Climate Reporting Requirements: What Australian Businesses Need to Know in 2026
Climate reporting requirements have transformed from voluntary best practice to mandatory compliance. For Australian businesses, 2026 marks a critical year as the phased rollout of sustainability standards brings thousands of additional companies into scope.
If you’re a business leader navigating this complex landscape, you need clarity on what’s required, when it applies, and how to comply effectively.
I’m Monique J Chelin, founder of MJC Sustainability and a sustainability consultant with over 20 years of experience helping organizations meet climate reporting obligations. I’ve worked with major companies including BHP Billiton, Virgin Australia, and the Australian Federal Government to build robust climate disclosure frameworks that satisfy regulators while creating business value.
What Are Climate Reporting Requirements?
Climate reporting requirements mandate that companies disclose information about climate-related risks, opportunities, and greenhouse gas emissions in their financial reports.
In Australia, these requirements are codified in:
- AASB S1: General Requirements for Disclosure of Sustainability-related Financial Information
- AASB S2: Climate-related Disclosures
These standards align with the International Sustainability Standards Board (ISSB) framework and are designed to provide investors and stakeholders with consistent, comparable climate information.
Who Must Comply with Climate Reporting Requirements?
Australia’s climate reporting requirements follow a phased approach:
Group 1 (Effective July 1, 2024)
Listed entities and large proprietary companies that meet at least two of three criteria: – Consolidated revenue exceeding $500 million – Consolidated gross assets exceeding $1 billion – 500 or more employees
Group 2 (Effective July 1, 2026)
Entities meeting at least two of three criteria: – Consolidated revenue exceeding $200 million – Consolidated gross assets exceeding $500 million – 250 or more employees
This is the critical threshold for 2026—thousands of mid-sized Australian companies will enter the reporting regime this year.
Group 3 (Effective July 1, 2027)
All other reporting entities not captured in Groups 1 or 2.
The Four Pillars of Climate Reporting
Climate reporting requirements are structured around four core disclosure areas:
1. Governance
Describe the governance processes, controls, and procedures used to monitor, manage, and oversee climate-related risks and opportunities.
Key Disclosures: – Board oversight of climate-related matters – Management’s role in assessing and managing climate risks – Integration of climate considerations into business strategy and risk management
Monique’s Insight: Investors want to see that climate isn’t just a sustainability team issue—it’s a board-level priority with clear accountability structures.
2. Strategy
Disclose climate-related risks and opportunities that could reasonably be expected to affect the entity’s prospects over the short, medium, and long term.
Key Disclosures: – Physical risks (extreme weather, sea-level rise, water scarcity) – Transition risks (policy changes, technology shifts, market disruptions) – Climate-related opportunities (resource efficiency, new markets, resilience) – Financial impacts on business model, strategy, and cash flows – Climate resilience of strategy under different climate scenarios
3. Risk Management
Explain the processes used to identify, assess, prioritize, and monitor climate-related risks, and how these integrate with overall risk management.
Key Disclosures: – Risk identification and assessment processes – Risk prioritization methodologies – Risk monitoring and mitigation strategies – Integration with enterprise risk management
4. Metrics and Targets
Disclose metrics and targets used to measure, monitor, and manage climate-related risks and opportunities.
Key Disclosures: – Greenhouse gas emissions (Scope 1, 2, and 3) – Climate-related metrics relevant to business model and industry – Progress against climate-related targets – Methodologies and assumptions used in calculations
Understanding Greenhouse Gas Emissions Scopes
Climate reporting requires disclosure of greenhouse gas emissions across three scopes:
Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, on-site fuel combustion)
Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling
Scope 3: All other indirect emissions in the value chain (e.g., purchased goods and services, business travel, employee commuting, product use, end-of-life treatment)
Monique’s Insight: Scope 3 emissions are often the largest component of a company’s carbon footprint but also the most challenging to measure. Start with high-priority categories and build capability over time.
Climate Scenario Analysis: What You Need to Know
Climate reporting standards require scenario analysis to assess the resilience of your business strategy under different climate futures.
What Is Scenario Analysis?
