AASB S2 group 2: what to fix before July

Australia’s mandatory climate reporting regime is no longer something to plan for, it is here. Group 1 entities are now in their first reporting period, and the spotlight has firmly shifted to AASB S2 Group 2. If your organisation meets the Group 2 thresholds, your first mandatory reporting period begins 1 July 2026. That is roughly 30 days away. 

For many sustainability managers and compliance officers, the honest question is not whether reporting is required, it is whether your organisation is actually ready for it. Data gaps that seemed manageable six months ago now carry real legal weight. Governance documentation that was informal is now auditable. And assurance providers are already booked up. 

This article covers the three areas where Group 2 entities most commonly fall short, what auditors are already flagging from Group 1 reports, and what needs to be fixed before July. 

Are you definitely in AASB S2 group 2? 

Before diving into the gaps, it is worth confirming scope, particularly for organisations that sit close to the thresholds or have complex group structures. 

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

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

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

For a full breakdown of who qualifies and what the first report must include, see our guide to AASB S2 Group 2 mandatory climate reporting. 

Thresholds are assessed on a consolidated group basis, which catches some organisations by surprise. Subsidiaries and controlled entities count. If there is any ambiguity around your group structure or employee methodology, resolve it now – not after July. 

The stakes: what full liability looks like from day one 

AASB S2 carries the same legal weight as financial reporting obligations under the Corporations Act. This is not a voluntary ESG commitment, it is a statutory requirement with teeth. 

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. 

The liability framework is not uniform across all disclosures, however, and understanding the distinction is critical for prioritising your preparation: 

The three-year modified liability period for Scope 3, scenario analysis and transition plans is often misread as permission to deprioritise those areas. It is not. It means enforcement actions are limited to ASIC rather than open to private litigation – the obligation to disclose and to do so accurately still exists. 

For a plain-English overview of the full standard, see Australia’s AASB S2 mandatory climate reporting explained. 

Problem 1: emissions data gaps 

This is the most common and most consequential gap for Group 2 entities. The core issue is that many organisations have some emissions data, often from NGER reporting or a previous voluntary disclosure, but that data does not meet AASB S2 requirements. 

The NGER trap 

NGER was designed for facility-level emissions reporting above specific thresholds: 25,000 tonnes CO₂e at facility level, 50,000 tonnes CO₂e at corporate group level. AASB S2 requires something fundamentally different. 

Organisations are expected to adopt the GHG Protocol to capture all emissions regardless of location – though where a jurisdiction requires a different methodology, such as NGER, entities may use that for the relevant portion of their emissions. NGER is a useful starting point. It is not a substitute. 

The gaps are structural: 

• NGER reports historical, facility-level operational data 
• AASB S2 requires Scope 1, 2 and 3 across the entire value chain. It also requires forward-looking scenario analysis, documented methodology, and an audit trail. 

If your Scope 1 and 2 figures currently live in a spreadsheet, or are calculated using NGER data without GHG Protocol methodology documentation, your data will not withstand limited assurance review. Auditors will flag this. 

Scope 3: don’t be misled by the grace period 

Scope 3 emissions are not required in Year 1 – but this grace period is widely misunderstood. Scope 3 typically represents 70–90% of a company’s total carbon footprint, dominated by purchased goods, services and supply chain activity. Collecting this data requires supplier engagement, methodology decisions and system configuration that takes six to twelve months minimum. 

Starting your Scope 3 data collection now is not optional if you want to meet Year 2 requirements without a crisis. Begin category mapping, identify your highest-emission categories, and start supplier engagement immediately. 

What good data infrastructure looks like 

Audit-ready emissions data under AASB S2 requires: 

• A documented calculation methodology aligned with the GHG Protocol 
• An audit trail showing the source of every data point 
• Version control so prior submissions can be traced and compared 
• Consistent organisational boundary definitions across reporting periods 

Spreadsheets cannot provide this. A purpose-built platform with methodology documentation and a full audit trail is what assurance providers will look for on Day 1. 

Problem 2: assurance readiness 

External assurance applies from your very first AASB S2 reporting period – not from Year 2 or Year 3. Assurance engagements are conducted under ASSA 5000 and ASSA 5010 

Here is exactly what is required and when: 

Year 1 (FY27 – starting 1 July 2026): Limited assurance over Scope 1 and 2 emissions, governance disclosures, and selected strategy paragraphs. 

Years 2 – 3 (FY28 – FY29): Limited assurance extends to all AASB S2 disclosures. 

From 1 July 2030 (FY31 onwards): Reasonable assurance over all climate-related financial disclosures, matching the rigour of a financial audit. 

