What Australia's New Mandatory Climate Reporting Rules Mean for Businesses in 2026

Australia has joined a growing number of countries requiring large businesses to disclose climate-related information as part of their annual reporting obligations. The Australian Sustainability Reporting Standards (ASRS) framework, built on the international ISSB standards, is now mandatory — and the phase-in timeline is well underway.

If your business hasn’t yet assessed what this means in practice, here’s what you need to know.

The legislative foundation

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 inserted sustainability reporting requirements into the Corporations Act 2001. ASIC oversees compliance, and the Australian Accounting Standards Board (AASB) published the operative standards: AASB S1 (general sustainability disclosures, voluntary) and AASB S2 (climate-related disclosures, mandatory for reporting entities above certain thresholds).

The standards are largely aligned with the International Sustainability Standards Board (ISSB) framework, which means Australian businesses operating globally or with international investors will find significant overlap with IFRS S1 and S2.

Three groups, three timelines

Mandatory reporting rolls out in three tranches based on entity size.

Group 1 — the largest Australian entities — must report from financial years beginning on or after 1 January 2025. These are companies that satisfy at least two of: consolidated revenue over $500 million, consolidated gross assets over $1 billion, or more than 500 employees.

Group 2 — mid-sized entities — must report from financial years beginning on or after 1 July 2026. The thresholds are two of: consolidated revenue over $200 million, consolidated gross assets over $500 million, or more than 250 employees.

Group 3 — smaller reporting entities — must report from financial years beginning on or after 1 July 2027. The thresholds drop to two of: consolidated revenue over $50 million, consolidated gross assets over $25 million, or more than 100 employees.

What AASB S2 actually requires

AASB S2 mandates disclosures across four pillars:

1. Governance — Board and management oversight of climate-related risks and opportunities, including the processes and controls in place.

2. Strategy — The climate-related risks and opportunities that could affect the entity’s business model, strategy, and financial position over short, medium, and long-term horizons.

3. Risk management — How climate-related risks are identified, assessed, prioritised, and managed, and how this integrates with the entity’s overall risk framework.

4. Metrics and targets — Quantitative data on climate-related performance, including Scope 1 and Scope 2 greenhouse gas emissions (and eventually Scope 3).

The assurance requirement

One aspect many businesses underestimate is the external assurance requirement. Sustainability reports must be independently assured, and the level of assurance increases over time:

• Limited assurance applies in the initial years of mandatory reporting
• Reasonable assurance — the more demanding standard — phases in as the regime matures

Limited assurance still requires an external auditor to verify your figures against underlying source documents. If your emissions data can’t be traced back to an invoice or meter reading, it will not survive scrutiny.

Practical implications for most businesses

For most companies entering mandatory reporting for the first time, the strategic questions (governance, scenario analysis, climate targets) are genuinely difficult but also well-supported by advisers and consultants. The harder operational problem is the data.

Scope 1 and Scope 2 emissions data comes from utility invoices, fuel records, gas bills, and meter readings — documents that typically live in accounts payable, fleet management, and facilities systems. Pulling them together, tagging them to sites and business units, and producing a traceable calculation is a data management challenge that most companies haven’t had to solve before.

The organisations getting ahead of Group 2 and Group 3 deadlines are those treating this as an infrastructure problem now, not a spreadsheet project the year reporting becomes mandatory.

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