Australia's Mandatory Climate Reporting Rollout: What Australian companies must do now

Australia has entered a new era of corporate accountability. Since January 2025, hundreds of Australian companies are now required to report on their climate-related risks and opportunities under mandatory climate reporting regulations. For many organisations, data collection has already begun.

If you're a sustainability lead or CFO navigating these requirements, you're probably feeling the pressure. The regulations are complex, the timelines are tight and the stakes are high - penalties can be up to $15 million or 10% of annual turnover for directors.

But mandatory climate reporting doesn't have to feel overwhelming. With the right approach and support, you can turn this compliance requirement into an opportunity to build a well prepared and more resilient business.

This guide breaks down exactly who needs to report and when, what you need to disclose and the practical steps you can take now to stay ahead of these mandatory reporting requirements.

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Who needs to report

The mandatory climate reporting framework applies to companies that prepare financial reports under Chapter 2M of the Corporations Act 2001. But not everyone reports at once. The Australian Government has created a phased rollout across three groups based on company size.

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*Group 2 also includes entities registered under the National Greenhouse and Energy Reporting (NGER) Act and large asset owners (such as superannuation funds) with consolidated assets exceeding $5 billion.

Important: If your financial year ends on 31 December, Group 1 entities have already started collecting data as of January 2025. Companies whose financial year ends on 30 June began data collection in July 2025.

Even if you're in Group 2 or 3, now is the time to start preparing. The companies already reporting are your roadmap and learning from their experiences will help you avoid common mistakes.

The good news? You don't need perfect data in year one. The standards recognise that this is new territory and allow for a phased approach to disclosures and assurance.

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Key requirements & timeline

ASRS reporting and AASB sustainability standards require disclosure across four key pillars based on the ISSB’s IFRS S1 and S2 standards, which themselves incorporate and fully adopt the four-pillar structure of the globally recognised TCFD (Task Force on Climate-Related Financial Disclosures) framework:

1. Governance

You need to show how climate-related risks and opportunities are embedded in your organisation's governance structures. This means disclosing:

• How your Board oversees climate-related matters
• Management's role in assessing and managing climate risks
• What processes, controls and procedures are in place
• How climate considerations influence strategic decisions

This isn't about creating new governance structures from scratch. Most organisations already have risk committees or sustainability working groups. The key is demonstrating that climate is integrated into existing decision-making processes, not treated as a separate compliance exercise.

2. Strategy

This pillar requires you to disclose the climate-related risks and opportunities that could materially affect your business prospects. In practice, this means:

• Identifying both physical risks (floods, bushfires, extreme weather) and transition risks (policy changes, technology shifts, market changes)
• Conducting scenario analysis to test your business resilience under different climate futures
• Disclosing your transition plans if you have climate targets or commitments
• Explaining the potential financial impacts on your cash flows, access to finance, or cost of capital

Scenario analysis is particularly challenging for many organisations. It requires thinking through "what if" situations, such as how your business would cope if carbon prices rose sharply or if extreme weather events became more frequent. 

3. Risk Management  

You must explain the processes you use to identify, assess, prioritise and monitor climate-related risks and opportunities and demonstrate how these integrate with your overall risk management framework.

This pillar is about showing you have systematic processes in place, not that you've eliminated all climate risk. Investors and regulators want to see that you understand your exposure and are actively managing it.

4. Metrics and Targets

The most quantitative pillar requires disclosure of:

• Greenhouse gas emissions across Scope 1, 2 and 3
• Cross-industry metrics including assets or business activities vulnerable to climate risks, capital deployed toward climate opportunities and executive remuneration linked to climate performance
• Any climate-related targets you've set and how they align with the Paris Agreement, as well as your progress and how it’s being monitored

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Understanding scope 1, 2 and 3 emissions

Emissions are broken down into three scopes by the Greenhouse Gas Protocol to provide a framework for companies to measure and manage their total carbon footprint. 

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For most companies, Scope 3 represents 70-90% of total emissions but it's also the hardest to measure because you need data from suppliers and partners. Recognising this challenge, there is a one-year deferral on Scope 3 disclosure in the first reporting year for all organisations.