Deloitte’s analysis of the AUASB framework notes that sustainability reports and related auditor reports must be lodged together, and that the sustainability reporting form must be submitted separately from Form 388. This is a common procedural error to avoid. 

The assurance provider capacity problem 

Assurance providers across Australia are under significant demand pressure as Group 1 reports continue to be finalised and Group 2 entities now begin engaging. If you have not already approached an assurance provider, do so immediately. Leaving this until closer to lodgement is a genuine risk… not a theoretical one. 

Early engagement also gives your management and directors visibility of higher-risk areas before sign-off. PwC’s review of the first Group 1 wave found that early alignment with assurance providers makes the reporting cycle smoother and more predictable as requirements expand. 

Problem 3: what auditors will flag 

PwC reviewed 22 first-wave Group 1 reporters (year ended 31 December 2025) and found that variability in reporting quality is high – across industries and between peers. That variability is now shaping what auditors and ASIC will scrutinise in Group 2 reports. The good news from Group 1: all sustainability reports received unqualified limited assurance opinions. The bar is achievable. The question is whether your organisation can clear it. 

Based on the most common findings from Group 1 and the known preparation gaps across Group 2, here is what auditors will look for: 

Governance documentation 

Board and executive oversight of climate-related risks must be formally documented – not just practised. AASB S2 requires disclosure of the specific processes, controls and procedures used by the board to monitor and oversee climate risks and opportunities. Informal governance arrangements that were adequate for voluntary reporting will not satisfy the standard. 

Check that your organisation can evidence: 

• Who on the board holds accountability for climate risk 
• How frequently climate risk is reviewed at board level 
• What management-level processes feed into board oversight 
• How climate considerations are integrated into strategic decisions 

Scenario analysis methodology 

AASB S2 requires climate scenario analysis using at least two temperature pathways – one aligned with a 1.5°C transition scenario, and one that addresses higher warming and physical risk. The AASB S2 Knowledge Hub recommends using IPCC AR6 or IEA NZE/APS pathways as the basis. 

Auditors will not simply accept a conclusion that climate risks are low or manageable. They will want to see the documented methodology behind the analysis – the scenarios used, the time horizons assessed, and how the results connect to your strategy and financial planning. 

The directors’ declaration 

The directors’ declaration for the sustainability report is a separate document from the financial statements declaration. It confirms that the climate-related disclosures comply with the Corporations Act and AASB S2. Directors must sign off on this with the same level of confidence they bring to financial statements. 

Ensure your board understands this obligation explicitly – that they are personally attesting to the accuracy and completeness of what is disclosed – and that they have had sufficient visibility of the underlying data and methodology to do so with confidence. 

KPMG’s early findings 

KPMG’s AASB S2 First Impressions dashboard tracking Group 1 disclosures found significant variation in governance disclosure depth, scenario analysis quality, and the degree to which climate risks and opportunities were connected to financial impacts. These are the same areas where Group 2 entities most commonly have work to do.  

For a step-by-step preparation guide, see five ways to prepare for Australia’s mandatory climate reporting. 

How eco-shaper helps group 2 entities get ready 

The preparation steps above are not just a checklist – each one has underlying system and process requirements that take time to build. eco-shaper is purpose-built for exactly this: delivering audit-ready AASB S2 compliance without the manual overhead. 

Here is what the platform delivers for Group 2 entities: 

• Audit-ready emissions data: full audit trail, documented GHG Protocol methodology, version control across reporting periods via Zero-Touch Data Automation 
• Scope 3 supplier engagement: your supply chain submits primary emissions data directly through the supplier engagement portal, eliminating the manual data-gathering burden 
• Australia-specific regional emissions factors: location-based data down to regional level, ensuring your Scope 1 and 2 calculations meet GHG Protocol requirements 
• AASB S2-aligned reporting: automated disclosures structured around the four pillars: Governance, Strategy, Risk Management, and Metrics and Targets via Company Reporting 
• Sprout AI – our AI-powered sustainability assistant to guide your team through data inputs, flag gaps, and accelerate your reporting timeline 

Your Scope 1 and 2 data needs to be audit-ready from 1 July – not after. Book a demo to see how eco-shaper can get your Group 2 report to assurance-ready standard before the deadline. 

The bottom line 

The Group 2 deadline is not a future compliance problem. It is a present one. The reporting period starts 1 July 2026, which means your data collection systems, governance documentation and assurance arrangements all need to be in place now – not when you sit down to write the report. 

The lessons from Group 1 are clear: the entities that found the first report manageable were the ones that built their infrastructure early, engaged their assurance providers ahead of time, and treated their climate disclosures with the same rigour as their financial statements. 

Group 2 has the advantage of watching Group 1 go first. Use it.