AASB S2 Reporting: Is Your Organisation Ready?

Many organisations already collect some form of sustainability data and may have also reported against frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD). However, AASB S2 Climate-related Disclosures, Australia’s mandatory climate reporting standard, introduces a new level of scrutiny, consistency and accountability.

The question many organisations are now asking is simple: Are our current systems, processes and governance arrangements capable of supporting AASB S2 reporting requirements?

Who Needs to Report?

Australia’s mandatory climate reporting regime is rolling out in phases. Whether your organisation is already reporting, preparing to start, or not yet in scope, the implications extend across the entire market.

Group 1 entities began reporting from 1 January 2025 and are now moving beyond first-year compliance. The challenge ahead is clear: disclosures will become more complex, with Scope 3 emissions, stronger data requirements, and increasing assurance expectations. Getting the right foundations in place now is critical to reduce both the risk and cost of rework in future reporting cycles.

From 1 July 2026, mandatory disclosure extends to Group 2 entities, generally captured if they meet at least two of the following thresholds:

• Revenue greater than $200 million
• Consolidated gross assets greater than $500 million
• More than 250 employees

The requirements also extend to certain entities under the National Greenhouse and Energy Reporting (NGER) scheme, as well as asset owners with more than $5 billion under management.

For Group 2 organisations, the timeline is tight, but there is a clear advantage in learning from earlier Group 1 reporters. Understanding reporting readiness, prioritising key data gaps, and adopting a structured approach from day one will be critical to managing first-year reporting risk and avoiding inefficient, manual processes.

Group 3 entities, while not mandated to report until 2027, will not be unaffected. As Group 1 and 2 organisations expand their Scope 3 disclosures, they will increasingly require emissions data from across their value chains. This means many Group 3 organisations will be asked for data well before they are formally required to report.

For Group 3 organisations, this is less about compliance today and more about being ready to respond. Building a basic emissions baseline and data capability now will make it easier to meet customer requests, maintain relationships, and avoid becoming a bottleneck in the reporting process.

Why Early Action Matters

One of the biggest misconceptions about AASB S2 is that disclosures can be prepared at the end of the reporting period. Much of the required information depends on processes, decisions and data that must be in place throughout the year.

Effective reporting depends on embedding the right processes early. This includes:

• Clearly defined and embedded governance structures
• Integration of climate-related risks into risk management processes
• Consistent data collection supported by appropriate controls
• Documented, traceable assumptions and methodologies
• Alignment between climate considerations and financial decision-making

The challenge is not simply producing a report. It is being able to demonstrate that the information disclosed is reliable, supportable, and reflects how the organisation actually manages climate-related risks and opportunities.

Organisations that put these elements in place early will be better positioned to deliver audit-ready disclosures and adapt as requirements evolve.

Common Readiness Gaps 

For many organisations, particularly Group 2 entities, AASB S2 represents a step change from their current sustainability reporting practices. Most fall into one of three broad categories:

1. Early-stage (Basic) 

These organisations may have undertaken some sustainability initiatives but have limited formal climate reporting processes.

Common characteristics include:

• Primarily narrative sustainability reporting

• Limited emissions data

• Informal governance arrangements

• Minimal connection between climate risks and business planning

2. Developing (Emerging)

Organisations that have already taken meaningful steps and may have experience reporting against TCFD or similar frameworks. There may be gaps around financial impacts, documentation and assurance readiness. Typical indicators include:

• Scope 1 and Scope 2 emissions reporting

• Some governance oversight

• Climate risks may be identified but not fully integrated

• Early-stage scenario analysis

3. Near-ready (Compliant)

• Structured disclosures across all AASB S2 pillars

• Scope 1–3 emissions reported

• Scenario analysis performed

• Some linkage to financial impacts and decision making

Even in this category, organisations may face challenges in demonstrating audit-ready, defensible disclosures.

Six Actions to Take

The good news is that organisations do not need to solve everything at once. A structured approach focused on priority areas can significantly improve reporting readiness.

1. Determine Whether You Are in Scope 

Start by confirming whether your organisation falls within the reporting thresholds.

• Group 1: Reconfirm scope across entities and assess how requirements evolve in Year 2 (including Scope 3 coverage)
• Group 2: Confirm whether thresholds are met and understand immediate reporting obligations
• Group 3: Assess potential future inclusion and exposure through customers and value chains

2. Conduct a Gap Assessment

Evaluate your current capabilities against AASB S2 requirements to identify where you stand today.

• Group 1: Identify gaps in Scope 3 coverage, data quality and audit readiness
• Group 2: Establish baseline readiness and prioritise critical first-year gaps
• Group 3: Understand current maturity and identify a starting point for emissions measurement

This provides clarity on:

• Existing strengths
• Compliance gaps
• Priority actions
• Resource requirements

3. Strengthen Governance

Many organisations have sustainability responsibilities distributed across multiple functions. Ensure clear board oversight and management accountability for climate-related disclosures:

• Group 1: Enhance oversight and embedding of controls to meet assurance expectations
• Group 2: Define roles, responsibilities and reporting structures from the outset
• Group 3: Establish basic ownership of climate data and accountability within the organisation

4. Build Internal Capability

Provide training for directors, executives and reporting teams to understand their responsibilities under the new regime. Building understanding across the organisation helps create a more effective reporting process:

• Group 1: Upskill teams to manage increasing complexity, including Scope 3 and financial integration
• Group 2: Build foundational knowledge across reporting teams and leadership
• Group 3: Raise awareness and basic understanding of emissions and data requirements

5. Set Up Data Collection Processes

Required information is often spread across different teams, span multiple functions and/or systems. Identify where critical climate-related information currently resides and determine how it will be collected, validated and maintained.

Reliable, consistent data is at the core of AASB S2 reporting:

• Group 1: Improve data quality, controls and supplier engagement for Scope 3
• Group 2: Establish structured data collection processes early to avoid manual rework
• Group 3: Begin capturing simple activity data to establish an emissions baseline

Data gathering outside of the organisation, such as for Scope 3 emissions, is one of the most complex areas with challenges around:

• Data availability

• Supplier engagement

• Calculation methodologies

• Assumptions and documentation

Establishing clear ownership for data and quality controls early can reduce significant reporting challenges later.

6. Understand Financial Integration

One of the most significant shifts under AASB S2 is the requirement to connect climate risks and opportunities with financial outcomes:

• Group 1: Strengthen links between climate data and financial decision-making
• Group 2: Begin integrating climate considerations into planning and budgeting processes
• Group 3: Build awareness of potential financial implications of climate risks over time

Many organisations are still developing approaches to assess and communicate how Climate-related Risks and Opportunities (CRROs) may influence:

• Revenue

• Operating costs

• Asset values

• Capital allocation

• Strategic investment decisions

The Organisations That Start Now Will Be Better Positioned

Across all Groups, AASB S2 will challenge existing reporting resilience and capability, whether through increasing complexity, immediate compliance requirements, or indirect value chain pressure.

The organisations that make the strongest progress are not necessarily those with large sustainability teams. They are the ones taking practical steps now to understand requirements, identify gaps and establish the foundations needed for reliable reporting.

Those foundations include governance, data quality, accountability, documentation and cross-functional collaboration. The earlier these elements are established, the easier the reporting process becomes.