GROUP 3 - REPORTING FROM JULY 2027

Smaller entity.
Same obligations.

Q: What is AASB S2 and when does mandatory climate reporting begin?

AASB S2 Climate-related Disclosures is Australia’s mandatory standard for climate-related financial disclosures, part of the Australian Sustainability Reporting Standards (ASRS). It is aligned with IFRS S2 and built on the TCFD framework. Mandatory reporting began for Group 1 entities from 1 January 2025, with Group 2 following from 1 July 2026 and Group 3 from 1 July 2027.

Q: What’s the difference between AASB S1 and AASB S2?

AASB S2 is the mandatory standard covering climate-related disclosures only. AASB S1 is a voluntary standard covering broader sustainability-related risks and opportunities (e.g., biodiversity, social issues). Only AASB S2 is currently required by law under the Corporations Act.

Q: What are the penalties for non-compliance with AASB S2?

Non-compliance carries civil penalties mirroring those for financial reporting breaches under the Corporations Act. This includes director liability for misleading disclosures. ASIC has enforcement powers, though for the first 3 years, private enforcement actions for Scope 3, scenario analysis, and transition plan disclosures are limited to regulator-only (ASIC) action.

Q: Do I need to report Scope 3 greenhouse gas emissions immediately?

No. Scope 3 GHG emissions reporting is optional in your first reporting year. It becomes mandatory from your second reporting period. However, most organisations start value chain mapping and carbon accounting for Scope 3 in Year 1 to ensure they have credible data ready for Year 2 disclosure.

Q: Can Group 3 entities avoid AASB S2 reporting entirely?

Not without documentation. Group 3 entities can claim a materiality exemption if they determine there are no material climate-related financial risks or opportunities. However, this requires a formal materiality assessment, a published statement explaining the conclusion, director sign-off, and an auditor’s report. You cannot simply choose not to report.

Your AASB S2 readiness checklist for Australian mandatory climate-related disclosures

Group 3 captures companies with $50M+ revenue, $25M+ assets, or 100+ employees - bringing thousands more Australian businesses into mandatory climate reporting under the Australian Sustainability Reporting Standards (ASRS) from July 2027. Whether you’re reporting in full or claiming the materiality exemption, this free readiness assessment covers both pathways.

40+

Checklist items

Step process

Disclosure pillars

Emission scopes

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Even if you can claim a materiality exemption, you still need a documented materiality assessment, director sign-off, and an auditor’s report. And Group 1 and 2 entities will be requesting your emissions data for their Scope 3 carbon accounting.

What is AASB S2?

AASB S2 Climate-related Disclosures is Australia’s mandatory standard for climate-related financial disclosures, embedded in the Corporations Act 2001. It is part of the Australian Sustainability Reporting Standards (ASRS) and is closely aligned with the global baseline set by IFRS S2, issued by the International Sustainability Standards Board. Built on the TCFD framework, it requires in-scope entities to prepare an annual sustainability report disclosing climate-related risks and opportunities - including greenhouse gas (GHG) emissions, scenario analysis, climate governance, and transition plans. Non-compliance carries civil penalties and director liability under the Corporations Act.

Who this applies to

Group 3 Thresholds

You’re in Group 3 if you meet at least two of three size criteria below. These align with the thresholds for large proprietary companies under the Corporations Act.

Revenue

≥ $50 million

Gross Assets

≥ $25 million

Employees

≥ 100

First Period

FY beginning on or after 1 Jul 2027

📋 Materiality Exemption - Group 3 Only

Group 3 entities can opt out of full AASB S2 reporting if they determine there are no material climate-related financial risks or opportunities. This requires a formal materiality assessment documenting your reasoning.

⚠ Still required even with the exemption: A published statement, a directors’ declaration confirming the assessment, and an auditor’s report. Director liability still applies for misleading statements.

What you must disclose

The Four Pillars of AASB S2

Climate-related disclosures under AASB S2 are structured around four pillars, aligned with the TCFD framework. All four must be addressed in your sustainability report, lodged with ASIC.

🏛

Climate Governance

Board and management oversight, directors’ duties, controls, and procedures for monitoring climate-related risks and opportunities. Includes skills assessment and reporting cadence.

🧭

Climate Strategy

Material climate risks, scenario analysis under 1.5°C and >2°C warming pathways, anticipated financial effects, and climate transition plans aligned with net zero targets.

🛡

Risk Management

How climate-related risks are identified, assessed, prioritised, and integrated into your enterprise risk management framework.

