Understanding Australia’s Mandatory Climate Reporting Requirements
Last updated: 5 March 2026
What is AASB S2?
AASB S2 is Australia’s mandatory climate-related disclosure standard. It requires certain companies to report their greenhouse gas emissions, climate-related risks, and sustainability strategies in their annual financial reports.
The standard is based on the International Sustainability Standards Board (ISSB) framework and aligns with global best practices for climate reporting.
Key requirements:
✓ Report greenhouse gas emissions (Scope 1, 2, and 3)
✓ Disclose climate-related risks and opportunities
✓ Explain governance and strategy for climate issues
✓ Provide metrics and targets for emissions reduction
AASB S2 is mandatory for certain entities and is being phased in across three groups from 2025-2027.
Who Must Comply with AASB S2?
Mandatory reporting applies to entities that meet 2 out of 3 criteria in each group.
Group 1 – Large Entities
Reporting:
- Scopes 1 & 2 – 1st January 2025
- Scope 3 – 1st July 2026
Criteria – must meet 2 of 3:
- Revenue > $500 million
- Assets > $1 billion
- Employees > 500
Examples:
- ASX 200 companies
- Major banks
- Large retailers
- Resource companies
Group 2 – Medium Entities
Reporting:
- Scopes 1 & 2 – 1st January 2026
- Scope 3 – 1st July 2027
Criteria – must meet 2 of 3:
- Revenue > $200 million
- Assets > $500 million
- Employees > 250
Examples:
- Mid-size ASX companies
- Regional banks
- Medium Manufacturers
Group 3 – Smaller Entities
Reporting:
- Scopes 1 & 2 – 1st January 2027
- Scope 3 – 1st July 2028
Criteria – must meet 2 of 3:
- Revenue > $50 million
- Assets > $25 million
- Employees > 100
Examples:
- Smaller ASX companies
- Large SME
- Medium SME
- Manufacturing
Special Case: NGER Reporter
Entities already reporting under the National Greenhouse and Energy Reporting (NGER) Act are automatically classified as Group 1, regardless of size.
NGER threshold: 50,000 tonnes CO₂-e or 200 TJ energy per year
These are typically large industrial facilities, manufacturers, and energy companies.
What if I’m Below the Thresholds?
Even if you’re not legally required to report under AASB S2, you may still need a carbon assessment if:
✓ You’re bidding on Federal, State and Local government tenders (many now require carbon reporting)
✓ You supply to Group 1, 2 or 3 companies (they need your data for Scope 3 reporting)
✓ You’re seeking green finance or sustainability-linked loans
✓ You want Climate Active or B Corp certification
✓ You’re preparing for future regulatory changes
✓ You want to demonstrate sustainability leadership
Industry research shows that 70%+ of large company emissions come from suppliers (Scope 3). This means millions of Australian businesses will be asked for emissions data, even if they’re not legally required to report.
Understanding Scope 1, 2, and 3 Emissions
AASB S2 requires reporting across three emission scopes:
Scope 1 – Direct
Emissions from sources you own or control:
- Fuel combustion (company vehicles, generators)
- On-site gas usage (heating, cooking)
- Refrigerant emissions
- Industrial processes
Example: A delivery company’s truck fleet emissions
Scope 2 – Indirect – Power
Emissions from purchased electricity/power:
- Office electricity
- Factory power
- Warehouse lighting & cooling
- Data Centre energy
- Shopping centres
Example: Lighting, power & HVAC for your office
Scope 3 – Supply Chain
Emissions from your value chain (upstream & downstream):
Upstream Emissions:
- Purchased goods & services (your suppliers)
- Business travel (flights, accommodation)
- Employee commuting
- Waste disposal
- Transportation & distribution
Downstream Emissions:
- Processing & Use of sold products
- End of life treatment of sold products
- Downstream leased assets
- Franchises & Investments
Example: A retailer’s emissions from the products they sell (manufactured by suppliers)
Scope 3 typically represents 70-90% of total emissions for most companies.
The Scope 3 Challenge
It’s the Largest Component
70-90% of most companies’ emissions are Scope 3 (their supply chain)
It’s Mandatory for Groups 1, 2 & 3
All Group 1, 2 & 3 companies must report Scope 3 emissions with Group 1 companies reporting from July 2026
It Requires Supplier & Supply Chain Data
Companies can’t report Scope 3 without emissions data from their suppliers & supply chain
Most Suppliers Aren’t Ready
Industry research shows “supplier data is patchy” across Australian industries
The Problem Scope 3 Reporting Causes
A working example
- A Group 1 company has 10,000 suppliers in their supply chain
- But, these small/medium SME suppliers were told they didn’t need to report emissions data – and so haven’t prepared
- What SMEs weren’t told was that they do actually need to report emissions data to their Group 1, 2 & 3 clients – or risk losing them
- Of their 10,000 suppliers, 60% of those lack emissions data
- The Company can’t report Scope 3 without this real supplier data
- But, the Company can’t replace 6,000 suppliers who are integrated into their supply chain
- NOW – both the Company and their Suppliers face disruption and financial loss.
NOW – both the Company and their Suppliers face disruption and financial loss.
How Less Carbon Can Help
For Reporting Entities (Groups 1, 2 & 3)
A practical way to protect supply-chain continuity and obtain real supplier data at scale for Scope 3 reporting.
- Bulk supplier assessments delivered in batches
- Real supplier data for accurate Scope 3 reporting
- Significantly lower cost than supplier replacement or internal rollout
- No disruption to critical embedded supply chains – limiting commercial risk
For SME Suppliers
A fast, fully online way to provide the AASB S2 compliant emissions information your customers need for Scope 3 reporting.
