Sustainability Reporting Requirements in Australia: AASB S2

Australia requires an annual sustainability report when an entity must prepare an annual financial report under Chapter 2M of the Corporations Act 2001 and meets a corporate-size, NGER, or asset-value threshold. The requirement was introduced by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 and is now part of Chapter 2M of the Corporations Act 2001 . The legal requirement is narrower than a general ESG report. It requires climate-related financial disclosures under AASB S2. A broader report covering other sustainability-related risks and opportunities can still be useful, but AASB S1 is voluntary .

Start with two questions: does your entity have to prepare an annual financial report under Chapter 2M, and does it fall into one of the groups below? ASIC confirms that both conditions matter in its guidance on who must prepare a sustainability report . Group Who is captured First financial year First report due Scope 3 and assurance Group 1 Entities meeting at least two of these consolidated tests: revenue of AUD 500 million, gross assets of AUD 1 billion, or 500 employees. It also includes NGER reporters whose group meets the 50,000 t CO2-e publication threshold. See the 2024 Act, section 1707B and the Clean Energy Regulator publication threshold . Financial years beginning on or after 1 January 2025 . Three months after year end for a disclosing entity, registered scheme, or registrable superannuation entity (RSE), and four months for other reporting entities. For a 31 December 2025 year end, this was 31 March or 30 April 2026. For a 30 June 2026 year end, it is 30 September or 31 October 2026. See ASIC's lodgement timetable . Scope 3 may be omitted in the first reporting year and applies from the second. Limited assurance starts in year 1; reasonable assurance over the full report starts in year 4. See AASB S2 Appendix C and ASSA 5010 . Group 2 Entities meeting at least two of these consolidated tests: revenue of AUD 200 million, gross assets of AUD 500 million, or 250 employees. It also includes other NGER reporters and registered schemes, RSEs, and retail corporate collective investment vehicles (CCIVs) with AUD 5 billion or more in assets. See the 2024 Act thresholds . Financial years beginning on or after 1 July 2026 . The same three-month or four-month rule applies. For a 30 June 2027 year end, the due date is 30 September or 31 October 2027. For a 31 December 2027 year end, it is 31 March or 30 April 2028. See ASIC's lodgement rule . Scope 3 may be omitted in the first reporting year and applies from the second. Limited assurance starts in year 1; reasonable assurance over the full report starts in year 4. See AASB S2 Appendix C and ASSA 5010 . Group 3 Entities meeting at least two of these consolidated tests: revenue of AUD 50 million, gross assets of AUD 25 million, or 100 employees. See Corporations Act section 292A . Financial years beginning on or after 1 July 2027 . The same three-month or four-month rule applies. For a 30 June 2028 year end, the due date is 30 September or 31 October 2028. For a 31 December 2028 year end, it is 31 March or 30 April 2029. See ASIC's lodgement rule . Scope 3 may be omitted in the first reporting year and applies from the second. Limited assurance starts in year 1; reasonable assurance over the full report starts in year 4. See AASB S2 Appendix C and ASSA 5010 . The size tests use consolidated figures where applicable, and part-time employees count as an appropriate fraction of a full-time equivalent under the Corporations Act . The dates above are financial-year start dates, not publication dates.

The Australian Sustainability Reporting Standards are issued by the Australian Accounting Standards Board. The current set contains AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information and AASB S2 Climate-related Disclosures . Both had an operative date of 1 January 2025, but only AASB S2 is mandatory for entities captured by the Corporations Act. For annual periods beginning before 1 January 2027, the September 2024 version of AASB S2 applies. AASB S2025-1 amends specific GHG disclosure requirements for annual periods beginning on or after 1 January 2027, with earlier application permitted if disclosed.

AASB S1 is voluntary in Australia. It gives a framework for reporting sustainability-related risks and opportunities that could affect cash flows, access to finance, or cost of capital. AASB S2 is the mandatory climate standard for entities captured by the Corporations Act, and it focuses on climate-related risks and opportunities. The AASB confirms this distinction in its current standards list . You do not have to apply voluntary AASB S1 to comply with mandatory AASB S2. AASB S2 contains the general disclosure requirements needed for climate information, as the AASB S2 standard explains.

The report contains climate statements, any required notes, and a directors' declaration. ASIC's current guide to what a sustainability report must contain says the climate statements cover material climate-related financial risks and opportunities, metrics and targets, and the related governance, strategy, and risk management information. Governance: who oversees climate-related risks and opportunities, what management does, and how decisions are monitored under AASB S2 . Strategy: how material physical and transition risks and climate opportunities could affect the business model, financial position, performance, cash flows, access to finance, or cost of capital under AASB S2 . Risk management: how the entity identifies, assesses, prioritises, monitors, and manages climate-related risks under AASB S2 . Metrics and targets: Scope 1, Scope 2, and, after first-year relief, Scope 3 GHG emissions, plus other climate metrics and targets required by AASB S2 . Scenario analysis: climate resilience assessed using at least a 1.5°C scenario and a scenario well above 2°C, as ASIC explains . Director oversight: a directors' declaration. For financial years beginning from 1 January 2025 through 31 December 2027, directors declare that the entity has taken reasonable steps to ensure the report complies, under the transitional provision in section 1707C . Keep the figures and claims in the report consistent with public communications. ASIC can direct an entity to explain, support, correct, or republish an incorrect, incomplete, or misleading sustainability statement under its sustainability-reporting powers . The ACCC also says environmental claims must be true, accurate, and based on reasonable grounds under the Australian Consumer Law .

