Mandatory Climate Reporting in Australia: Which Group Are You In, and What Does AASB S2 Require?

Australia's mandatory climate reporting regime is live law, arriving at companies' doors in size order. The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 amended Chapter 2M of the Corporations Act to require a new sustainability report as part of the annual report, prepared in accordance with AASB S2 Climate-related Disclosures.1,2 The first question for every board is not "what do we disclose?" but "which Group are we in?", deadlines, assurance and directors' exposure all flow from that.

Key takeaways. Mandatory climate reporting in Australia is phased across three Groups: Group 1 reports for financial years commencing on or after 1 January 2025, Group 2 from 1 July 2026, and Group 3 from 1 July 2027.3 You are captured if you meet two of three size thresholds (consolidated revenue, gross assets, employees), are an NGER reporter, or are an asset owner with $5 billion or more. The sustainability report sits inside the annual report with a directors' declaration, and only AASB S2 (climate) is mandatory, AASB S1 is voluntary.5,6 Scenario analysis must use at least two scenarios, 1.5°C and one well exceeding 2°C, under Corporations Act s 296D. A temporary modified liability regime shields Scope 3, scenario analysis and transition plan statements from private litigation until financial years commencing after 31 December 2027, though ASIC enforcement still applies. Assurance ramps to reasonable assurance over everything for financial years commencing on or after 1 July 2030.9

Which Group is your company in? The thresholds that decide everything

The regime phases in by cohort. It applies to entities that must prepare financial reports under Chapter 2M of the Corporations Act, companies, registered schemes, registrable superannuation entities and retail CCIVs. An entity falls into a Group by satisfying at least two of three size tests for the financial year, or through one of two alternative doors: National Greenhouse and Energy Reporting (NGER) scheme reporting, or large asset ownership.3,4

  Group 1 Group 2 Group 3
Status (July 2026) Mandatory, reporting Mandatory, first period live Phasing in
First reporting period FYs commencing on or after 1 Jan 2025 FYs commencing on or after 1 Jul 2026 FYs commencing on or after 1 Jul 2027
Consolidated revenue (meet 2 of 3) ≥ $500 million ≥ $200 million ≥ $50 million
Consolidated gross assets (meet 2 of 3) ≥ $1 billion ≥ $500 million ≥ $25 million
Employees (meet 2 of 3) ≥ 500 ≥ 250 ≥ 100
NGER reporters NGER reporters above the s 13(1)(a) publication threshold All other NGER reporters –
Asset owners – Registered schemes, super entities and retail CCIVs with ≥ $5 billion in assets –
Relief None None May prepare simplified statements if no material climate risks or opportunities, with an explanation of how that conclusion was reached8

Three practical points trip people up. First, the size tests are assessed at the consolidated level: a mid-sized subsidiary of a large group does not escape by looking at its own numbers. Second, the NGER door overrides size: an NGER-registered company well under the Group 1 size thresholds still reports in Group 1 or 2, depending on whether it exceeds the publication threshold.3 Third, the tests apply each financial year: a business growing through the $200 million revenue or 250-employee marks must monitor whether it has tipped into scope.

Here is the two-of-three test applied to a mid-market company with $250 million consolidated revenue, $180 million gross assets and 300 employees:

$250m revenue ✓+300 employees ✓+$180m assets ✗→2 of 3 Group 2 tests met=Group 2 · first period from 1 Jul 2026

Revenue clears the $200m Group 2 threshold and headcount clears 250, two of three is enough. It fails the Group 1 tests ($500m / $1b / 500), so its first period is the first financial year commencing on or after 1 July 2026.

Figure 1. Phase-in by Group: each obligation attaches to the first financial year commencing on or after the start date, a June year-end Group 2 entity's first period runs 1 July 2026 – 30 June 2027.
Phase-in of mandatory climate reporting by Group 1 Jan 2025 1 Jan 2026 1 Jan 2027 1 Jan 2028 1 Jan 2029 Group 1, FYs commencing on/after 1 Jan 2025 First reports lodged with FY2025 annual reports (Dec year-ends: early 2026) Group 2, from 1 Jul 2026 First reports: FY ending 30 Jun 2027 annual reports Group 2 start: 1 Jul 2026 Group 3, from 1 Jul 2027 First reports: FY2028 Start dates per the Treasury Laws Amendment (FMI and Other Measures) Act 2024; year-end determines when each entity's first period actually begins.

