Mandatory climate reporting is no longer on the horizon. The first reports have been lodged, and the phased timeline is now working through the remaining groups.
Group 1 entities with December year-ends, the first cohort of Australia’s largest companies and significant emitters to report, have lodged their first sustainability reports under AASB S2. By early May, 259 reports for the year ended 31 December 2025 had been lodged with ASIC. June year-end Group 1 reporters will follow later this year, Group 2 entities began their first reporting period on 1 July 2026, and for Group 3, the financial year that has just started is the last full year before mandatory reporting begins.
If your organisation has a June year-end and falls within Group 3, your first sustainability report will cover the year commencing 1 July 2027. That may sound distant, but the experience of the first reporters suggests otherwise. The entities that managed their first year well were those that used the preceding year to establish their data, governance and processes. For Group 3, that year is now underway.
Are you in Group 3?
You are in Group 3 if you prepare financial reports under Chapter 2M of the Corporations Act and meet at least two of the following three thresholds on a consolidated basis:
- Revenue of $50 million or more
- Gross assets of $25 million or more
- 100 or more employees
For many Tasmanian businesses, the employee and asset tests are the ones that quietly capture them. This is worth checking properly rather than assuming.
A note on the 2026-27 Federal Budget, handed down in May: The Australian Government has proposed doubling the large proprietary company thresholds to $100 million revenue and $50 million gross assets. If legislated, this would take some private companies out of the reporting net altogether. But it is a proposal, not law, and the employee threshold is unchanged.
For businesses in a growth phase, the thresholds deserve particular attention, because scope is not a one-off test. It is assessed each financial year. A business sitting below the thresholds today can grow into them, and a business the Budget proposals would move out of scope can grow back in. If your trajectory involves adding headcount, acquiring assets or lifting revenue over the next few years, the more useful question is not whether you are in scope now, but when you are likely to cross the thresholds and what you want in place before that point. Establishing emissions data and climate governance while still below the thresholds is considerably more efficient than doing so in the year the obligation first applies, and it means the reporting requirement arrives as a manageable step rather than a significant undertaking.
There is also a commercial dimension that applies regardless of where the thresholds land. Group 1 and 2 reporters must disclose Scope 3 emissions from their second year, and that data comes from their suppliers. If a major customer is a mandatory reporter, expect emissions data requests whether or not you have obligations of your own. For a growing business, the ability to answer those requests well is increasingly part of winning and keeping larger contracts.
Early Lessons from the First Reporters
The December year-end Group 1 reports provide valuable insight for the entities that follow. These are early observations, drawn from the first reports lodged rather than the full Group 1 population, and the picture will develop further as June year-end reporters lodge later this year. Even so, a few patterns stand out.
The effort was bigger than expected.
Among the reports lodged and reviewed to date, length ranged from 7 to 82 pages, averaging around 30. Behind every page sits data collection, governance sign-off and documentation that most entities were building for the first time. Preparers consistently underestimated how long emissions data would take to assemble to a standard which would meet assurance requirements.
Judgement calls attract scrutiny.
One of the clearest divides in the reports lodged so far was financial quantification. Of the early Group 1 reports reviewed to date, about two-thirds quantified the financial impact of climate risks. The rest leaned on the proportionality mechanisms in AASB S2, citing measurement uncertainty. The standard allows this, but ASIC has already signalled that these judgements are an area of focus, and it expects entities to disclose their judgements, assumptions and areas of uncertainty clearly rather than leaving readers to guess.
“Reasonable and supportable” is being applied firmly.
In its early observations on the first sustainability reports, ASIC identified instances where entities had previously reported to the market that extreme weather had affected their assets or operations but did not address similar risks in their sustainability report. ASIC’s position is clear: information about past events, current conditions and forecasts of future conditions constitutes reasonable and supportable information, and it belongs in the report.
Transitional relief was used, but not universally.
Almost all reporters to date applied the relief allowing them to omit comparative information, and most deferred Scope 3 emissions. But a meaningful number voluntarily disclosed Scope 3 categories anyway, often because customers and lenders were asking regardless.
What Group 3 entities should do this year
The good news is that Group 3’s first year comes with meaningful relief: no Scope 3 disclosure in year one, no comparatives, and a three-year modified liability period for forward-looking statements. Between now and 30 June 2027, the priorities are:
Confirm your scope and trajectory.
Test the thresholds properly, on a consolidated basis and, if you are growing, project when you are likely to cross them. Monitor the Australian Government’s proposed changes to the reporting thresholds, announced in the 2026-27 Federal Budget, as they move through consultation.
Start collecting emissions data now.
Your first report will need Scope 1 and 2 emissions, subject to limited assurance from year one. And because Scope 3 becomes mandatory in year two, the data collection for it needs to start during your first reporting year. A full year of clean baseline data, gathered before anything is mandatory, is the single most valuable thing this year can produce.
Put governance in place.
The board of directors need visible oversight of climate risk, and the first wave showed that assurers and ASIC both look for evidence of it. This does not need to be elaborate. It needs to exist and be documented.
Do a genuine risk assessment.
This is the foundation of the disclosure: identify your physical and transition risks, assess them over short, medium and long-term horizons, and document how you reached your conclusions. Everything else in the report builds on this work.
Learn from what is already public.
Real AASB S2 reports now exist across resources, energy, insurance and financial services. There is no need to design your disclosure from a blank page.
Making use of the lead time
The entities that found the first reporting period most difficult were not those with the greatest climate risk. They were those that began assembling data, governance and documentation within their first reporting period rather than before it. Group 3 has the advantage of reporting last, but that advantage only holds if the lead time is used.
If you would like assistance testing whether you are in scope, building an emissions baseline, or establishing climate risk governance that will stand up to assurance, our advisory team works with businesses across Tasmania on exactly this.
