What Are My Mandatory Sustainability Reporting Requirements Heading Into 2026, And How Do I Get On Top of Them?

As sustainability and climate disclosures become mandatory for more organisations, thousands of businesses will be brought into a new era of regulated transparency. It is one that demands not only data but governance, assurance, and accountability.

For most large listed companies, sustainability reporting has already evolved from a voluntary disclosure into a strategic necessity. But from 1 July 2026, the second tier of Australian entities - the so-called Group 2 reporters - will formally join the regime. Their first mandatory reports will cover the financial year ending 30 June 2027, setting a new baseline for corporate responsibility and investor confidence across the mid-market.

For these businesses, this is a structural shift in how their leaders and stakeholders will need to articulate risk, resilience, and long-term value creation.

What Is The Australian Mandatory Sustainability Reporting Framework?

Australia's sustainability-reporting requirements sit within the Corporations Act 2001 and are administered by ASIC and the Australian Accounting Standards Board (AASB). The standards - AASB S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and AASB S2 (Climate-related Financial Disclosures) - align closely with international best practice, particularly the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB).

The reporting framework will be phased in across three groups:

• Group 1: Large listed and NGER-reporting entities - reporting from 1 January 2025 (first full reports due for 30 June 2026 year-ends).
• Group 2: Medium-sized entities meeting two of three thresholds (? 250 employees, ? $200 million revenue, ? $500 million assets) - reporting from 1 July 2026.
• Group 3: Smaller entities (? 100 employees, ? $50 million revenue, ? $25 million assets) - reporting from 1 July 2027.

Each group will be required to prepare a sustainability report alongside their annual financial report, directors' report, and auditor's report.

The Strategic Reality for Group 2 Companies

While the early focus has been on large listed entities, the 2026 transition will arguably have the greatest impact on Group 2 companies - the broad middle of Australia's corporate ecosystem.

These are businesses that are large enough to influence supply chains and capital flows, but not always resourced with the internal sustainability or data-management infrastructure of the ASX 100. For many, this will be their first encounter with regulated climate disclosure, and the expectations are high.

Group 2 companies will be required to disclose:

• Governance arrangements for oversight of climate-related risks and opportunities.
• Strategy and resilience under different climate scenarios.
• Risk-management processes integrated into overall enterprise risk frameworks.
• Metrics and targets, including greenhouse gas emissions (Scope 1 and 2 from year one; Scope 3 from year two) and progress against reduction or transition targets.
• Forward-looking statements supported by evidence and reasonable basis.

Critically, these disclosures will not be confined to narrative sections of the annual report. They will be subject to auditor assurance and must be prepared with the same rigour as financial statements. Limited assurance will apply initially, moving toward reasonable assurance as the regime matures.

How To Prepare For Mandatory Reporting From July 1, 2026

For companies that will first report under the new regime in 2027, the next 18 months will be decisive. Establishing a credible sustainability-reporting framework requires time, coordination, and cross-functional alignment. We recommend a staged approach built around six core workstreams:

1. Confirm Thresholds and Applicability

Undertake a formal assessment of whether your entity meets the Group 2 criteria under Chapter 2M of the Corporations Act. This should include consolidated entities and subsidiaries, as thresholds are assessed on a group basis.

2. Conduct a Gap Assessment

Compare current reporting practices with the AASB S1 and S2 standards. Identify data gaps, process weaknesses, and governance shortfalls across emissions measurement, scenario analysis, and risk integration.

3. Establish Governance and Accountability

Review board and management structures to clarify responsibility for sustainability disclosures. Establish clear reporting lines between sustainability, finance, and risk functions.

4. Build Data and Assurance Capability

Invest in systems that can capture, validate, and report greenhouse gas emissions and other sustainability metrics. Engage with external advisors and auditors early to align on assurance expectations and control environments.

5. Integrate Sustainability into Strategy and Risk

Incorporate climate-related risks into enterprise-risk frameworks and strategic planning processes. Scenario analysis should be used to assess financial resilience under multiple climate trajectories.

6. Engage the Supply Chain

Scope 3 emissions will require engagement beyond the organisation's boundaries. Work with suppliers and partners to establish consistent data-collection and reporting methodologies across your value chain.

How To Turn Obligation into Advantage

While mandatory reporting introduces new regulatory burdens, it also provides a platform for differentiation. Investors, lenders, and customers increasingly view credible ESG reporting as a proxy for good governance and long-term value creation.

By approaching compliance as a strategic opportunity - rather than a cost - organisations can:

• Strengthen access to sustainable finance and investment.
• Enhance brand and stakeholder trust.
• Improve operational efficiency through better data visibility.
• Benchmark progress against peers and global leaders.

For mid-market businesses in particular, early action can create competitive advantage. Those who invest now in credible sustainability governance will not only meet the 2026 reporting milestone but position themselves as trusted partners in a decarbonising economy.

The next two years will define Australia's sustainability-reporting maturity. The shift from voluntary ESG disclosure to mandatory, assured sustainability reports marks a fundamental change in corporate accountability.

Ascentium Australia assists growth and mis-enterprise companies across all sectors in developing and implementing ESG reporting frameworks that meet evolving regulatory and investor expectations. If your organisation is preparing for the 1 July 2026 reporting start, now is the time for us to act.

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