However, this doesn't mean you can ignore it. Limited assurance on Scope 3 starts in year two, so you need to begin building your data collection processes immediately to make sure you’re prepared.

Phased Assurance Timeline

All sustainability reports must be independently assured by a qualified auditor or consultant. The level of assurance increases over time:

• Years 1-3: Limited assurance
• Year 4 onwards: Reasonable assurance (similar to financial audits)
• By 2030: Full reasonable assurance across all climate disclosures

This phased approach gives you time to build robust data systems that you will become more confident in over time and encourages a “progress over perfection” mindset. 

So don't wait to start your data collection. Assurance-ready disclosure requires verifiable data, documented methodologies and strong internal controls. The companies treating assurance as an afterthought will face painful last-minute scrambles.

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Hidden risks: data quality and greenwashing

Beyond the technical compliance requirements, two major risks deserve attention:

1. Data Quality and Reliability

Early Scope 3 emissions calculations will inevitably involve estimation and assumptions. You might not have perfect data from every supplier in year one - that's widely understood and accepted. However, what matters is being transparent about your methodology, documenting your assumptions and committing to continuous improvement.

Poor quality data creates several problems. It undermines confidence, increases assurance costs and makes it hard to track real progress over time. More seriously, it can expose you to accusations of greenwashing or even legal liability if your disclosures are materially misleading.

How to guard against data quality risks

• Document your calculation methodologies clearly
• Conduct internal audits of your emissions data before external assurance
• Use recognised standards like the GHG Protocol Corporate Standard
• Consider third-party verification even before it's mandatory
• Build systems that allow continuous data improvement, not one-off compliance exercises

2. Implementation Resourcing and the Talent Gap

Australia has somewhat of a shortage of sustainability expertise. Demand for professionals who understand carbon accounting, scenario analysis and AASB sustainability standards and auditing currently exceeds supply.

Many companies are discovering they need capabilities they don't currently have:

• Carbon accounting specialists to quantify Scope 1, 2 and 3 emissions
• Data analysts to collect and validate emissions data across complex supply chains  
• Sustainability strategists to develop credible transition plans
• Internal auditors who understand both climate science and financial materiality

Building these capabilities in-house is expensive and time-consuming. Hiring external consultants for everything is also costly and can create dependency. The organisations succeeding are those who invest in platforms and partnerships that provide expertise alongside technology, allowing internal teams to upskill and manage reporting confidently.

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What you need to get started now

The regulatory timeline waits for no one. Here's your practical implementation checklist:

If you're starting from scratch

1. Determine your reporting group

Calculate whether you meet the thresholds for Group 1, 2 or 3. Remember, you need to meet at least two of the three criteria (revenue, assets, employees).

2. Establish governance and accountability 

Assign clear ownership. Typically, this involves the Board (oversight), a senior executive like the CFO or Chief Sustainability Officer (management accountability) and cross-functional teams (implementation).

3. Conduct a preliminary emissions boundary assessment

Even a rough estimate helps you understand your emissions profile and identify data gaps. Focus on Scope 1 and 2 first since they’re the most directly controllable. You should be able to do this assessment internally with the support of robust carbon accounting software (like Climate Zero!). 

4. Map your data sources and gaps

Where does your energy data come from? Who holds information about business travel, purchased goods, waste? Identifying these data sources early prevents last-minute panic. Spending time on a data management plan to understand your data sources, metrics, who is responsible for what and how frequently you intend on capturing data will save you significant cost and resources over time. Climate Zero has a great template to get you started. 

5. Choose your tools and partners

Decide whether you'll manage reporting in-house with carbon accounting software, engage external consultants, or use a hybrid approach. Most mid-to-large organisations find that platforms like Climate Zero offer the right balance: professional-grade accuracy backed by expert support, without the ongoing cost of full-service consultancy.

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If you're already collecting data

1. Ensure your systems are assurance-ready

Review your data collection processes. Can you produce audit trails? Are your assumptions documented? Is your methodology consistent with the GHG Protocol?

