Yesterday marked a genuine turning point in Australian corporate regulation. From 1 July 2026, Group 2 entities under the Corporations Act – organisations meeting at least two of three thresholds: consolidated revenue of $200 million or more, gross assets of $500 million or more, or 250 or more employees – enter their first mandatory reporting period under AASB S2 Climate-related Disclosures.
It’s worth being precise about what that means. This is not a preparation deadline. It is the start of the reporting period itself. Every day from here forward, in-scope organisations are accumulating the emissions data, governance evidence and risk documentation that will need to appear in their first sustainability report. There is no grace period on the clock – only on some of the disclosure requirements.
For mid-tier mining contractors, construction firms, engineering groups and resources services businesses across WA, many of whom sit squarely within Group 2 thresholds on either revenue, assets or employee count, this is the point where climate disclosure moves from a strategic conversation into a live legal obligation.
AASB S2 Requirements for Group 2 Entities From Day One
AASB S2 disclosures sit across four pillars – governance, strategy, risk management, and metrics and targets (for a fuller breakdown of how these fit together, see our overview of the AASB sustainability standards) – and Group 2 entities face real obligations across all four from their very first reporting period:
Governance disclosures, covering named roles, board and committee structures, and escalation processes for climate-related risk, are required immediately. This isn’t satisfied by a general statement that the Board “considers sustainability.” Regulators expect to see who is accountable, how climate risk reaches the Board, and how it factors into decisions.
Scope 1 and Scope 2 emissions data must be collected and audit-ready from day one of the reporting period – not compiled retrospectively at year-end. Scope 2 in particular must be reported on a location-based basis using grid-average emissions factors under the GHG Protocol Corporate Standard, which catches out organisations that have only ever tracked market-based Scope 2 figures for internal purposes.
Limited assurance applies from Year 1 over Scope 1 and 2 emissions and governance disclosures, in line with ASIC’s guidance on sustainability reporting requirements. This is a lower bar than the reasonable assurance that phases in for all disclosures by 2030, but it still means external assurance providers are reviewing your data trail, not just your narrative.
Scope 3 Emissions Reporting: Where Group 2 Entities Get Breathing Room
Group 2 entities do get one meaningful concession. Scope 3 emissions reporting is not required in Year 1 (broadly FY27 for most Group 2 entities with standard financial years), with mandatory reporting beginning in Year 2. But that grace period applies to disclosure, not preparation – data collection for Scope 3 needs to begin now, because a year is not enough time to build a defensible Scope 3 inventory from scratch once the deadline arrives. Given Scope 3 typically represents the large majority of total emissions for both mining and construction businesses, this is the area most likely to catch organisations out later if it’s deprioritised now.
AASB S2 Penalties and Director Liability Under the Corporations Act
AASB S2 carries the same legal weight as financial reporting under the Corporations Act. False or misleading climate statements can attract penalties of up to $15 million or 10 per cent of annual turnover, whichever is greater, and directors can be held personally liable for governance and Scope 1/2 disclosures from Year 1.
There is a modified liability settlement – a three-year safe harbour – that limits enforcement action on Scope 3, scenario analysis and transition plan disclosures to regulator-only action rather than broader civil claims. That safe harbour is a genuine benefit, but it’s easy to misread as a free pass. It reduces litigation exposure on the hardest disclosures; it does not remove the requirement to report them credibly, and it does not extend to governance or Scope 1/2 data, which carry full liability now.
A regulatory landscape still in motion
It’s also worth noting that the settings aren’t entirely fixed. The May 2026 Federal Budget proposed lifting large proprietary company thresholds from $50 million to $100 million in revenue and $25 million to $50 million in gross assets, which would move some private companies out of Group 3 reporting scope entirely, alongside a flagged consultation on easing supplier information requests connected to Scope 3 reporting. Neither change is legislated yet. For Group 2 entities reporting from today, none of this changes your current obligations – but it’s a reasonable signal that government is conscious of the compliance burden and may adjust the edges of the regime over the next reporting cycle.
What this Means for Leadership Teams
If your organisation falls within Group 2 thresholds, the honest question for today isn’t “when do we need to start preparing” – that window has closed. It’s “can we currently produce audit-ready Scope 1 and 2 data, and can we clearly name who is accountable for climate governance at Board level?”
Organisations that treat this as a narrow finance or sustainability team exercise tend to underestimate how much cross-functional coordination – finance, risk, operations, governance – is genuinely required to produce a defensible first report. Those that get the foundations right now will spend far less time firefighting when Scope 3 reporting becomes mandatory next year.
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