Last updated: May 29, 2026. Australia now has mandatory climate-related financial disclosure for large companies and financial institutions. The regime is no longer only a proposal: the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 amended the Corporations Act 2001, the first reporting cohort began for financial years starting on or after 1 January 2025, and the Australian Sustainability Reporting Standards are in force.
Short answer: in-scope Australian entities must prepare a sustainability report as part of their annual reporting package. The mandatory standard is AASB S2 Climate-related Disclosures. AASB S1, the broader sustainability standard, is voluntary in Australia for now. Many smaller businesses will not report directly, but they may still receive climate or emissions data requests from larger customers, lenders, investors, insurers, or supply-chain partners.
What changed in Australia?
Australia has moved from voluntary ESG reporting toward a formal climate-disclosure regime. The new requirements sit under Chapter 2M of the Corporations Act 2001 and are administered by ASIC. They apply to reporting entities that already have Chapter 2M annual financial reporting obligations and fall into one of the phased reporting groups.
The practical change is that climate information now needs to be prepared with the discipline of financial reporting. Companies need governance, risk-management processes, scenario analysis, emissions calculations, assumptions, internal review, director sign-off, and assurance readiness. A glossy sustainability brochure is not enough.
AASB S1 and AASB S2 are not the same
Australia issued two Australian Sustainability Reporting Standards in September 2024:
- AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information - a voluntary standard for broader sustainability-related financial information.
- AASB S2 Climate-related Disclosures - the mandatory climate standard for entities required to report under the Corporations Act.
This distinction matters. Australia is not currently requiring all in-scope companies to produce a broad ESG report covering every environmental, social, and governance topic. The mandatory legal requirement is focused on climate-related financial disclosures. Broader sustainability information can still be useful for investors, customers, procurement, and voluntary reporting, but it should not be confused with the mandatory AASB S2 obligation.
Who must report, and when?
The Australian regime phases in over three cohorts. In general, a large entity or its controlled entities are captured if the entity is required to prepare an annual financial report under Chapter 2M and satisfies at least two of the relevant size tests. NGER reporters and certain large asset owners can also be captured.
Group 1 - financial years beginning on or after 1 January 2025
- Consolidated revenue of AUD 500 million or more;
- consolidated gross assets of AUD 1 billion or more; and/or
- 500 or more employees.
Group 1 also captures National Greenhouse and Energy Reporting (NGER) reporters above the NGER publication threshold.
Group 2 - financial years beginning on or after 1 July 2026
- Consolidated revenue of AUD 200 million or more;
- consolidated gross assets of AUD 500 million or more; and/or
- 250 or more employees.
Group 2 also includes other NGER reporters and registered schemes, registrable superannuation entities, and retail corporate collective investment vehicles with AUD 5 billion or more in assets under management.
Group 3 - financial years beginning on or after 1 July 2027
- Consolidated revenue of AUD 50 million or more;
- consolidated gross assets of AUD 25 million or more; and/or
- 100 or more employees.
ASIC's small-business guidance is clear that sole traders, partnerships, trusts, and smaller companies are generally not directly in scope. However, companies below the thresholds can still feel the regime indirectly through customer or supplier requests.
What has to go into the sustainability report?
An in-scope entity prepares a sustainability report alongside its annual financial report, directors' report, and auditor's report. Under AASB S2, the climate disclosures are built around four familiar pillars:
- Governance: board and management oversight of climate-related risks and opportunities.
- Strategy: material climate-related risks and opportunities, their expected effects on the business, and resilience under climate scenarios.
- Risk management: how climate-related risks are identified, assessed, prioritised, monitored, and integrated into wider risk processes.
- Metrics and targets: greenhouse gas emissions, climate-related metrics, targets, progress, and the assumptions behind the numbers.
For many companies, the hard part is not writing the final report. It is building enough evidence behind the report for finance, legal, directors, auditors, and external users to trust the disclosures.
Greenhouse gas emissions are central
AASB S2 requires disclosure of Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. The standard generally points to the GHG Protocol, while recognising that an entity may be required by a jurisdictional authority or exchange to use another method for some emissions. Australian entities that already report under the National Greenhouse and Energy Reporting Scheme should check how NGER measurement interacts with their AASB S2 disclosures.
A few details are easy to miss:
- Scope 2 emissions are disclosed on a location-based basis, with information about relevant contractual instruments where needed to explain the result.