Group 2 climate reporting has started: why 1 July 2026 matters now

For Group 2, the first reporting period is not a future event. For June year-end entities, it began on 1 July 2026. Every tonne of gas burned, every governance decision taken and every supplier engaged from that date falls inside the period the first sustainability report must cover.

Group 2's first reporting period began on 1 July 2026. Climate reporting is period-based, not deadline-based: the report is lodged with the FY2027 annual report, but the emissions data capture, governance arrangements and methodologies it describes must already be running now.3

An emissions baseline reconstructed in July 2027 from whatever invoices survive is exactly the kind of disclosure that struggles under assurance. Group 1's first season showed that data architecture, emissions, financial-impact estimates, scenario inputs, was the critical path, not the drafting.

Group 3 entities (two of: $50 million revenue, $25 million assets, 100 employees) have until financial years commencing on or after 1 July 2027, but the relief has a trap: a "no material climate risks or opportunities" statement is only defensible if you have done the risk assessment and can explain the methodology.8

If you are anywhere near the Group 2 thresholds, confirm your Group today, the clock may already be running.

What must the sustainability report contain?

The sustainability report is the fourth report in the annual report, sitting alongside the financial report, directors' report and auditor's report, and lodged at the same time.5 ASIC's Regulatory Guide 280 confirms it comprises three elements:8

  • Climate statements prepared in accordance with AASB S2, disclosures across the four pillars of governance, strategy, risk management, and metrics and targets, covering material climate-related financial risks and opportunities, greenhouse gas emissions (Scope 1, 2 and, subject to first-year relief, Scope 3), targets, and scenario analysis;
  • Notes to the climate statements: required by law, although ASIC has said it does not generally expect entities will need them; and
  • a directors' declaration on compliance (more on the transitional wording below).

AASB S2 asks the questions investors have asked under TCFD for years, but with statutory force: who on the board oversees climate risk; how climate risks and opportunities affect the business model, strategy and cash flows over the short, medium and long term; how resilient the strategy is under different warming pathways; and what your emissions, targets and progress are. Vague answers now sit inside a document with the same legal status as your financial statements.

Companies can still publish broader ESG content, but ASIC expects mandatory climate information to be clearly identified and not obscured: with a prominent index table distinguishing mandatory disclosures from voluntary material.13

Who sets the standards, and what did Australia change from IFRS S2?

AASB S2 is deliberately close to the ISSB's IFRS S2 baseline: that is the point, letting Australian reports slot into the global comparability project, but there are modifications worth knowing:6,7

Area IFRS S2 (ISSB baseline) AASB S2 (Australia)
Scope of mandate Designed to operate with IFRS S1's general requirements Climate-only. Operates standalone; Australian-specific Appendix D carries the general requirements needed to apply it without S1
General sustainability disclosure IFRS S1 covers all sustainability-related risks AASB S1 exists but is Voluntary, no legislative requirement to apply it6
Industry-based (SASB-derived) metrics Must consider and disclose industry-based metrics, with reference to SASB-based guidance Requirements to consider and disclose industry-based information were removed6
Scenario analysis Method left to the entity's circumstances Corporations Act s 296D overlays a minimum two-scenario requirement (1.5°C and well exceeding 2°C)5
Not-for-profits Investor-focused definition of users Modified definitions of primary users for NFP entities

The upshot: a report built properly on AASB S2 is substantively an ISSB-aligned report, which matters for groups also facing IFRS S2-based regimes in New Zealand, the UK and the growing list of ISSB adopters across Asia.

What does the climate scenario analysis requirement actually involve?

This is where Australian law goes beyond the ISSB baseline. AASB S2 requires entities to assess climate resilience using scenario analysis and to disclose the scenarios and assumptions used, but it does not prescribe which scenarios. Section 296D of the Corporations Act does. Climate resilience must be assessed against at least two possible future states:5,6

  • a scenario where global average temperature rise is limited to 1.5°C above pre-industrial levels: consistent with the goal in Australia's Climate Change Act 2022, and the scenario that stresses transition risk (rapid policy, carbon pricing, technology and demand shifts); and
  • a scenario where warming well exceeds 2°C (in practice, around 2.5°C or higher), the scenario that stresses physical risk (chronic heat, flood, fire and water stress hitting assets, supply chains and insurability).

