If your organisation qualifies as a Group 2 entity under the new Mandatory Climate-Related disclosure laws, it’s no longer a future requirement. It applies to financial years beginning on or after 1 July 2026, so for those businesses that work to a July-June financial year, it leaves limited time to prepare. Lessons learned from those Group 1s that have already started reporting are that building the governance frameworks, data systems, and assurance processes required takes 12 months.
That window is narrowing. Organisations that have not yet started are likely to face compressed timelines, fragmented data, and increased regulatory risk in their first reporting cycle.
What is Group 2 Mandatory Climate Reporting in Australia?
Group 2 mandatory climate reporting is the second phase of Australia’s sustainability disclosure framework under the Australian Sustainability Reporting Standards (ASRS). It applies to organisations that meet specific financial, asset, and employee thresholds under theCorporations Act 2001 and is implemented primarily through AASB S2, which aligns with IFRS S2 issued by the International Sustainability Standards Board.
Under this regime, Group 2 companies are legally required to publish structured climate-related financial disclosures (a ‘Sustainability Report’) as part of their annual reporting package. This is regulated financial disclosure, not voluntary ESG reporting.
Does Your Organisation Qualify as a Group 2 Entity?
Group 2 entities are mid-tier organisations that meet at least two of the following thresholds for two consecutive financial years, assessed on a consolidated basis:
| Threshold | Group 2 Criteria |
| Consolidated Revenue | $200M or more, but less than $500M |
| Consolidated Gross Assets | $500M or more, but less than $1B |
| Employees | 250 or more employees |
The regime also applies to financial institutions, registered schemes, and registrable superannuation entities meeting equivalent size or reporting criteria under the Corporations Act.
Why This Matters Beyond Compliance
Mandatory Climate Reporting represents a structural shift in how climate risk is treated under Australian financial reporting standards. Under AASB S2, climate-related risks are recognised as material financial risks that must be integrated into governance, risk management, strategy, and financial disclosures, rather than treated solely within standalone sustainability reporting.
For organisations that move early, this creates tangible competitive and stakeholder advantages:
| Benefit | What It Means for Your Organisation |
| Investor and Lender Confidence | Demonstrates climate governance maturity to capital markets and financial partners that are increasingly focused on climate-related financial risk |
| Board and Governance Accountability | Establishes structured board oversight of climate risk in line with rising expectations from regulators and institutional stakeholders |
| Operational Resilience | Early identification of physical and transition risks helps reduce exposure to supply chain disruption, regulatory impacts, and asset stranding |
| Supply Chain Readiness | Preparation for Scope 3 disclosures strengthens visibility across the value chain and improves readiness for downstream reporting requirements |
| Long-Term Value Creation | Organisations with credible climate strategies are better positioned to attract talent, retain customers, and build competitive advantage |
Organisations that treat climate reporting purely as a compliance exercise will miss these advantages and face greater disruption when regulatory scrutiny intensifies. For a detailed breakdown of what early preparation looks like in practice, download the Mandatory Climate Reporting Whitepaper or watch a recording of our recent Mandatory Climate Reporting Webinar.
When does Group 2 Mandatory Climate Reporting start?
Group 2 mandatory climate reporting applies to financial years beginning on or after 1 July 2026 under the Australian Sustainability Reporting Standards (ASRS) and AASB S2.
For entities with a 30 June financial year-end, this means FY2026–27 is typically the first reporting period in scope. Climate-related financial disclosures must be included within the annual financial reporting package alongside financial statements.
While the first reporting period begins in FY2026–27, organisations are expected to have governance structures, data collection processes, and internal controls in place to support accurate reporting from the start of that period.
With reporting now imminent, organisations that have not yet begun preparation face significantly compressed implementation timelines ahead of their first mandatory reporting cycle.
What Must Group 2 Companies Disclose Under AASB S2?
AASB S2 requires climate-related financial disclosures structured across four key areas, integrated into an entity’s annual financial reporting:
| Pillar | What It Covers |
| Governance | Board and executive oversight of climate-related risks and opportunities, including accountability structures and decision-making processes |
| Strategy | The impact of climate-related risks and opportunities on business model, strategy, and financial planning, including scenario analysis across short, medium, and long-term horizons |
| Risk Management | Processes for identifying, assessing, and integrating climate-related risks into enterprise risk management frameworks |
| Metrics and Targets | Scope 1 and Scope 2 greenhouse gas emissions must be disclosed from the first reporting period, along with climate-related targets and performance metrics. The more difficult Scope 3 emissions should be prepared for early, with disclosure expected from the second reporting year. |
Although Scope 3 disclosure is expected to begin in the second reporting year, organisations should begin establishing data collection processes early. Value chain emissions are typically the most complex to map and measure, and delayed preparation can create unnecessary pressure in later reporting cycles.