- Scope 3 requires a value-chain view, not just easy-to-find supplier data.
- Emission factors, boundaries, organisational structure, exclusions, and estimation methods should be documented.
- Scenario analysis, transition plans, Scope 3 emissions, and assumptions can create assurance and liability sensitivity, so the evidence file matters.
If your team has not calculated emissions before, start with a practical GHG emissions calculations exercise before trying to draft the final disclosure narrative.
Assurance is phased in
The AUASB issued ASSA 5000 and ASSA 5010 to support sustainability assurance in Australia. The assurance pathway is phased rather than immediate full audit of everything.
- In the first reporting year, the assurance practitioner reviews selected disclosures, including governance, strategy risks and opportunities, Scope 1 and Scope 2 emissions, and statements that there are no material climate-related risks or opportunities.
- In the second and third years of reporting, the review extends to all disclosures in the sustainability report.
- From the fourth year of reporting onwards, the auditor conducts an audit over all disclosures in the sustainability report.
This timeline is one reason companies should not wait until the reporting deadline. AASB S2 reporting needs controls, source documents, calculation files, reviewer notes, management judgments, and a clear audit trail.
Lodgement timing matters
Reporting entities must lodge the sustainability report and the auditor's report on the sustainability report with ASIC. The timing depends on the type of reporting entity. ASIC guidance says lodgement is generally due within three months after financial year end for disclosing entities, registered schemes, and registrable superannuation entities, and within four months after financial year end for other reporting entities.
That means the first wave is already live operationally. For a 31 December 2025 year end, the first Group 1 sustainability reports were due in March or April 2026 depending on the entity type. For a 30 June 2026 year end, the first Group 1 sustainability reports are due in September or October 2026.
What smaller businesses should expect
Many small and mid-sized Australian businesses will not report directly under AASB S2. But that does not mean the regime is irrelevant. Large reporting entities must think about climate-related risks and opportunities across their value chains. As a result, customers or suppliers may ask for emissions, energy, activity data, climate-risk information, or evidence that supports their own Scope 3 calculations.
ASIC notes that larger businesses can often use estimates and industry averages instead of sourcing data directly from every small business. Still, in competitive procurement situations, a supplier with clean emissions data and a credible methodology can respond faster and look more prepared than one starting from scratch.
Practical preparation checklist
Australian companies preparing for mandatory reporting should work through the requirements before the first reporting year closes. A practical readiness exercise should cover:
- confirming whether the entity is Group 1, Group 2, Group 3, an NGER reporter, an asset owner, or out of direct scope;
- mapping the entities, facilities, and business units included in the reporting boundary;
- identifying climate-related risks and opportunities across short, medium, and long-term horizons;
- setting governance responsibilities for directors, executives, finance, risk, operations, legal, and sustainability owners;
- calculating Scope 1, Scope 2, and relevant Scope 3 emissions;
- documenting emission factors, assumptions, estimation methods, and data limitations;
- preparing climate scenario-analysis inputs and decision records;
- checking whether existing NGER, financial, risk, and sustainability data can be reconciled;
- building a disclosure evidence file for assurance; and
- reviewing the draft report for consistency with financial reporting, public claims, and customer-facing materials.
Common mistakes to avoid
The first reporting cycles are likely to expose practical weaknesses rather than purely technical ones. Watch for:
- assuming AASB S1 is mandatory in the same way as AASB S2;
- using a marketing sustainability report as the starting point instead of the legal requirements;
- publishing emissions figures without a clear boundary, factor source, or calculation method;
- ignoring Scope 3 until late in the process;
- drafting scenario analysis without documenting judgments and assumptions;
- forgetting that directors and auditors need evidence, not just final prose;
- treating the ASIC lodgement deadline as the project deadline; and
- answering customer data requests differently from the numbers used in formal reporting.
How Keslio can help
Keslio can support Australian and Australia-linked teams with sustainability reporting and communications, GHG emissions calculations, and supplier request support.
Typical support includes checking whether the request is about mandatory AASB S2 reporting, a customer Scope 3 data request, a voluntary sustainability report, or an investor/lender questionnaire; preparing a data request list; calculating emissions; building methodology notes; drafting practical reporting content; and helping the team assemble an evidence file for review.
Need help applying these requirements?
If your team is preparing for Australian climate reporting or responding to a customer request linked to Australia's new regime, Keslio can help turn the requirement into a scoped workplan, calculation file, and customer-ready response.
