AASB S2 Group 2: Mandatory climate reporting Australia 2026

Australia’s mandatory climate reporting regime is well underway. Group 1 companies are now in their first reporting period, and the spotlight is now shifting to AASB S2 Group 2 entities, whose first reporting period begins 1 July 2026. If your organisation meets the Group 2 thresholds, this is your most urgent compliance deadline. This guide covers who qualifies, what must be disclosed, and the practical steps your sustainability team needs to take before July.

If your organisation meets the Group 2 thresholds, this is your most urgent compliance deadline. This guide covers who qualifies, what must be disclosed, and the practical steps your sustainability team needs to take before July.

Who is in AASB S2 Group 2?

Under the Corporations Act 2001, your organisation is in Group 2 if it meets at least two of these three size criteria on a consolidated group basis:

• Consolidated revenue of AUD$200 million or more
• Consolidated gross assets of AUD$500 million or more
• 200 or more employees

You are also in Group 2 if you are a controlling corporation required to report under the NGER Act but not captured by Group 1, or an asset owner with AUD$5 billion or more in assets under management.

Timeline: Group 1: from 1 January 2025 | Group 2: from 1 July 2026 | Group 3: from 1 July 2027

How AASB S2 Group 2 differs from Group 1

Group 2 entities benefit from lessons learned by Group 1 early reporters, but face the same core disclosure requirements. Key differences in Year 1:

• Scope 3 grace period: Group 2 entities do not need to report Scope 3 in Year 1 (FY27), but must begin data collection immediately — Scope 3 is mandatory from Year 2 (FY28)
• Comparative data: Group 2 is not required to provide comparative period data in its first report
• Modified liability: A three-year safe harbour applies to forward-looking statements including scenario analysis and transition plans
• Assurance: Limited assurance applies from Year 1 over Scope 1 and 2 — not full reasonable assurance, which phases in by 2030

What AASB S2 Group 2 entities must disclose

The Four AASB S2 Pillars

AASB S2 is based on IFRS S2, the global climate disclosure standard issued by the International Sustainability Standards Board (ISSB) in 2023, which in turn builds on the widely adopted Task Force on Climate-related Financial Disclosures (TCFD) framework. Both share the same four disclosure pillars – Governance, Strategy, Risk Management, and Metrics and Targets – all of which are mandatory for Group 2 from Year 1, though a modified liability period applies to scenario analysis and transition plans.

1. Governance

Disclose how your board and senior management oversee climate-related risks and opportunities. This includes named roles, committee responsibilities, and how climate issues are escalated to board level. The AICD Director’s Guide to Mandatory Climate Reporting is essential reading for any board member of a Group 2 entity.

2. Strategy

Identify the transition risks (policy, technology, market) and physical risks (extreme weather, chronic climate shifts) that could affect your cash flows. You must also conduct climate scenario analysis using at least two temperature pathways: one consistent with 1.5 °C, representing an orderly transition to a lower-carbon economy, and one of 2.5°C or higher, representing a high-emissions, limited action future, referencing frameworks such as the IPCC AR6 or IEA World Energy Outlook.

3. Risk Management

Explain how your organisation identifies, assesses, and monitors climate-related risks and how this integrates with your broader enterprise risk management framework. ASIC expects climate risk to sit within the same processes as financial and operational risk, not treated as a standalone ESG exercise.

4. Metrics and Targets

This is where most organisations face their steepest challenge. Beyond emissions volumes, entities must also disclose climate-related metrics such as internal carbon price and climate-related capital expenditure where these are used in decision-making. The phased emissions disclosure requirements are:

Scope 1 and Scope 2 emissions: mandatory from Year 1, measured using the GHG Protocol Corporate Standard. Note that Scope 2 must be reported on a location-based basis, using grid-average emissions factors; entities that currently track only market-based Scope 2 will need to calculate location-based emissions.

Scope 3 emissions: one-year grace period applies; mandatory from Year 2 (FY28 for most Group 2 entities)

Climate-related targets: disclose any targets set, methodology used, and progress against them.

The Scope 3 problem AASB S2 Group 2 cannot ignore

Scope 3 emissions under AASB S2 carry a grace period, but that does not mean you can wait. Scope 3 typically represents 70-90% of a company’s total carbon footprint, dominated by purchased goods, services, and supply chain activities. Collecting this data requires supplier engagement, methodology decisions, and system configuration that takes 6-12 months minimum.