ASIC's guidance frames the two together as bracketing the plausible range: high-end transition risk at one end, high-end physical risk at the other.5 Entities may use more scenarios. First-year reporters learned that the disclosure is less about modelling sophistication and more about showing how the scenarios were applied to your actual strategy: which assets, which markets, which horizons, and what the board concluded about resilience.

Do we have to report Scope 3 emissions in year one?

Not immediately. AASB S2 provides transition relief: an entity is exempt from disclosing Scope 3 emissions in its first reporting year.6 From year two, Scope 3 disclosure is required, across the value chain categories relevant to the entity, and Scope 3 information may be prepared using data from the immediately preceding year, which softens the data-lag problem for large supply chains.

Treat the relief as a build year, not a holiday. Scope 3 is where most mid-market reporters have the least data and the most exposure: it typically dwarfs Scope 1 and 2, relies on suppliers and estimation methods, and enters the assurance scope early in the phasing.9 The entities with a defensible year-two Scope 3 number spent year one mapping the 15 GHG Protocol categories, ranking them for materiality, and standing up screening estimates, preserving the calculation trail for the assurer.

Directors' duties and the modified liability regime: what are "protected statements"?

Directors sign the sustainability report the way they sign the financial report. The declaration is the sharp end of the regime, and Parliament softened it, temporarily, in two ways.3,5

The transitional directors' declaration

For financial years commencing between 1 January 2025 and 31 December 2027, directors declare that the entity has taken reasonable steps to ensure the substantive provisions of the sustainability report comply with the Act. From financial years commencing 1 January 2028, that qualifier disappears: directors must declare the report is in accordance with the Corporations Act and AASB S2.5 "Reasonable steps" implies documented processes: board oversight, competent preparation, controls over data, and records showing the judgement calls. An evidence trail is the difference between an assertion and a defence.

The protected statements window

The modified liability regime recognises that some disclosures are inherently estimates about the future. During the transition, protected statements in the sustainability report (and audit reports on it) are immune from civil action by private litigants, only ASIC can bring proceedings, and criminal liability is unaffected:5

  • Scope 3 emissions, scenario analysis and transition plan statements: protected for reports covering financial years commencing 1 January 2025 to 31 December 2027;
  • Forward-looking climate statements generally: protected only for financial years commencing 1 January 2025 to 31 December 2025 (so this limb has already closed for new periods).
Figure 2. The modified liability regime: what is protected, and until when. Protection attaches to statements in the sustainability report itself, it does not follow them into investor decks or websites.
Modified liability: what is protected, and until when FYs from 1 Jan 2025 1 Jan 2026 1 Jan 2027 1 Jan 2028 1 Jan 2029 Forward-looking climate statements FYs 1 Jan – 31 Dec 2025 only full liability settings apply (window closed) Scope 3, scenario analysis, transition plans protected: FYs commencing 1 Jan 2025 – 31 Dec 2027 full liability from 1 Jan 2028 All other sustainability report content normal Corporations Act liability from day one Protected: private civil actions barred, ASIC action and criminal proceedings still available Protection covers statements required by Commonwealth law in the sustainability report; voluntary documents are not covered.

Three caveats keep lawyers busy. The protection covers statements required by Commonwealth law in the sustainability report, voluntary disclosures, summaries and material reproduced in investor presentations are not covered.13 ASIC has no power to widen the safe harbour. And the regime is temporary: from financial years commencing 1 January 2028, Scope 3 numbers and scenario analysis carry the same misleading-and-deceptive-statement exposure as anything else directors sign.

What is ASIC's enforcement posture? RG 280 in brief

ASIC issued Regulatory Guide 280: Sustainability reporting on 31 March 2025: the central regulatory guidance for preparers.4 Its stated posture is a "proportionate and pragmatic approach to supervision and enforcement" while the requirements phase in, focused on high-quality, consistent and comparable climate-related financial disclosure: not on second-guessing "the ambition or merit of an entity's climate-related strategy".5

Pragmatic does not mean passive. Greenwashing enforcement continues under existing misleading-statement provisions, ASIC's actions against superannuation funds and asset managers pre-date this regime, and RG 280 signals particular attention to whether mandatory information is complete, clearly identified, and consistent with what the entity says elsewhere. The realistic first-year risk is not prosecution over an imperfect Scope 3 estimate; it is an ASIC query about numbers that cannot be traced to evidence, or a report that contradicts the company's own marketing.

