Australia's mandatory climate-related financial reporting regime is not a future obligation. It is active now. The largest group of reporting entities has already completed its first reporting period; a second, much larger group of mid-sized businesses began its first mandatory period on 1 July 2026. For many companies, the practical question has shifted from "will this apply to us" to "how far along should we already be."
The legal basis
The regime sits in the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, which inserted mandatory climate-related financial disclosure obligations into Chapter 2M of the Corporations Act 2001. The disclosure standard itself is AASB S2, issued by the Australian Accounting Standards Board. It is built on the same four pillars as the global ISSB S2 standard — governance, strategy, risk management, and metrics and targets — with Australian-specific requirements added on top, most notably a requirement to model outcomes under two distinct climate scenarios rather than one.
Who is caught
Entities that already prepare annual financial reports under Chapter 2M become subject to AASB S2 once they meet at least two of three size thresholds, assessed by reporting group:
Group 1 — consolidated revenue above $500 million, consolidated assets above $1 billion, or more than 500 employees. First reporting period: financial years beginning on or after 1 January 2025.
Group 2 — consolidated revenue above $200 million, consolidated assets above $500 million, or more than 250 employees. First reporting period: financial years beginning on or after 1 July 2026.
Group 3 — consolidated revenue above $50 million, consolidated assets above $25 million, or more than 100 employees. First reporting period: financial years beginning on or after 1 July 2027.
Two categories are captured outside this size test. Entities that report under the National Greenhouse and Energy Reporting Act above the relevant emissions threshold fall into Group 1 regardless of their revenue or headcount. Asset owners — superannuation funds and registered investment schemes — with assets under management above $5 billion are also captured.
Group 3 entities have a narrower obligation: they need only report if they identify a material climate-related risk or opportunity, though the assessment of whether one exists is itself subject to director declaration and, ultimately, audit.
What has to be ready before the reporting period starts — not at lodgement
This is the point most businesses underestimate. The obligation begins on the first day of the reporting period, not at the point the report is lodged with ASIC. Scope 1 and Scope 2 emissions data needs to be collected from day one. Governance disclosures need to name the actual roles, committees and escalation paths responsible for climate risk — not a generic statement of intent. If any of that infrastructure doesn't exist yet, waiting for the lodgement deadline to build it means reporting on a period that has already partly happened without the data to show for it.
Some genuine relief, but not much runway
The legislation includes two forms of transitional relief. Scope 3 emissions reporting — covering a company's value chain, suppliers and financing activities — is deferred to an entity's second reporting period rather than its first. And for a fixed three-year window from 1 January 2025, actions relating to Scope 3 disclosures, scenario analysis and transition plans are limited to regulator-only enforcement, giving companies some protection while methodology matures. Assurance also phases in gradually: limited assurance applies from the first reporting period over Scope 1 and 2 emissions and governance disclosures, with the regime moving toward reasonable assurance — a materially higher bar — for financial years beginning on or after 1 July 2030.
None of this relief removes the underlying obligation. It buys time to get the methodology right, not permission to defer starting.
The practical implication
For a Group 2 entity with a 30 June year-end, the first AASB S2-compliant Sustainability Report will cover the year ending 30 June 2027, ordinarily lodged alongside the Annual Report later that year. That sounds distant until you work backward: emissions data collection, governance documentation, scenario modelling and the underlying methodology all need to exist and be defensible from the first day of that reporting period — which, for many Group 2 entities, has either just started or is about to.
The report itself is the last step in this process, not the first.
This article summarises the general application of AASB S2 as at the date shown above and does not constitute legal, accounting or assurance advice. Entities should confirm their specific reporting group and obligations with appropriately qualified advisers. Regulatory basis last reviewed August 2026.