AASB S2 accepts both spend-based and activity-based approaches under the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. However, activity-based data (using actual quantities and product-level emission factors) is preferred by assurers and creates competitive advantage in sustainability-focused tenders.

Action Now: Map your top 5 Scope 3 categories by spend to identify your hotspots, then engage major suppliers to begin building activity-based data for those categories… Contact major suppliers to request emissions data or Environmental Product Declarations (EPDs). Start now, as you need a full year of data before your second report is due.

Does NGER Reporting cover your AASB S2 obligations?

This is the most common question we hear, and the answer is no. The two frameworks serve completely different purposes:

• NGER: Covers Australian operations only, using NGER methodology, for government policy purposes. Historical data only. No assurance required.
• AASB S2: Covers global operations using the GHG Protocol. Requires Scope 3, 10-30 year scenario projections, and mandatory external assurance from Year 1.

Following December 2025 AASB clarifications, companies must adopt the GHG Protocol to capture all emissions regardless of location. NGER is a starting point, not a substitute. Refer to the AASB S2 Knowledge Hub for the full methodology guidance.

AASB S2 Group 2 penalties for non-compliance

AASB S2 carries the same legal weight as financial reporting obligations under the Corporations Act 2001. False or misleading climate statements can result in fines of up to $15 million or 10% of annual turnover, whichever is greater. Directors can be held personally liable. A three-year modified liability period applies to Scope 3, scenario analysis and transition plans — but Scope 1 and 2 disclosures and governance carry full liability from Year 1. ASIC’s Regulatory Guide 280 outlines enforcement expectations. The transition period does not mean Group 2 entities can delay preparation — systems and data collection must be in place from 1 July 2026.

AASB S2 Group 2 assurance requirements

External assurance applies from an entity’s first AASB S2 reporting period. Assurance engagements are conducted under AUASB standards ASSA 5000, with the scope and timing of required assurance phased in accordance with ASSA 5010 (finalised January 2025)

Under the phased pathway, Group 2 entities:

• Year 1: Limited assurance over Scope 1 and 2 emissions, governance disclosures, and selected strategy paragraphs
• Year 2-3: Limited assurance over all AASB S2 disclosures
• From 1st July 2030: Reasonable assurance over all climate-related financial disclosures

This mirrors the rigour of a financial audit. Spreadsheet-based carbon tracking will not withstand assurance review. You need a purpose-built platform with a full audit trail, documented methodology, and version control.

Note: A three-year modified liability period applies to Scope 3, scenario analysis, and transition plans, which limits enforcement to regulator-only action. Governance and Scope 1/2 carry full liability from Year 1.

How AASB S2 Group 2 entities should prepare for July 2026

Now to April 2026

• Confirm your Group 2 status on a consolidated group basis. Check ASIC’s Regulatory Guide 280
• Conduct a gap analysis against all four AASB S2 pillars
• Select and implement a carbon accounting platform with audit trail capability

April to June 2026

• Run board training on AASB S2 governance obligations
• Begin climate scenario analysis using IPCC AR6 or IEA NZE/APS pathways
• Engage an assurance provider, as demand is high; do not leave this until lodgement

From 1 July 2026

• Scope 1 and 2 data collection must be live from this date
• Begin Scope 3 category mapping and supplier engagement for Year 2 readiness
• Lodge your sustainability report via the ASIC portal alongside your annual report

How eco-shaper helps AASB S2 Group 2 companies get compliant

eco-shaper is Australia’s purpose-built sustainability reporting platform designed specifically for AASB S2 compliance. Trusted by Australian Group 1 reporters and built to handle the complexity of Group 2 obligations from day one with local support from our trusted ESG experts.

• Scope 1, 2 and 3 emissions tracking with a full audit trail
• GHG Protocol-aligned methodology built in, with no manual configuration required
• Scope 3 Supplier Portal: collect, verify and manage activity-based supplier emissions data directly through eco-shaper’s supplier engagement tools, giving you audit-ready value chain data without the manual back-and-forth
• Australian regional emission factors across all 8 regions, ensuring location-based calculations are accurate and compliant
• Sprout AI: intelligent emissions data analysis that identifies gaps, flags anomalies and accelerates your reporting workflow
• Net zero planning tools to map reduction pathways against sector/industry benchmarks e.g. SBTi and track progress against your climate targets
• Assurance-ready reporting output from day one
• Onboarding support from our sustainability reporting specialists

See how eco-shaper’s zero-touch data automation simplifies the process

Start your free trial at eco-shaper – no credit card required. Our team will have you capturing compliant data within days, not months.