AASB S2 requires Scope 1, Scope 2, and Scope 3 GHG emissions. Scope 1 is direct emissions from sources the entity owns or controls. Scope 2 is indirect emissions from purchased or acquired electricity, steam, heating, or cooling. Scope 3 covers other indirect emissions across the upstream and downstream value chain. These definitions and disclosure requirements are in AASB S2 . An entity may use the AASB S2 first-year transition relief and omit Scope 3 emissions in its first annual reporting period. Scope 3 then applies from its second reporting year. That extra year is preparation time, not a reason to wait: supplier data, spend records, logistics information, estimates, emission factors, boundaries, and calculation notes take time to organise.

Assurance starts in the first reporting year. Under ASSA 5010 , year 1 requires limited assurance over governance, selected climate-risk and opportunity disclosures, Scope 1 and Scope 2 emissions, and any statement that there are no material climate-related risks or opportunities. Years 2 and 3 require limited assurance over all disclosures. From year 4, the auditor conducts reasonable assurance over the full sustainability report. The assurance engagement follows ASSA 5000 General Requirements for Sustainability Assurance Engagements . In plain words, your evidence file matters from the first report, even though the depth of assurance increases over time.

The temporary settings limit private legal action for certain protected statements. For financial years beginning from 1 January 2025 through 31 December 2027, protected statements include Scope 3 emissions, scenario analysis, and transition plans. For financial years beginning from 1 January through 31 December 2025, the protection also covers other forward-looking climate statements. Criminal proceedings and action brought by ASIC remain possible under section 1707D of the 2024 Act , and ASIC summarises the position on its modified-liability page . This is not a general exemption from accurate reporting. ASIC says it will take a pragmatic and proportionate approach in the early years, but it has also begun reviewing lodged reports and can require evidence or corrections, as set out in its administration and enforcement approach .

The sustainability report and the auditor's report on it must be lodged within three months after year end for disclosing entities, registered schemes, and RSEs, and within four months for other reporting entities. ASIC says the financial report, directors' report, and financial auditor's report for the same period should be lodged at the same time. Direct ASIC filing uses Form 398 for the sustainability reports and Form 388 for the financial reports, as explained in ASIC's current lodgement guidance . Listed companies and listed registered schemes can use ASIC Corporations (Electronic Lodgment of Financial and Sustainability Reports) Instrument 2026/59 to lodge electronically through ASX, NSX, SSX, or Cboe when its conditions are met. ASIC also lists class relief for stapled entities and related schemes, while individual relief applications must be made prospectively. See ASIC's relief summary .

Most small businesses do not have a direct filing duty. Direct reporting still requires a Chapter 2M annual financial-reporting obligation and one of the sustainability-reporting thresholds. ASIC lists small proprietary companies without Chapter 2M reporting obligations among the entities that do not have to prepare a sustainability report in its scope guidance . A mid-sized company should still check the Group 3 tests. From financial years beginning on or after 1 July 2027, the corporate-size threshold is met when an entity satisfies at least two of AUD 50 million revenue, AUD 25 million gross assets, or 100 employees, under Corporations Act section 292A .

A supplier may be outside direct scope and still receive a request. ASIC says larger businesses and financial institutions may ask entities in their value chain for information that supports climate reporting and Scope 3 calculations. ASIC also notes that reporting entities can use estimates and industry averages where direct supplier data is difficult or costly to obtain. See ASIC's small-business guidance . A practical request may ask for electricity and fuel use, travel and freight data, purchased goods or services, waste, the reporting boundary, the calculation method, emission factors, policies, targets, and source documents. Ask what period, entity, unit, method, and deadline the customer needs before building a full report they did not request.

The National Greenhouse and Energy Reporting Scheme, or NGER, is a separate national scheme for company emissions, energy production, and energy consumption. The Clean Energy Regulator says the facility thresholds are 25,000 t CO2-e or 100 TJ of energy produced or consumed, while the corporate-group thresholds are 50,000 t CO2-e or 200 TJ of energy produced or consumed. See the Clean Energy Regulator threshold guide . NGER status can also determine when AASB S2 reporting starts. NGER reporters above the publication threshold enter Group 1, while other NGER reporters enter Group 2 under the 2024 Act's phase-in rules . Do not assume the two reports use identical boundaries or methods. Reconcile the NGER file to the AASB S2 reporting entity, explain differences, and keep both sets of records.

Start with the legal entity and reporting year. Confirm the Chapter 2M duty, group threshold, NGER status, asset-owner test, and filing date against ASIC's scope guidance . Then build the report backwards from the evidence the directors and assurance practitioner will need. Set the reporting entity and consolidation boundary. Assign board, management, finance, risk, operations, legal, and sustainability responsibilities. Identify material physical risks, transition risks, and climate opportunities. Prepare the two required climate scenarios and record assumptions. Calculate Scope 1 and Scope 2 emissions, then map Scope 3 data for the second reporting year. Document source records, methods, emission factors, estimates, exclusions, controls, and review notes. Reconcile climate disclosures with the financial report and public environmental claims. Plan the year 1 limited-assurance work before the report is drafted. This guide is general information, not legal advice. Confirm formal applicability or an interpretation issue with your legal adviser or ASIC.