Mandatory climate reporting in Australia: What it means for your business

Quick summary

Australia is phasing in mandatory climate reporting for large businesses under a standard called AASB S2. If your business meets certain size thresholds, you may already need to report your emissions, climate risks and governance to shareholders, whether you feel ready or not. This article sets out which businesses this applies to, when, what has to be disclosed, and where NSW businesses can get government funding to help with the cost of getting ready.

Key takeaways

• Mandatory climate reporting is rolling out in three size-based waves between January 2025 and July 2027, not on a single start date for everyone.

• Whether this applies to you depends on your revenue, gross assets and employee numbers, not your industry or whether you think of yourself as an energy or environmental business.

• The report sits alongside your financial statements and needs sign-off from your board, making this a director-level responsibility.

• You will need to disclose governance, strategy, risk management, and metrics and targets, plus your scope 1 and 2 emissions from year one, with scope 3 phased in later.

• NSW businesses can apply for up to $25,000 in government co-funding towards the cost of getting ready, but the current round closes 30 November 2026.

• Zembl has partnered with climate reporting specialist NetNada to help businesses work out if and when this applies to them, and what to do next.

What is mandatory climate reporting?

Climate reporting used to be optional. A handful of large companies published a sustainability report each year because they chose to, alongside their usual financial statements. That changed when the federal government amended the Corporations Act to make climate-related disclosure mandatory for large businesses. It is now a legal reporting obligation, as opposed to a voluntary sustainability initiative.

The detail of what has to be reported comes from a new accounting standard called AASB S2. It was written by the Australian Accounting Standards Board, the body that already sets the rules your finance team follows for ordinary financial reporting. AASB S2 spells out exactly what a business has to say about its emissions and the climate risks it faces, so the requirement is consistent across every business it applies to.

Does this apply to my business, and when?

The rules on who has to prepare a sustainability report apply in three waves, based on size. You do not need to meet every threshold below, just two out of the three: revenue, gross assets or employee numbers.

There is a second way in. Any business already registered under the National Greenhouse and Energy Reporting scheme above the top threshold, or large asset owners managing $5 billion or more, is captured in Group 1 or Group 2 regardless of the revenue and asset figures above. If you are not sure which group applies to you, it is worth confirming your exact position with your accountant or auditor rather than guessing. The consequences of getting it wrong sit with your board.

What exactly do you have to report?

What are the four areas businesses must disclose?

AASB S2 groups everything you need to say into four areas.

• Governance: who on your board and in management is responsible for overseeing climate risks and opportunities.

• Strategy: how climate risks and opportunities could affect your business model, strategy and financial position, now and later.

• Risk management: the process you use to identify, assess and manage climate-related risks.

• Metrics and targets: the numbers, including your emissions figures and any targets you have set to reduce them.

What are scope 1, 2 and 3 emissions?

Emissions are grouped into three scopes, so every business is measuring and reporting the same things in the same way.

• Scope 1: direct emissions from sources your business owns or controls, such as gas heating, on-site generators or a company vehicle fleet.

• Scope 2: indirect emissions from the electricity, steam, heating or cooling you buy and use.

• Scope 3: everything else in your value chain, from the emissions your suppliers create to how customers use what you sell.

Scope 1 and 2 emissions have to be reported from your first year. Scope 3 is phased in later, because it is harder to measure and often outside your direct control. Exactly when it applies to you depends on your reporting group, so this is another point worth checking rather than assuming.

Who has to sign off the report?

The sustainability report is not a side document for the sustainability team to handle alone. It sits inside your annual report, next to your financial statements, and needs the same board-level sign-off. That makes it a governance responsibility that belongs to your directors, with input from finance, risk and sustainability rather than any one of them working it out alone.

By May 2026, ASIC had already received 259 sustainability reports, most from unlisted companies rather than listed ones. Common early mistakes include vague disclaimers that undercut the whole report, and businesses failing to link past extreme weather events, such as a flood or heatwave that affected their operations, to the climate risks they say they face going forward. These are normal teething problems for a brand new requirement, but they show why it pays to get the basics right from the start.

