Australia has entered a new era of mandatory climate disclosure. With the introduction of the Australian Sustainability Reporting Standards (ASRS) — specifically AASB S1 and AASB S2 — thousands of Australian companies must now report on climate-related risks and opportunities in a structured, auditable format. If your organisation falls within scope, understanding these requirements is no longer optional.
This guide covers who must report, the phased timelines, what the materiality assessment involves, and practical steps to get compliant.
What Are AASB S1 and AASB S2?
The Australian Accounting Standards Board (AASB) developed two sustainability reporting standards based on the global ISSB framework (IFRS S1 and S2):
- AASB S2 (Climate-related Disclosures): Mandatory. Requires entities to disclose climate-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital.
- AASB S1 (General Sustainability Reporting): Currently voluntary. Covers broader sustainability topics beyond climate.
The legal basis is the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, which amended the Corporations Act to require climate-related financial disclosures for in-scope entities.
AASB S2 is closely aligned with IFRS S2 but includes Australian-specific modifications, such as adjustments to the phase-in timeline and transitional relief provisions.
Who Must Report? The Three-Group Phase-In
Australia is phasing in mandatory AASB S2 reporting across three groups, determined by entity size:
| Group | Entities | First Reporting Period |
|---|---|---|
| Group 1 | Large listed entities, registered schemes, and NGER reporters with >$500M revenue or >$1B assets | Annual periods beginning on or after 1 January 2025 |
| Group 2 | Mid-size entities with $200M–$500M revenue or $500M–$1B assets | Annual periods beginning on or after 1 July 2026 |
| Group 3 | Small listed entities and large proprietary companies with $50M–$200M revenue or $25M–$500M assets | Annual periods beginning on or after 1 July 2027 |
For Group 1 entities with a 30 June year-end, the first reports covering AASB S2 disclosures will be due for the year ending 30 June 2026. Group 2 entities will follow roughly a year later, and Group 3 another year after that.
The Group 3 Exemption — and Why It Still Requires Assessment
Group 3 entities can claim an exemption from AASB S2 disclosures — but only if they can demonstrate that no material climate-related risks or opportunities exist for their business. This is not a blanket opt-out. To justify the exemption, companies must conduct a structured materiality assessment and document their reasoning.
In practice, this means Group 3 entities need a formal process to evaluate climate risks even if they ultimately conclude none are material. Without documented evidence, the exemption claim may not withstand regulatory scrutiny or audit challenge.
What AASB S2 Requires You to Disclose
AASB S2 follows the same four-pillar structure as IFRS S2 and the former TCFD recommendations:
1. Governance
How does your board and management oversee climate-related risks and opportunities? Disclose the governance structures, roles, responsibilities, and decision-making processes in place.
2. Strategy
What climate-related risks and opportunities has the entity identified, and how do they affect its business model, strategy, and financial planning? This includes climate scenario analysis — assessing the resilience of your strategy under different climate futures.
3. Risk Management
How does the entity identify, assess, prioritise, and monitor climate-related risks? How are these processes integrated into overall enterprise risk management?
4. Metrics and Targets
Disclose quantitative metrics including Scope 1 and Scope 2 greenhouse gas emissions. Scope 3 emissions are subject to transitional relief — entities are not required to disclose Scope 3 in their first reporting year, with relief available for subsequent periods as well.
The Climate Materiality Assessment Under AASB S2
AASB S2 uses a financial materiality lens. A climate-related risk or opportunity is material if omitting or misstating information about it could reasonably be expected to influence the decisions of primary users of financial reports — primarily investors, lenders, and creditors.
This is sometimes called "single materiality" or "outside-in" materiality, as opposed to the double materiality approach used under the EU's CSRD/ESRS framework. Under AASB S2, you are assessing how climate affects your business, not how your business affects the climate.
Key Steps in the Assessment
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Identify climate-related risks and opportunities across your value chain — consider physical risks (acute and chronic), transition risks (policy, technology, market, reputation), and opportunities (resource efficiency, new markets, resilience).