📊

Metrics & Targets

Scope 1 & Scope 2 GHG emissions (Year 1), material Scope 3 emissions (Year 2), carbon accounting methodology, climate targets, and capital deployed.

The operational challenge

Scope 2: your energy data matters even if you claim the exemption

Even if your entity claims the materiality exemption, Group 1 and Group 2 businesses in your supply chain are already requesting your energy data for their Scope 3 disclosures. Being able to produce clean electricity consumption and emissions figures isn't optional - it's becoming a commercial requirement.

For franchise operators, hospitality venues, childcare centres, and retail businesses, the pressure comes from both sides: regulatory obligations if you report in full, and supply chain data requests even if you don't. Either way, you need to know your Scope 2 emissions from purchased electricity.

Practical first step: Centralise all electricity billing data across your sites. Map NMIs to locations. Apply NGA emission factors for your state grid. Multi-site energy management platforms can do this automatically, even for smaller portfolios.

Inside the checklist

What you’ll get

Covers both the full climate-related disclosure pathway and the materiality exemption pathway, with actionable steps for gap analysis, carbon accounting, and ESG readiness.

AASB S2 Compliance Readiness Checklist - Group 3

40+ items

Confirm Chapter 2M status and Group 3 thresholds - You need two of three: $50M revenue, $25M assets, 100+ employees under the Corporations Act

Conduct a materiality assessment of climate risks - Determine if the exemption applies or full climate-related financial disclosures are required

Document the materiality assessment with director sign-off - Even if exempted, formal documentation and an auditor’s report are mandatory - director liability applies

Prepare for supply chain carbon accounting requests - Group 1 and 2 entities will request your GHG emissions data for their Scope 3 disclosures

Build greenhouse gas emissions measurement capability - Start Scope 1 & 2 carbon accounting using appropriate emission factors early

+ 35 more items covering climate governance, scenario analysis, transition plans, net zero targets, and both reporting pathways...

Key dates

Your Group 3 Timeline

Critical milestones for Group 3 entities under Australia’s mandatory climate reporting regime.

NOW – JUN 2027

Preparation window

Conduct materiality assessment, build carbon accounting capability, prepare for supply chain data requests

1 JUL 2027

First reporting period begins

Mandatory climate-related disclosures are live - or materiality exemption statement required

H1 2029

First sustainability report due to ASIC

Lodge alongside financial statements under the Corporations Act

YEAR 2 (FY29)

Scope 3 emissions become mandatory

If reporting fully, material value chain GHG emissions must be disclosed

1 JUL 2030

Reasonable assurance required

Full reasonable assurance across all climate-related financial disclosures

Frequently Asked Questions

What is AASB S2 and when does mandatory climate reporting begin?

AASB S2 Climate-related Disclosures is Australia’s mandatory standard for climate-related financial disclosures, part of the Australian Sustainability Reporting Standards (ASRS). It is aligned with IFRS S2 and built on the TCFD framework. Mandatory reporting began for Group 1 entities from 1 January 2025, with Group 2 following from 1 July 2026 and Group 3 from 1 July 2027.

What’s the difference between AASB S1 and AASB S2?

AASB S2 is the mandatory standard covering climate-related disclosures only. AASB S1 is a voluntary standard covering broader sustainability-related risks and opportunities (e.g., biodiversity, social issues). Only AASB S2 is currently required by law under the Corporations Act.

What are the penalties for non-compliance with AASB S2?

Non-compliance carries civil penalties mirroring those for financial reporting breaches under the Corporations Act. This includes director liability for misleading disclosures. ASIC has enforcement powers, though for the first 3 years, private enforcement actions for Scope 3, scenario analysis, and transition plan disclosures are limited to regulator-only (ASIC) action.

Do I need to report Scope 3 greenhouse gas emissions immediately?

No. Scope 3 GHG emissions reporting is optional in your first reporting year. It becomes mandatory from your second reporting period. However, most organisations start value chain mapping and carbon accounting for Scope 3 in Year 1 to ensure they have credible data ready for Year 2 disclosure.

Can Group 3 entities avoid AASB S2 reporting entirely?

Not without documentation. Group 3 entities can claim a materiality exemption if they determine there are no material climate-related financial risks or opportunities. However, this requires a formal materiality assessment, a published statement explaining the conclusion, director sign-off, and an auditor’s report. You cannot simply choose not to report.

Don’t wait for the deadline
to figure this out

Get the complete AASB S2 readiness assessment checklist covering both reporting pathways - full climate-related disclosures and the materiality exemption - with every step mapped out.