The landscape of corporate reporting in Australia is evolving, bringing new considerations for businesses and the accountants who guide them. With mandatory climate reporting Australia on the horizon, understanding these changes is becoming a key part of financial planning and risk management. This guide will walk you through how to accurately identify which of your clients will need to report under the new AASB S2 climate related financial disclosures, ensuring they are well-prepared for these upcoming requirements. It is about bringing clarity to a new area, helping you equip your clients with the insights they need to navigate this shift smoothly.
Understanding the Phased Approach to Mandatory Climate Reporting
The new framework for mandatory climate reporting in Australia introduces a phased implementation. This means not all companies will start reporting at the same time. The timing depends on specific criteria related to a company’s size and its current reporting obligations under other environmental schemes. By understanding these groups, you can quickly determine your client’s initial reporting period under AASB S2.
Group 1: Immediate Action for Larger Entities
For your larger clients, the reporting journey begins sooner. Companies in Group 1 are those required to report under Chapter 2M of the Corporations Act that meet at least two of the following size thresholds: consolidated revenue of $500 million or more, consolidated gross assets of $1 billion or more, or 500 or more employees. Additionally, this group includes controlling corporations already reporting over 50 kilotonnes CO2-e under the National Greenhouse and Energy Reporting (NGER) Act. For these entities, the first mandatory reporting period starts from 1 July 2024. Identifying these clients promptly is crucial to assist them in preparing their initial climate related financial disclosures.
Group 2: Preparing for the Near Future
The next wave of mandatory climate reporting Australia commences for Group 2 entities. These are companies that report under Chapter 2M of the Corporations Act and meet at least two of these criteria: consolidated revenue of $200 million or more, consolidated gross assets of $500 million or more, or 250 or more employees. This group also includes any NGER reporters not captured in Group 1, as well as asset owners with over $5 billion in assets under management. Their reporting journey begins from 1 July 2026. This timeline offers a valuable window to organise data collection and reporting processes effectively.
Group 3: A Clear Runway for Medium-Sized Businesses
The final phase brings in a broader range of medium-sized businesses. Group 3 encompasses Chapter 2M reporting entities that meet at least two of these thresholds: consolidated revenue of $50 million or more, consolidated gross assets of $25 million or more, or 100 or more employees. These clients will begin their mandatory climate reporting from 1 July 2027. This provides the longest lead time, allowing for a methodical approach to integrating sustainability reporting into existing business operations.
Key Steps for Accountants: A Practical Checklist
As an accountant, your role in this process is pivotal. Performing a thorough multi-factor assessment is key to determining your client’s specific obligations and preparing them for the ASRS climate framework. Here are the practical steps to guide your analysis:
Verify Corporate Structure
The initial step is to confirm if your client is a reporting entity under Chapter 2M of the Corporations Act. This is the foundational requirement for mandatory climate reporting in Australia. If they do not fall under this chapter, the current AASB S2 requirements may not apply to them, though voluntary reporting might still be considered.
Assess Against Financial and Employee Thresholds
Once the Chapter 2M status is confirmed, you will need to test your client’s consolidated financial figures and employee numbers against the specific criteria for Groups 1, 2, and 3. It is important to look at the data for the two preceding financial years, as a company must meet at least two of the three size-based criteria to fall into a particular group. This precise comparison will help pinpoint their designated reporting group and earliest start date for climate related financial disclosures.
Confirm NGER Act Status
Beyond the size thresholds, being a registered controlling corporation under the National Greenhouse and Energy Reporting (NGER) Act is a significant trigger. This status can automatically place a client into Group 1 or Group 2, irrespective of some of the size criteria. It is a critical factor to check, especially for larger industrial or energy-intensive clients, as it signals an earlier need for sustainability reporting Australia.
Document Your Findings
After completing your assessment, it is essential to maintain a clear and defensible record of your findings. This documentation serves several purposes: it demonstrates due diligence in meeting compliance obligations, provides a clear roadmap for your client, and is crucial information for auditors. A well-documented assessment ensures transparency and accountability in the client’s mandatory climate reporting journey.
Plan for Future Assurance
Identifying your client’s reporting start date is also the first step in preparing for mandatory assurance engagements. The introduction of AASB S2 climate related financial disclosures will eventually include requirements for limited, and then reasonable, assurance. Knowing the start date allows you to proactively plan for the necessary data collection, internal controls, and audit readiness, making the transition smoother for your client.
Beyond Identification: The Broader Impact
While determining the reporting group is a key first step, the implications of AASB S2 extend beyond a simple check box. Understanding the broader context helps you provide more comprehensive advice.
Operational Readiness
For operations leaders within your client’s organisation, the reporting start date acts as a clear project timeline. It signals when new data collection processes will be needed. By identifying the reporting group early, operational teams can design and implement efficient, traceable data collection methods across various sites and functions. This proactive approach helps to embed climate reporting into existing workflows, avoiding last-minute, disruptive data chases. This is especially true for scope 1 2 and 3 emissions data, which will become a central focus.
Governance and Compliance
From a governance perspective, identifying the reporting obligation under the ASRS climate framework triggers the need for robust internal controls and disclosure procedures. Boards and executive teams will need a formal assessment of their entity’s reporting obligations and timeline. This ensures that the organisation establishes clear policies and processes for managing and reporting climate-related information, helping to eliminate compliance blind spots and supporting the integrity of their sustainability reporting Australia efforts.
Strategic Sustainability Planning
For sustainability and ESG officers, the accountant’s assessment provides the definitive trigger for action. It validates the need for investment in systems and resources, allowing them to build a strong business case for a proactive approach to climate disclosure. Whether a client is in Group 1 with immediate needs or Group 3 with more lead time, a clear understanding of their obligations helps to move the conversation from “if” to “when and how,” fostering a more strategic and defensible sustainability program. Even if a client falls below current mandatory thresholds, this assessment can still inform voluntary reporting decisions based on investor or supply chain pressures.
Navigating the new era of mandatory climate reporting in Australia is a journey that begins with a precise understanding of an organisation’s obligations under AASB S2. As accountants, your expertise in identifying the relevant reporting groups and timelines is invaluable. By following a clear assessment process, you empower your clients to transition from uncertainty to a confident, well-prepared position, ready to embrace the evolving landscape of climate related financial disclosures. This proactive approach not only ensures compliance but also positions businesses to thoughtfully integrate these new considerations into their broader strategy.
What steps are you currently taking to assess your clients’ mandatory climate reporting obligations, and what have been your key learnings so far?