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Evaluate financial materiality — for each identified risk or opportunity, assess whether it could reasonably affect cash flows, access to finance, or cost of capital over the short, medium, or long term. Consider both magnitude and likelihood.
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Apply judgment — AASB S2 does not prescribe quantitative thresholds. You must apply entity-specific judgment and document your reasoning, considering both quantitative factors (potential financial impact) and qualitative factors (nature of the risk, strategic relevance, stakeholder expectations).
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Document thoroughly — your materiality assessment process and conclusions should be audit-ready. Assurance requirements phase in over time, starting with limited assurance and progressing to reasonable assurance from 1 July 2030.
Assurance Requirements
Assurance is being phased in alongside the reporting requirements:
- Limited assurance on Scope 1 and Scope 2 emissions and governance disclosures applies from the start of each group's reporting period.
- Reasonable assurance on all climate disclosures is expected from annual periods beginning on or after 1 July 2030.
The Australian Auditing and Assurance Standards Board (AUASB) is developing the assurance framework, aligned with international standards (ISSA 5000).
Practical Steps to Prepare
For Group 2 Entities (Reporting from July 2026)
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Start your materiality assessment now. Identify which climate risks and opportunities are relevant to your industry and operations. The ISSB's industry-based metrics derived from SASB provide sector-specific starting points — particularly relevant for mining and resources, financial services, and real estate companies on the ASX. A structured, repeatable assessment process will save time and ensure consistency.
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Establish governance structures. Ensure your board has clear oversight of climate-related matters. Document roles, responsibilities, and reporting lines.
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Build data collection processes. Scope 1 and 2 emissions data must be quantified. Begin collecting activity data and establishing calculation methodologies aligned with the GHG Protocol or NGER requirements.
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Engage with your auditor early. Discuss assurance readiness and what evidence they will expect to see.
For Group 3 Entities (Reporting from July 2027)
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Assess whether the exemption applies. Conduct a documented materiality assessment to determine if material climate risks exist. Even if you believe no material risks apply, you need the assessment on record.
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Don't wait until 2027. Preparing a robust materiality assessment takes time, especially if your organisation has not previously engaged with climate risk. Start in 2026 to avoid a last-minute scramble.
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Consider voluntary early adoption. Applying AASB S2 early can build investor confidence and prepare your organisation for when reporting becomes mandatory.
How Materiality Master Can Help
Materiality Master provides a structured, step-by-step workflow for conducting ISSB-aligned materiality assessments. The platform guides you through identifying climate-related risks and opportunities, evaluating their financial materiality, and documenting your assessment in an audit-ready format.
For consulting firms advising multiple clients across Groups 2 and 3, Materiality Master's multi-client dashboard enables scalable delivery without sacrificing consistency. Learn more about AASB S2 materiality assessments or see pricing and plans.
Frequently Asked Questions
Is AASB S1 mandatory in Australia?
No. As of April 2026, AASB S1 (General Sustainability Reporting) remains voluntary. Only AASB S2 (Climate-related Disclosures) is mandatory. The government may consult on making AASB S1 mandatory in the future, but no timeline has been set.
What happens if my company doesn't comply with AASB S2?
AASB S2 disclosures are part of the annual financial report under the Corporations Act. Non-compliance can result in regulatory action from ASIC, similar to failures in financial reporting. Modified assurance opinions may also affect investor confidence and access to capital.
Can Group 3 entities simply opt out of AASB S2?
Not without justification. Group 3 entities can claim an exemption, but they must demonstrate through a documented materiality assessment that no material climate-related risks or opportunities exist. A simple statement that "climate is not relevant" is unlikely to satisfy auditors or regulators.
How does AASB S2 differ from the EU's CSRD?
The key difference is the materiality approach. AASB S2 uses financial materiality only (how climate affects the business), while the EU's CSRD requires double materiality (also considering how the business affects the environment and society). For a detailed comparison, see our ISSB vs. ESRS materiality assessment analysis.
