AASB S2 Group 2 Reporting Period Starts — What Have We Learned from Group 1?

July 16, 2026

As the new financial year begins, Group 2 entities are joining Australia’s largest companies in producing mandatory climate-related disclosures under AASB S2. For this group, organisations are shifting from understanding the requirements to implementing them. This includes establishing their governance arrangements, mapping their scope 1 and 2 emissions data, and deciding on their reporting infrastructure. However, what makes this moment useful is that Group 1 isn’t theoretical anymore. The first reports, for December 2025 year-ends, have been lodged and reviewed, providing Group 2 entities with practical insights into ASIC’s expectations for climate-related financial disclosures.

Which Entities Count as a Group 2?

An entity falls into this group if it meets at least two of these three thresholds: consolidated revenue of $200 million or more, consolidated gross assets of $500 million or more, or 250 or more employees. Asset owners managing large pools of capital (more than $5 billion), and entities reporting under the National Greenhouse and Energy Reporting (NGER) scheme, can also be captured regardless of whether they meet the size thresholds.

What Group 1’s First Reports Looked Like

ASIC’s early observations found that the market is building capability, with variability in reporting quality both across industries and between peers in the same sector. While there is no single approach to meeting the requirements, ASIC’s observations make clear that disclosures should be decision-useful and aligned with the requirements of AASB S2.

Lesson 1: Judgement Needs to Be Visible

A PwC review found one of the clearest disparities across Group 1 reports was related to financial quantification. Roughly two-thirds of Group 1 companies quantified how climate risks and opportunities affect their financial position, performance and cash flows, while others leaned more heavily on the proportionality mechanisms built into AASB S2, often justifying it with high measurement uncertainty. While the standard recognises that some uncertainty is inevitable, it also requires entities to apply and explain judgements. ASIC has indicated that the assumptions, methodologies and judgements underpinning disclosures will be an area of focus moving forward. As Australia’s phased assurance regime expands over the coming years, these judgements will also be subjected to increasing scrutiny by assurance providers. Judgement should be well documented and supported with clear evidence of methodology and assumptions.

Lesson 2: Structure and Clarity Matter as Much as Content

Two structural issues stood out to ASIC. Some reports blended voluntary climate content in with the mandatory disclosures without clearly distinguishing the two, while others carried disclaimers, telling users not to rely on the report for investment decisions, or disclaiming responsibility for accuracy, which ASIC clearly stated is not consistent with the statutory framework. While there is no rigid report structure under AASB S2, PwC’s review found some of the clearest reports utilised a detailed disclosure index mapping each requirement to the relevant section of the report.

Report length also varied enormously and highlighted that more pages doesn’t necessarily provide clearer or more useful information. Instead, concise and decision-useful disclosures, that are logically structured are easier for users to navigate.

Lesson 3: The Reporting Effort Is Longer Than Teams Expect

Early experience with the standards has shown that preparing for mandatory climate reporting often takes longer than organisations anticipate. Governance alignment, establishing internal processes, data gathering and validating information all require more lead time and coordination than teams often allow for. KPMG and the Australian Institute of Company Directors have both observed a similar trend at the board level. Many directors viewed climate reporting as an extension of existing risk and compliance processes, only to find the complexity and resource demands were significantly underestimated.Preparing early, well before your first reporting period, will allow sufficient time for cross functional collaboration, board review and assurance readiness.

Practical Actions for Groups 2 and 3

For organisations yet to commence mandatory climate reporting, foundations should be established early. Based on the experiences of Group 1 reporters, the following actions can help support a smoother implementation:

Assess current readiness against AASB S2 requirements and identify governance, data and capability gaps.
Establish governance arrangement early and assign clear roles and responsibilities across the organisation.
Establish a clear report structure early, distinguish between mandatory and voluntary disclosures and apply a disclosure index to map reporting requirements.
Develop robust reporting processes and documentation that clearly support judgements and areas of uncertainty, creating a consistent approach to future reporting.
Create a project plan that allocates sufficient time for data collection, cross functional input, board review and assurance activities.

How Can Cress Help

If your organisation is preparing to report under the AASB S2 and needs an experienced partner, Cress is here to help. From assessing reporting readiness and strengthening governance to developing greenhouse gas inventories and undertaking climate risk assessments, we help organisations prepare with confidence. Get in touch with our team to find out how we can support your journey to mandatory reporting.

Cress is the Hydroflux Group’s in-house sustainability consulting team, operating as a specialised division and driven by a simple but powerful goal: to help organisations across Australia, New Zealand and the Pacific region create a more sustainable future. As a young and agile team, we combine technical expertise with fresh, forward-thinking approaches to help clients navigate complex challenges across climate risk, emissions reduction, modern slavery, water stewardship, and ESG reporting, building on the Hydroflux legacy of engineering excellence while bringing a sustainability lens to the industries and communities shaping the future of our region.

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