With FY2026–27 approaching for Group 2 entities, early preparation is increasingly important to support data readiness, governance alignment, and assurance requirements as the reporting framework matures.
Who Is Accountable Inside Your Organisation?
Climate-related financial reporting under AASB S2 is not solely the responsibility of the sustainability team. It requires cross-functional ownership across governance, finance, risk, strategy, and operations, with clearly defined accountability across the organisation. Mostly, responsibility falls to existing reporting teams, which often falls under the CFO and finance team’s remit.
The Growth Activists works with leadership teams across these functions to establish clear ownership structures before the reporting period begins, as unclear accountability is one of the most common gaps identified in climate reporting readiness assessments.
| Function | Key Responsibilities |
| Board | Oversight of climate-related risks and opportunities, approval of governance structures, and accountability for disclosures |
| CEO and Executive Leadership | Integration of climate considerations into business strategy and capital allocation, and overall organisational oversight |
| CFO and Finance | Integration of climate-related data into financial reporting, ensuring data controls, and supporting audit and assurance processes |
| Risk | Integration of physical and transition climate risks into enterprise risk management frameworks |
| Strategy | Scenario analysis, business model resilience, and long-term strategic planning under different climate scenarios |
| Sustainability | Coordination of emissions measurement systems, data collection processes, and support for Scope 1, Scope 2 (and Scope 3) emissions reporting |
A lack of clearly defined ownership across these functions is one of the most common challenges in early-stage climate reporting readiness. Establishing accountability early, before the first reporting period begins, supports stronger data integrity, governance alignment, and reporting efficiency.
How Group 2 Companies Should Prepare: 5 Key Steps
Based on readiness assessments conducted with mid-sized Australian organisations, effective Group 2 preparation typically requires coordinated action across five key areas aligned with AASB S2 requirements.
1. Conduct a Reporting Gap Assessment
Assess current capabilities against AASB S2 disclosure requirements, including governance structures, emissions data systems, risk integration, and reporting processes. This establishes a baseline and identifies gaps before the first reporting period begins.
2. Build Emissions Data Capability
Establish reliable systems for measuring Scope 1 and Scope 2 greenhouse gas emissions in line with regulatory requirements. Begin mapping Scope 3 emissions early so your organisation is ready for the second-year disclosure, as value chain data collection is complex and often requires significant lead time.
3. Embed Climate into Board Governance
Define clear board and executive oversight structures for climate-related risks and opportunities. This includes establishing governance frameworks, reporting cycles, and accountability structures aligned with AASB S2 disclosure requirements.
4. Integrate Climate Risk into Enterprise Risk Frameworks
Incorporate physical and transition climate risks into existing enterprise risk management systems and scenario analysis processes. Climate risk integration is required to be embedded within business-as-usual risk and strategy processes ahead of the reporting period.
5. Prepare for Assurance Requirements
Climate-related disclosures will be subject to phased assurance requirements, starting with limited assurance over selected disclosures and increasing over time. Establishing audit-ready documentation, internal controls, and data governance processes early helps reduce assurance risk in the initial reporting cycles.
Assurance Requirements: What Group 2 Needs to Know
Australia’s mandatory climate reporting regime requires external assurance over climate-related disclosures, with standards set by the Auditing and Assurance Standards Board (AUASB) under the Australian Sustainability Reporting Standards.
Limited assurance applies to selected disclosures in the early phases, with requirements expected to expand over time as the framework matures.
Strong data governance, documentation, and internal controls are essential from the outset to ensure auditability and compliance.
Organisations that build assurance-ready processes early, rather than retrofitting later, are better positioned to reduce implementation risk and strengthen credibility with regulators and investors.
Next Steps: What Group 2 Organisations Should Do Now
With FY2026–27 approaching for Group 2 entities, the remaining time is a critical implementation window to establish reporting capability, governance structures, and data systems aligned with AASB S2 and assurance requirements.
Decisions made now on ownership, systems, and strategy will determine whether mandatory climate reporting becomes a structured compliance process or a more complex operational and governance challenge.
The Growth Activists supports mid-sized Australian organisations with Group 2 readiness, including gap assessments, governance design, emissions data systems, and assurance preparation, helping teams build the capability needed to meet climate reporting obligations with confidence.
Download the Mandatory Climate Reporting Whitepaper or watch a recording of our recent webinar to understand what Group 2 organisations need to prioritise now.