How does assurance phase in, and when is reasonable assurance required?

Sustainability reports are subject to assurance by the financial statement auditor under standards issued by the AUASB: ASSA 5000 (general requirements for sustainability assurance engagements) and ASSA 5010, which sets the phased timeline.9,10 The trajectory, for each Group from its own first reporting year:

  • Year 1: limited assurance over governance and strategy disclosures on climate risks and opportunities, and Scope 1 and Scope 2 emissions;
  • Years 2–3: assurance extends across the remaining disclosures, with Scope 3 entering the scope from year two;
  • End state: reasonable assurance over all mandatory climate disclosures for financial years commencing on or after 1 July 2030: the same standard of scrutiny as a financial audit. Group 3 entities reach the full requirement by years commencing 1 July 2031.9
Figure 3. Assurance phasing under AUASB standard ASSA 5010: by financial years commencing 1 July 2030, climate disclosures face financial-audit-grade scrutiny.
Assurance ramp: limited today, reasonable over everything by FY2031 Year 1: limited assurance governance • strategy • Scope 1 & 2 Years 2–3: scope widens Scope 3 enters from year 2; remaining disclosures phased in Reasonable assurance, all mandatory climate disclosures FYs commencing on/after 1 Jul 2030 (Group 3: by 1 Jul 2031) First reporting year Transition years End state Level of assurance scrutiny → each Group runs this ramp from its own first reporting year (ASSA 5010, AUASB, January 2025).

Assurance-readiness is a property of your process, not your PDF. Assurers will ask where each number came from, who approved the methodology, what changed since last year and why. If the answer lives in one analyst's spreadsheet, limited assurance will be uncomfortable and reasonable assurance unachievable. Building the evidence register now, source documents, emission factors, calculation methods, sign-offs, is cheaper than retrofitting it in 2029.

How does mandatory climate reporting interact with NGER?

The NGER scheme does not go away: the two regimes run in parallel and intersect in three places.

First, NGER status determines your Group. NGER reporters above the publication threshold in s 13(1)(a) of the NGER Act are Group 1 regardless of size; all other NGER reporters are Group 2.3,12 NGER registration is itself threshold-based: broadly, facilities emitting 25 kt CO₂-e or producing/consuming 100 TJ of energy, or corporate groups at 50 kt CO₂-e or 200 TJ.11

Second, NGER data feeds the sustainability report, but only partly. NGER covers Scope 1 and 2 at facility and corporate-group level under Clean Energy Regulator methodologies. AASB S2 requires the GHG Protocol as the default measurement basis but accommodates entities required by other regimes to measure differently, so NGER reporters can generally leverage their existing Scope 1 and 2 measurement approach. What NGER does not give you is Scope 3, financed emissions, scenario analysis or the governance and strategy disclosures.

Third, consistency is now a compliance issue. Your NGER submission and your sustainability report are both public documents describing the same operations; divergent boundaries or unexplained differences are exactly the sort of inconsistency ASIC and assurers will probe.

First-year preparation roadmap: what to do in the next 12 months

For a Group 2 entity whose first period began 1 July 2026, or a Group 3 entity working ahead, a realistic sequence:

  • Confirm scope and entity structure (now). Apply the two-of-three test at the consolidated level, check NGER status, and identify which entity in the group lodges the report.
  • Stand up governance (months 1–2). Board and committee oversight of climate risk, documented; management roles assigned; a reporting calendar aligned to the financial close.
  • Baseline Scope 1 and 2 emissions (months 1–4). Define organisational boundaries, capture energy and fuel data monthly rather than annually, and lock methodologies. These numbers face limited assurance in year one.
  • Screen Scope 3 (months 3–6). Map all 15 categories, rank by estimated magnitude, and start screening estimates for the material ones, the first-year relief expires quickly.
  • Run scenario analysis (months 4–8). Two scenarios minimum, 1.5°C and well above 2°C, applied to your actual asset base and strategy, with the board's resilience conclusions minuted.
  • Draft, challenge, assure (months 8–12). Draft climate statements early, run an internal challenge against AASB S2 and RG 280, and engage your auditor on assurance expectations before year-end, not after.

