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Published Feb 13, 2026
Complying with Australia’s Mandatory Climate Reporting Laws in 2026
What is Mandatory Now
Australia’s mandatory climate reporting sits inside the annual reporting system most large organisations already know: Chapter 2M of the Corporations Act. If your entity is in scope, you must prepare a sustainability report as part of your annual reporting obligations, and that report must contain the climate related financial information required under the Corporations Act and AASB S2.
In the legislation, it is defined like a proper report package: climate statements and notes, any other statements and notes required by legislative instrument, and a directors’ declaration.
Australian Securities and Investments Commission has stated that the first round of mandatory sustainability reports are due to be lodged with ASIC from March 2026.
A useful mental model: treat the sustainability report like a new “chapter” of the annual report. Same level of seriousness, same kind of scrutiny, and it connects directly to financial prospects.
Who Must Report and When
The Gate Test for Being in Scope
Per ASIC, an entity must prepare a sustainability report if it both:
Is required to prepare an annual financial report under Chapter 2M, and
Meets one of the sustainability reporting thresholds in section 292A (corporate size, emissions threshold, or value of assets threshold).
The Phase in Schedule and Thresholds
ASIC’s Regulatory Guide RG 280 summarises the phase in across three groups. The trigger is the annual reporting period commencement date, and each group has specific thresholds.
Group | Reporting periods commencing | Who is captured (high level) | Thresholds (meet at least two, unless emissions threshold applies) |
|---|---|---|---|
Group 1 | 1 Jan 2025 to 30 Jun 2026 | Large entities (excluding registered schemes, RSEs, retail CCIVs) and certain NGER reporters | Corporate size: revenue ≥ $500m; gross assets ≥ $1b; employees ≥ 500. Emissions threshold also pulls in certain NGER reporters in a group meeting the NGER threshold. |
Group 2 | 1 Jul 2026 to 30 Jun 2027 | Mid sized entities; all NGER registered corporations; plus large asset pools (registered schemes, RSEs, retail CCIVs) | Corporate size: revenue ≥ $200m; gross assets ≥ $500m; employees ≥ 250. Emissions threshold: registered corporations under NGER. Value of assets threshold: assets ≥ $5b (registered schemes, RSEs, retail CCIVs). |
Group 3 | From 1 Jul 2027 | Smaller entities that still meet minimum size tests | Corporate size: revenue ≥ $50m; gross assets ≥ $25m; employees ≥ 100. |
Table: phase in groups and thresholds (RG 280 Table 2)
A practical example: if a company has $550m consolidated revenue but only $600m gross assets and 350 employees, it still lands in Group 1 because it satisfies “two of three” only if it also hits at least one of the other criteria. In this case it does not. That company might instead be captured later if it meets Group 2 thresholds or the emissions threshold.
How the Emissions Threshold Connects to NGER
The emissions threshold is tied to being a registered corporation with obligations under the National Greenhouse and Energy Reporting scheme (NGER).
A screening shortcut: if your corporate group meets the Clean Energy Regulator thresholds, you should assume climate reporting needs a hard look. The Clean Energy Regulator describes NGER thresholds such as 50,000 tonnes or more of CO2 e (scope 1 and scope 2), or production or consumption of 200 TJ or more of energy.
What the Sustainability Report Must Include
The Legal “Container” of the Report
Legally, the sustainability report must include climate statements, notes, and a directors’ declaration. The Minister can also require specific disclosures by legislative instrument, and the report must include any other information necessary to ensure the climate statements and notes together make the disclosures required by the Corporations Act.
The Climate Standard you Must Comply With
ASIC’s materials describe the sustainability report as containing the climate related financial information required under the Corporations Act and AASB S2 Climate related disclosures, which is the mandatory climate standard.
AASB S2 is issued by the Australian Accounting Standards Board and is built to align with international sustainability disclosure standards through the work of the International Sustainability Standards Board.
What AASB S2 Asks You to Explain
AASB S2 is structured around the same four “big buckets” climate reporting has converged on globally:
Bucket | What you disclose |
|---|---|
Governance | Who oversees climate risks and opportunities, and how responsibilities sit across board and management. |
Strategy | What climate risks and opportunities could reasonably affect cash flows, access to finance, or cost of capital, and how the business model and value chain might change. |
Risk management | The processes used to identify, assess, prioritise and monitor climate risks and opportunities, and how they fit within overall risk management. |
Metrics and targets | Emissions, transition and physical risk exposure metrics, internal carbon prices, remuneration links, and progress against targets. |
AASB S2 also requires scenario analysis to inform climate resilience disclosures and expects the scenario analysis approach to be scaled to the entity’s circumstances.