2. Conduct a gap analysis against AASB S2 requirements

You might already track some emissions, but are you covering all material Scope 3 categories? Have you completed scenario analysis? If you have a transition plan, is it clearly documented?

3. Plan for continuous improvement

Regulatory requirements will evolve and your required level of assurance will increase as the regulation matures. Build systems that allow for refinement and expansion rather than starting over each year.

4. Communicate your progress

Early movers have a competitive advantage. Transparent climate reporting builds trust with investors, customers and employees. Don't wait until disclosure is mandatory to start talking about your climate journey.

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Why choose Climate Zero for your carbon accounting software?

Meeting mandatory climate reporting requirements is complex but you don't have to navigate it alone. Climate Zero is designed specifically for Australian companies facing these challenges.

Built by sustainability experts with over 15 years of experience, Climate Zero combines carbon accounting software with the mandatory climate reporting expertise you need. Our platform:

• Makes compliance easier: Track emissions across all three scopes with built-in tools designed for ASRS reporting requirements
• Provides expert support: Access sustainability professionals who understand Australian regulations, not just generic software support 
• Grows with you: Whether you're in Group 1, 2 or 3 our platform scales to meet your needs as requirements evolve
• Ensures data quality: Built on global standards (GHG Protocol) with audit trails and verification processes that make assurance smoother

You don't need to become a carbon accounting expert to meet your obligations. With Climate Zero you get robust, accurate emissions tracking that's easier to use than you might think.

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Looking ahead

Australia's mandatory climate reporting framework represents one of the biggest shifts in corporate disclosure in a generation. It's challenging, yes. But it's also an opportunity to understand your business better, identify risks before they become crises and build resilience for the future.

The companies thriving under these requirements are those who started early, invested in the right tools and expertise and treated climate reporting as a strategic priority rather than a compliance burden.

With the right support, you can measure and reduce emissions more easily than you think. You can meet these requirements. And together we can create a clearer, cleaner future.

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Further Reading

• Complete Guide to Mandatory Climate Reporting ‍
• Understanding ASRS and AASB Sustainability Standards

Official Regulatory Resources

For the most current information on mandatory climate reporting requirements, refer to these official Australian sources:

• AASB Sustainability Standards: Australian Accounting Standards Board
• ASIC Guidance: Sustainability Reporting Resources
• Treasury Legislation: Treasury Laws Amendment Financial Market Infrastructure and Other Measures Bill 2024

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Frequently Asked Questions

Who is exempt from Mandatory Climate Reporting in Australia?

Charities and not-for-profits, government entities and companies below the size thresholds. However even if your organisation is technically exempt you may still be indirectly affected, i.e. needing to provide emissions data to larger companies in your supply chain who are required to report Scope 3 emissions.

What happens if I don't comply with mandatory climate reporting requirements?

Non-compliance with Chapter 2M of the Corporations Act can result in significant financial penalties. The Australian Securities and Investments Commission (ASIC) oversees enforcement and has indicated it will take misleading disclosure seriously. Beyond regulatory penalties, non-compliance can damage investor confidence, affect your cost of capital and create reputational risks.

Can I voluntarily report before my mandatory reporting date?

Yes. Companies in any group can choose to voluntarily apply AASB S1 and AASB S2 before their mandated start date. Many companies are finding that early voluntary reporting helps them work out issues before mandatory assurance begins. However, if you claim voluntary compliance you must meet all requirements of the standards.

How accurate do my Scope 3 emissions calculations need to be?

The standards recognise that Scope 3 measurement is challenging and allows entities to use "reasonable and supportable information available without undue cost or effort." This means estimation is acceptable, provided you document your methodology and assumptions. What matters most is transparency about data limitations and demonstrating continuous improvement over time.

Do I need separate software for climate reporting or can I use spreadsheets?

While it's technically possible to manage reporting in spreadsheets, most organisations find this approach quickly becomes unworkable as data complexity grows. Spreadsheets are error-prone, difficult to audit, hard to update and don't scale well across multiple sites or reporting periods. Purpose-built carbon accounting software provides accuracy, efficiency and the audit trails that are required for assurance. Get in touch to find out how Carbon Zero can help.