Is there funding to help pay for getting ready?

If your business is based in NSW, the NSW Government's Net Zero Planning Grant can co-fund up to 50% of the cost of getting ready, up to $25,000 per business. It covers the cost of bringing in a specialist to help with things like a greenhouse gas inventory, a net zero action plan, target setting or a climate risk assessment, the groundwork that sits behind a sustainability report.

To be eligible for the grant, your business generally needs to:

• Hold an ABN, be registered for GST, and have operations based in NSW.

• Spend at least $200,000 a year on energy at one site, or $500,000 across multiple NSW sites, including all fuels.

• Not already be a Group 1 reporting entity, and not have received this grant before.

Round 2 opened on 1 September 2026 and closes 30 November 2026 at 5pm, with applications assessed as they come in rather than held until the round ends. If you think you are eligible, applying earlier matters more than applying perfectly.

There is no equivalent national grant at the moment, so businesses outside NSW are working from a smaller pool of support. That does not change the reporting requirement itself, only the funding available to help with it.

How can Zembl help?

Zembl has partnered with climate reporting specialists NetNada to help businesses work through this without it turning into a drawn-out project. Between us, we can confirm whether and when this is likely to apply to your business, check your eligibility for funding where it exists, and map out what getting ready actually involves.

A short discovery call is the easiest way to find out where you stand. Get in touch with Zembl to book one in.

FAQs

Do I need to report if my business does not currently lodge financial statements under the Corporations Act?

Generally no. Mandatory climate reporting sits on top of the existing financial reporting framework, so it applies mainly to entities already required to prepare financial reports under the Corporations Act, plus a small number of other captured entities such as large NGER reporters and big asset owners. If you are unsure whether that includes you, check with your accountant.

What counts as an employee when working out the threshold?

The employee threshold is based on full-time equivalent staff across your business and any related entities, not headcount at a single site. A business with several smaller locations can add up to a much bigger number than it expects, which is one reason group structures need to look at this together rather than site by site.

Do I need to measure scope 3 emissions straight away?

Not usually. Scope 1 and 2 emissions are required from your first reporting year, but scope 3, the emissions in your wider supply chain, is phased in later because it is harder to measure and often outside your direct control. When it applies to you depends on your reporting group, so it is worth confirming rather than assuming either way.

Is the NSW Net Zero Planning Grant available if my business is outside NSW?

No. It is a NSW Government program, so it is only open to businesses with NSW-based operations that meet the energy spend and other eligibility criteria. There is currently no equivalent national grant, so businesses in other states are working from a smaller pool of support while facing the same reporting requirement.

Who is NetNada?

NetNada is the climate reporting and sustainability specialist that Zembl has partnered with to help businesses measure and report their emissions. Its software is designed to turn work that traditionally took months, gathering data, calculating emissions and drafting disclosures, into a matter of days, which is the main reason Zembl brought it in as a partner for this requirement.

What happens if my emissions estimates turn out to be wrong?

Reasonable estimates, disclosed transparently along with the assumptions behind them, are expected in the early years of a new reporting requirement. ASIC's guidance so far focuses on businesses being clear about their judgements and uncertainty. What it does expect is that businesses avoid disguising gaps with vague disclaimers or unclear cross-references.

Does this apply to not-for-profits or superannuation funds?

It can. The requirement is built around size thresholds and existing Corporations Act reporting obligations rather than sector, so some large not-for-profits, registered schemes and superannuation funds are captured, particularly large asset owners managing $5 billion or more. Structure and sector do not exempt a business on their own, size and asset base do the real work.

Can a smaller business ignore this altogether?

Not entirely. A business below the Group 3 thresholds has no reporting obligation of its own. But if it supplies businesses that do report, its emissions count towards their scope 3 figures, so customers may start asking for that data. A business growing towards the revenue, asset or employee thresholds should also keep an eye on them, since Group 3 starts in 2027.