- Compliant Supplier Emissions Certificates for customer requirements
- Fixed-price assessments for businesses that need more
- Fast turnaround through a fully online process
- Protects your customer relationships, reduces business risk & gives you a significant competitive advantage for new business
What’s Required in an AASB S2 Report?
A compliant report must include:
- Governance
- Board oversight of climate-related risks
- Management’s role in climate strategy
- How climate risks are integrated into decision-making
- Strategy
- Climate-related risks and opportunities
- Impact on business model and value chain
- Resilience of strategy under different climate scenarios
- Risk Management
- Processes for identifying climate risks
- How risks are assessed and prioritised
- Integration with overall risk management
- Metrics and Targets
- Greenhouse gas emissions (Scope 1, 2, 3)
- Climate-related metrics (energy use, water, waste)
- Targets for emissions reduction
- Progress against targets
- Evidence and Methodology
- Calculation methodologies used
- Emission factors applied (NGER 2025)
- Data sources and assumptions
- Evidence register
Compliance Standards and Frameworks
AASB S2 aligns with:
✓ ISSB Standards (International Sustainability Standards Board)
✓ GHG Protocol (Greenhouse Gas Protocol)
✓ TCFD (Task Force on Climate-related Financial Disclosures)
✓ NGER (National Greenhouse and Energy Reporting)
Emission factors:
- Must use NGER 2025 emission factors (Australian standard)
- Updated annually by the Clean Energy Regulator
- Specific factors for electricity, fuel, transport, etc.
Assurance requirements:
- Year 1-3: Limited assurance (lower standard)
- Year 4+: Reasonable assurance (higher standard, similar to financial audit)
Penalties for Non-Compliance
Entities that fail to comply with AASB S2 face:
Direct Penalties:
- Financial penalties (amounts vary by jurisdiction)
- ASIC enforcement action
- Potential director liability
Indirect Consequences:
- Investor backlash (ESG investors demanding compliance)
- Share price impact (non-compliance signals poor governance)
- Reputational damage (media scrutiny, customer concerns)
- Tender disqualification (government contracts require compliance)
- Financing difficulties (banks requiring sustainability reporting)
For suppliers:
- Loss of contracts (customers need your data for Scope 3)
- Competitive disadvantage (compliant competitors win business)
- Exclusion from supply chains (major companies prioritising compliant suppliers)
- Existential threat to your business
Industry-Specific Impacts
Resources & Mining
- High Scope 1 emissions (fuel, explosives)
- Complex supply chains (10,000-15,000 suppliers)
- Specialised suppliers (12-18 month qualification periods)
- Cannot replace suppliers quickly
Retail & FMCG
- 70%+ emissions are Scope 3 (products sold)
- Large supplier bases (8,000-12,000 suppliers)
- Critical suppliers (fresh produce, logistics)
- Just-in-time supply chains
Financial Services
- Low Scope 1 & 2 (offices only)
- High Scope 3 (financed emissions, suppliers)
- Intense ESG scrutiny from investors
- Regulatory pressure
Manufacturing
- Moderate Scope 1 & 2 (factories, energy)
- High Scope 3 (raw materials, components)
- Just-in-time suppliers (zero tolerance for disruption)
- Quality-certified suppliers (lengthy re-qualification)
How Less Carbon Can Help
We specialise in AASB S2 compliant carbon assessments for Australian businesses of all sizes.
For Suppliers (Below Group 3 Thresholds):
Supplier Certificate: $995 + GST
- 3-day turnaround
- Provides data your customers need
- AASB S2 compliant
- Valid for 12 months
For SMEs (1-100 Employees):
Comprehensive Assessments: $1,995-$7,995 + GST
- Full Scope 1, 2, 3 analysis
- Detailed compliance reports
- Reduction recommendations
- 5-7 day delivery
For Large Companies (Supply Chain Assessments):
Supplier Rescue Program: From $695 + GST per supplier
- Assess entire supplier base
- Bulk pricing for 100-1,000+ suppliers
- 12-week timeline
- Ensure Scope 3 compliance
Frequently Asked Questions
Q: Do I need to report if I’m below the thresholds?
A: Not legally, but you may need reporting for tenders, supply chain requirements, or green finance. [Read our FAQ]
Q: When do I need to start preparing?
A: Now. If you supply to Group 1 companies, they’ll ask for your data by July 2026 (4 months away).
Q: What if I don’t have all my data?
A: We can work with incomplete data using industry averages and estimates. [Contact us]
Q: How often do I need to update my report?
A: Annually, aligned with your financial year. We offer discounted annual updates (40-60% off).
Additional Resources
Understanding the Crisis:
Why both suppliers and large companies face mutual disruption
Pricing Information:
View all assessment tiers and pricing
Common Questions:
Comprehensive Q&A
Get Started:
Discuss your needs
Sources and References
- AASB S2 Climate-related Disclosures (Australian Accounting Standards Board)
- NGER Emission Factors 2025 (Clean Energy Regulator)
- Oxford Economics (2025), “Beyond Compliance: Closing the Scope 3 Data Gap in Australia’s Food and Grocery Sector”
- Sphera (2025), “The 2025 Scope 3 Report: Forge a Path to Climate Leadership”
- AASB-AUASB (July 2025), “Preparedness of ASX-listed entities for climate-related reporting requirements”
Last updated: 5 March 2026
Questions?
Contact us at support@lesscarbon.com.au