Emissions Disclosures and The Three “Scopes”
AASB S2 requires disclosure of absolute gross greenhouse gas emissions classified as scope 1, scope 2 and scope 3. It defines them as follows:
Scope 1: direct emissions from sources owned or controlled by the entity.
Scope 2: indirect emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the entity.
Scope 3: other indirect emissions in the value chain, upstream and downstream, grouped into 15 categories including “investments” (Category 15).
AASB S2 requires emissions measurement in line with the Greenhouse Gas Protocol corporate standard unless a jurisdictional authority or exchange requires another method.
Illustrative example:
Scope 1 is your own car’s exhaust.
Scope 2 is the emissions created at the power station that generates the electricity you buy.
Scope 3 is what is outside your fence line, like supplier manufacturing, customer use of your products, and financed emissions if you are a financial institution.
Heads up for 2027 and later
AASB has issued AASB S2025 1 Amendments to Greenhouse Gas Emissions Disclosures. These amendments apply for annual reporting periods beginning on or after 1 January 2027 and are designed to provide additional relief, clarify existing relief, and refine certain greenhouse gas disclosure requirements.
If your controls and data model are built in 2026, build them so they can absorb these 2027 adjustments without rebuilding everything.
Certification, Assurance and Liability
Directors’ Declaration
In the Corporations Act, the sustainability report includes a directors’ declaration about whether the substantive provisions are in accordance with the Act, including compliance with sustainability standards and the climate statement disclosure requirements.
ASIC guidance explains that this declaration is staged:
For financial years commencing between 1 January 2025 and 31 December 2027, directors must declare that the entity has taken reasonable steps to ensure the report (other than the declaration) aligns with the Corporations Act and AASB S2.
For financial years commencing on or after 1 January 2028, directors must declare whether the report (other than the declaration) is in accordance with the Corporations Act and AASB S2.
If you want a concrete feel for “reasonable steps”, ASIC describes actions such as establishing systems to identify and monitor material climate related financial risks and opportunities, establishing controls for preparation of the sustainability report, setting up record keeping controls, and applying a “critical lens” to methodologies, assumptions and potential omissions.
Audit and Assurance Standards
The Corporations Act requires entities that must prepare a sustainability report to have it audited and obtain an auditor’s report, with an explicit note that for financial years commencing before 1 July 2030 the audit requirement may be modified.
On the assurance standards side, the Auditing and Assurance Standards Board has:
Approved ASSA 5000 (Australia’s sustainability assurance standard based on the international ISSA 5000) for reporting periods beginning on or after 1 January 2025, and
Approved ASSA 5010, which sets the timeline for when parts of the mandatory climate information are subject to limited assurance (review) and reasonable assurance (audit) over time.
AUASB also states that under the Act, the auditor of the financial report provides assurance over the mandatory climate information in the annual report.
The Assurance Timetable: What Gets Assured, and When (simplified from AUASB phasing model)
The table below is a simplified reading of the AUASB phasing model. The model is similar in shape for each group, but the start year shifts: Group 1 starts first, Group 2 starts one year later, Group 3 later again.
Disclosure area | Year 1 | Years 2 and 3 | Year 4 onward |
|---|---|---|---|
Governance | Limited assurance | Limited assurance | Reasonable assurance |
Strategy risks and opportunities | Limited assurance (limited components in Year 1) | Limited assurance | Reasonable assurance |
Scenario analysis | No assurance required in Year 1 | Limited assurance | Reasonable assurance |
Transition plans | No assurance required in Year 1 | Limited assurance | Reasonable assurance |
Risk management | No assurance required in Year 1 | Limited assurance | Reasonable assurance |
Scope 1 and 2 emissions | Limited assurance | Limited assurance | Reasonable assurance |
Scope 3 emissions | Not applicable in Year 1 (then comes in) | Limited assurance | Reasonable assurance |
Climate metrics and targets | No assurance required in Year 1 | Limited assurance | Reasonable assurance |
A key detail: for some Group 1 entities (those with years commencing 1 January to 30 June), AUASB notes the Year 1 provisions can effectively apply twice, and scope 3 reporting is required for the year commencing 1 January 2026 to 30 June 2026 for those entities.
Modified Liability Settings for Early Years
ASIC explains a modified liability regime for certain “protected statements”. Under this setting, no legal action other than criminal action or action by ASIC can be brought in relation to protected statements made in the sustainability report or the auditor’s report.
The protected statement categories and their time windows include:
Statements about climate that are forward looking, for reports prepared for financial years commencing between 1 January 2025 and 31 December 2025, and
Statements about scope 3 emissions, scenario analysis or transition plans, for reports prepared for financial years commencing between 1 January 2025 and 31 December 2027.