Group 1's consistent lesson: the binding constraint is infrastructure, one system of record where emissions data, evidence, scenario assumptions and disclosure drafts live together, so the report is an output rather than a heroic annual assembly job. That is the problem EcoLedger was built for, guided AASB S2-aligned workflows, full Scope 1–3 carbon accounting across all 15 Scope 3 categories, and an evidence register behind every figure.

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Frequently asked questions

Is AASB S1 mandatory in Australia?

No. Only AASB S2 (climate) is mandated through the Corporations Act. AASB S1, covering broader sustainability-related financial disclosure, is voluntary, there is currently no legislative requirement to apply it.

When does Group 2 climate reporting start in Australia?

For financial years commencing on or after 1 July 2026. A June year-end Group 2 entity's first reporting period is 1 July 2026 – 30 June 2027, with the sustainability report lodged as part of the FY2027 annual report. A December year-end Group 2 entity's first period begins 1 January 2027.

Can we be sued over our Scope 3 emissions or scenario analysis disclosures?

Not by private litigants during the transition. Statements about Scope 3 emissions, scenario analysis and transition plans in sustainability reports for financial years commencing 1 January 2025 to 31 December 2027 are protected statements, only ASIC can take action, and criminal liability remains. The protection does not follow those statements into investor presentations or websites, and it expires.

Do we have to use two climate scenarios under AASB S2?

Yes, it is a legislative minimum, not guidance. Section 296D of the Corporations Act requires resilience assessment against at least two future states: warming limited to 1.5°C above pre-industrial levels, and warming well exceeding 2°C. AASB S2 itself does not prescribe scenarios; you may use more.

How does NGER reporting interact with AASB S2?

NGER continues as a separate obligation to the Clean Energy Regulator, and it determines your Group: NGER reporters above the s 13(1)(a) publication threshold are Group 1; all other NGER reporters are Group 2 regardless of size. NGER covers Scope 1 and 2 only, so NGER reporters still need to build Scope 3 accounting for AASB S2.

When is reasonable assurance required for sustainability reports?

Assurance phases in under ASSA 5010: limited assurance over governance, strategy and Scope 1 and 2 emissions in year one, extending to Scope 3 and other disclosures in later years. Reasonable assurance over all mandatory climate disclosures applies for financial years commencing on or after 1 July 2030, with Group 3 entities reaching that point by years commencing 1 July 2031.

What if our company has no material climate risks or opportunities?

Only Group 3 entities get relief. A Group 3 entity that determines it has no material climate-related financial risks or opportunities may prepare simplified climate statements saying so, provided it explains how it reached that conclusion. Group 1 and Group 2 entities must prepare full climate statements under AASB S2.

References

  1. Federal Register of Legislation, Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (No. 87, 2024), accessed July 2026.
  2. Australian Accounting Standards Board, AASB S2 Climate-related Disclosures (September 2024), accessed July 2026.
  3. Allens, Mandatory climate-related financial reporting is here (September 2024), accessed July 2026.
  4. ASIC, Regulatory Guide 280: Sustainability reporting (issued 31 March 2025), accessed July 2026.
  5. ASIC, RG 280 Sustainability reporting (full guide, PDF), accessed July 2026.
  6. AASB, An Overview of Australian Sustainability Reporting Standards (April 2025, PDF), accessed July 2026.
  7. AASB, AASB S2 Knowledge Hub: General FAQs, accessed July 2026.
  8. ASIC, What should your sustainability report contain?, accessed July 2026.
  9. AUASB, Climate and sustainability assurance requirements approved, accessed July 2026.
  10. AUASB, ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports (January 2025, PDF), accessed July 2026.
  11. Clean Energy Regulator, NGER scheme: Assess your obligations, accessed July 2026.
  12. AustLII, National Greenhouse and Energy Reporting Act 2007, s 13, Thresholds, accessed July 2026.
  13. Herbert Smith Freehills Kramer, Full steam ahead for Australian climate reporting as ASIC releases its final guidance (April 2025), accessed July 2026.
  14. KPMG Australia, Australian Sustainability Reporting: legislation and standards guide (PDF), accessed July 2026.
  15. EY Australia, Mandatory climate-related financial disclosures: update and summary (July, PDF), accessed July 2026.

This article is general information, not legal or financial product advice. Requirements described were verified against the sources above in July 2026; entities should confirm their position against current legislation, standards and ASIC guidance. Aspects of the regime, including future ASIC guidance and Group 3 implementation detail, may continue to evolve.

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