A practitioner giving reasonable assurance in FY2031 will test methods, boundaries and emission factors for consistency against prior years. Figures resting on undocumented spreadsheets from FY2026–FY2029 become restatement risk at exactly the moment the numbers attract an audit opinion, the same dynamic playing out in every phased assurance regime globally.

What protection do first-time reporters have?

The modified liability regime is real but narrow and temporary. For sustainability reports covering financial years commencing between 1 January 2025 and 31 December 2027, statements about Scope 3 emissions, scenario analysis and certain climate transition matters are "protected statements": only ASIC can take action on them, and private claims are barred. Everything else in the report, Scope 1 and 2, governance, the numbers tying to the financial statements, carries ordinary directors' liability from day one, and the protection lapses entirely for later years. Group 3 entities reporting from FY2028 will enjoy little or none of it.^2,6

What should Group 2 and Group 3 do this year?

Group 2's first reporting periods began on 1 July 2026, which means the data being generated right now is the data that will be assured.⁸ The first wave's experience compresses into six moves:

• Get the boundary decision in writing. The reporting entity follows the financial statements; document the consolidation approach and the GHG organisational boundary (operational control is the common choice), with named subsidiaries, signed off by the group finance lead before the period, not during assurance.
• Lock the factor library. One vintage of emission factors across the group, cited: the current NGER measurement determination for Australian energy, IPCC AR6 GWPs, GHG Protocol for methodology. Mixed vintages across subsidiaries are precisely the kind of inconsistency a limited assurance review surfaces.
• Build the evidence trail live. Every material line item tagged to a source document, invoice, meter read, freight bill, at the point of capture. ASIC's transparency observation and the assurance standard both point at the same discipline: reconstruction at year end is where first-year programmes bleed time.⁴
• Start Scope 3 before it is mandatory. The first-year relief buys one period, and the first wave shows most reporters spending it. Category screening, supplier data requests and estimation methods take longer than a year to mature; a dry run in the relief year is the cheap option.³
• Quantify scenarios, and document the judgements. Recognised references (NGFS, IPCC, IEA) plus bounded financial estimates beat narrative; and per ASIC, put the assumptions and uncertainties next to the numbers they affect.^3,4
• Sweep for regulatory targets and minute the board. Safeguard Mechanism baselines and other required targets belong in the targets disclosure, and board climate oversight should be evidenced in minutes with actions and dates, the paper trail is the disclosure.⁴

Done now, in the first months of the reporting period, each of these is a process choice. Done at year end, each is a remediation project.

Frequently asked questions

When did mandatory climate reporting start in Australia?

Group 1 entities report for financial years commencing on or after 1 January 2025, so the first mandatory AASB S2 reports, from December 2025 year ends, were lodged in early 2026, and the larger June 2026 year-end cohort reports from late 2026. Group 2 starts with financial years commencing on or after 1 July 2026, and Group 3 from 1 July 2027.

Who is in Group 1, Group 2 and Group 3?

Entities meeting at least two of three size thresholds: Group 1 at A$500m revenue, A$1bn gross assets or 500 employees (plus large NGER reporters); Group 2 at A$200m revenue, A$500m gross assets or 250 employees (plus other NGER reporters and A$5bn asset owners); Group 3 at A$50m revenue, A$25m gross assets or 100 employees.

Is Scope 3 reporting mandatory under AASB S2?

Yes, but with a one-year transitional relief: an entity may omit Scope 3 in its first reporting year. Nearly all first-wave Group 1 reporters used the relief, though just over half voluntarily disclosed some Scope 3 categories. From each entity's second reporting year, Scope 3 disclosure is mandatory and progressively enters assurance scope.

What assurance is required over Australian climate reports?

Assurance is performed by the entity's financial report auditor under ASSA 5000, on the phased timeline in ASSA 5010: limited assurance over Scope 1 and 2 emissions in the first year, expanding in later years, and reasonable assurance over all mandatory climate disclosures for financial years commencing on or after 1 July 2030.

What did ASIC say about the first sustainability reports?

In its 18 May 2026 early observations, ASIC noted improved quantity and quality of climate disclosure but flagged six areas: disclaimers inconsistent with the statutory framework, risk identification ignoring past climate impacts, insufficient transparency of judgements and uncertainties, voluntary content obscuring material information, imprecise cross-referencing, and climate target disclosures that missed regulatory obligations such as the Safeguard Mechanism.

Are directors protected from liability for first climate reports?

Partially and temporarily. For reports covering financial years commencing 1 January 2025 to 31 December 2027, statements on Scope 3 emissions, scenario analysis and certain transition matters are protected statements, actionable only by ASIC. All other disclosures carry ordinary liability, and the protection does not extend beyond those years.

References

1. AASB, AASB S2 Climate-related Disclosures (September 2024), accessed August 2026.
2. Federal Register of Legislation, Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, Schedule 4 (climate reporting and modified liability), accessed August 2026.
3. PwC Australia, AASB S2 unpacked: how did Australia's Group 1 climate reporting fare? (review of 22 December-2025 year-end reports), accessed August 2026.
4. ASIC, ASIC issues early observations on sustainability reporting ahead of 30 June 2026, 18 May 2026, accessed August 2026.
5. AUASB, Climate and sustainability assurance requirements approved (ASSA 5000 and ASSA 5010), accessed August 2026.
6. KPMG Australia, AASB S2 climate disclosures: requirements and reliefs, accessed August 2026.
7. Anthesis, ASRS and AASB S2: Australia's sustainability reporting regime, accessed August 2026.
8. Cress Consulting, AASB S2 Group 2 reporting period starts: what have we learned from Group 1?, accessed August 2026.

This guide is general information, not legal, accounting or assurance advice. First-wave statistics reflect the small early cohort of December-2025 year-end reporters and may not represent the full Group 1 population; check the primary sources above for the current position.