This is not a free pass to guess. Think of it like learner plates for a brand new reporting discipline: you still need to drive properly, but the law recognises early stage uncertainty in some forward looking areas.
Data Quality, Traceability and Keeping Records
Sustainability Records are Mandatory
If an entity must prepare a sustainability report, it must keep written sustainability records that explain and record the preparation of the substantive provisions of the report, and those records must be retained for seven years.
The law backs this with strict liability offences for contraventions, and it also requires that electronic records be convertible into hard copy.
Scope 3 Traceability is Built into AASB S2
AASB S2 requires entities to disclose the measurement approach, inputs and assumptions used to measure greenhouse gas emissions, including scope 3, and to disclose which scope 3 categories are included.
It also requires disclosures about the extent to which scope 3 emissions are measured using inputs from specific activities in the value chain, and the extent to which inputs are verified.
ASIC’s own review of voluntary disclosures ahead of the March 2026 lodgements observed that companies commonly used a mix of supplier and customer data and secondary data such as industry averages for scope 3, consistent with what the standards allow.
The key operational point: if you rely on estimates, you need a paper trail that explains why those estimates were reasonable and what data quality limitations exist. That is the kind of thing auditors and ASIC review teams probe.
Use the Right Emissions Factors
Australia has two government “lanes” that organisations often mix up:
NGER reporting: administered by the Clean Energy Regulator for registered corporations, with annual reporting due by 31 October each year (until deregistered).
Emissions estimation for broader uses: supported by the Department of Climate Change, Energy, the Environment and Water through the National Greenhouse Accounts Factors, which it publishes and updates annually.
DCCEEW is explicit that the National Greenhouse Accounts Factors should not be used to meet NGER reporting requirements, even though the methods draw on the NGER measurement framework.
If you are building a climate reporting data stack in 2026, consider that your methodology notes should clearly separate “NGER compliance measurement” versus “financial disclosure measurement” where the methods diverge.
A Practical Compliance Playbook for 2026
Lock Down Scope and Timing Fast
Confirm whether you are captured by corporate size, emissions threshold, or value of assets threshold, and which group applies based on your reporting period start date.
If you are Group 1, assume you are working toward the March 2026 lodgement window ASIC has flagged.
Design the Reporting Process Around Assurance
Because assurance ramps up quickly, build the process as if you will be audited, even in the early limited assurance phase.
Focus areas auditors and ASIC will naturally gravitate to:
Governance clarity and documentation,
Evidence that your climate risks and opportunities assessment links to financial prospects,
Scenario analysis inputs and assumptions, especially once it moves into limited assurance,
Emissions calculation methods, including scope 3 estimation logic and data quality notes.
Prepare for the Directors’ Declaration
For 2025 to 2027 starts, directors must sign a “reasonable steps” declaration, then from 2028 it becomes a stronger “in accordance” declaration.
Here's a simplified checklist consistent with ASIC’s description of director expectations:
Establish systems to identify, assess and monitor material climate related financial risks and opportunities,
Establish controls, policies and procedures for preparing the report and keeping sustainability records,
Document methods, inputs and assumptions so auditors and directors can challenge them.
Build your Record Keeping and Traceability so it Survives Contact with a Regulator
ASIC has stated it will begin reviewing sustainability reports lodged with it from 2026 and will publicly report findings, and it has highlighted its directions power to require corrections where statements are incorrect, incomplete or misleading.
Treat Scope 3 as a Supply Chain Data Program
AASB S2 requires you to disclose scope 3 categories included, measurement approach, and information about data inputs and verification.
Practical ways to make this manageable:
Start with the scope 3 categories most likely to be material for your business and document why,
Collect primary data for major suppliers and major customer pathways where possible, and document where you use secondary data and why,
Tag each dataset to a source, period, and owner so it can be traced back during assurance.
Plan for 2027 Changes Early
If you are designing systems in 2026, plan for the 2027 effective date of AASB’s amendments to greenhouse gas emissions disclosures, rather than hard coding a single year approach.
Prepare with Confidence
From 2025 onward, climate disclosures carry director sign-off requirements, structured reporting standards, and a phased assurance pathway that moves toward full reasonable assurance by 2030.
The expectations are clear:
• Verifiable emissions data.
• Documented methodologies.
• Board-level accountability.
• Scalable digital systems.
Organisations that build structured, auditable data infrastructure now will move through assurance cycles with far less friction.
If you would like to discuss how to structure your climate data systems, traceability processes, or assurance readiness under the ASRS framework, contact us - our team can walk through your current setup and identify practical next steps.