Scenario analysis involves modeling how your business would perform under different climate scenarios, typically including:
- Low warming scenario (1.5°C): Aggressive climate action with rapid transition to low-carbon economy
- Medium warming scenario (2-3°C): Moderate climate action with gradual transition
- High warming scenario (4°C+): Limited climate action with severe physical climate impacts
How to Conduct Scenario Analysis
Step 1: Identify key climate-related risks and opportunities for your business
Step 2: Select relevant climate scenarios aligned with recognized frameworks (e.g., IPCC, IEA, NGFS)
Step 3: Assess potential impacts on business model, operations, and financial performance under each scenario
Step 4: Evaluate the resilience of your current strategy and identify adaptation measures
Step 5: Disclose findings, assumptions, and limitations in your climate report
Common Climate Reporting Challenges
Challenge #1: Data Quality and Availability
Many companies struggle to collect accurate emissions data, particularly for Scope 3 categories involving complex supply chains.
The Solution: Start with estimation methodologies and improve data quality over time. Use industry averages and spend-based calculations initially, then transition to activity-based data as systems mature.
Challenge #2: Scope 3 Emissions Complexity
Calculating Scope 3 emissions across 15 categories is resource-intensive and requires engagement with suppliers and customers.
The Solution: Prioritize the most material Scope 3 categories for your industry. For most companies, purchased goods and services, capital goods, and use of sold products are the largest contributors.
Challenge #3: Scenario Analysis Expertise
Conducting credible scenario analysis requires climate science knowledge, financial modeling skills, and industry expertise.
The Solution: Engage external experts to build internal capability. Start with qualitative assessments and progress to quantitative modeling as resources allow.
Challenge #4: Integration with Financial Reporting
Climate reporting must be integrated with financial reporting, requiring coordination between sustainability, finance, and risk teams.
The Solution: Establish cross-functional working groups with clear governance structures and reporting lines to the board.
The Business Benefits of Climate Reporting
While compliance is the immediate driver, effective climate reporting delivers strategic value:
1. Improved Risk Management
Systematic climate risk assessment helps identify vulnerabilities and build resilience before crises occur.
2. Access to Capital
ESG-focused investors managing trillions of dollars prioritize companies with transparent, credible climate disclosures.
3. Operational Efficiency
Measuring emissions often reveals opportunities for energy efficiency, waste reduction, and cost savings.
4. Competitive Advantage
Strong climate performance and disclosure can differentiate your brand, attract customers, and win contracts.
5. Regulatory Compliance
Meeting climate reporting requirements reduces regulatory risk and avoids penalties.
How Monique J Chelin Can Help
As a sustainability consultant specializing in climate reporting, I provide:
- Climate Risk Assessments: Comprehensive identification and evaluation of physical and transition climate risks
- Greenhouse Gas Inventories: Scope 1, 2, and 3 emissions measurement using recognized methodologies
- Scenario Analysis: Climate scenario modeling tailored to your industry and business model
- Disclosure Preparation: AASB S1 and S2 compliant climate reports integrated with financial reporting
- Capability Building: Training and coaching to build internal climate reporting expertise
My approach combines technical rigor with practical implementation, ensuring your climate reporting meets regulatory requirements while supporting strategic decision-making.
Climate Reporting Checklist for 2026
Use this checklist to assess your readiness:
- Determined whether your organization is in scope for Group 2 reporting (effective July 1, 2026)
- Established board-level oversight and governance structures for climate reporting
- Conducted climate risk assessment covering physical and transition risks
- Implemented greenhouse gas emissions measurement systems (Scope 1, 2, and 3)
- Conducted climate scenario analysis to assess strategy resilience
- Developed climate-related metrics and targets aligned with business strategy
- Integrated climate reporting with financial reporting processes
- Engaged external assurance providers to verify climate disclosures
- Built internal capability through training and knowledge transfer
Take Action Now
Climate reporting requirements are here to stay, and 2026 brings thousands of Australian businesses into scope. The companies that act now will be better prepared, more resilient, and better positioned to attract investment.
Need expert guidance on climate reporting? Contact Monique J Chelin at MJC Sustainability for practical, results-driven support tailored to your industry and business needs.
About Monique J Chelin
Monique J Chelin is the founder of MJC Sustainability, an international management consultancy specializing in climate reporting, ESG risk management, and sustainability consulting. With over 20 years of experience working with organizations including BHP Billiton, Virgin Australia, and the Australian Federal Government, Monique provides expert guidance on climate disclosure frameworks including AASB S1, AASB S2, and TCFD. As Australia’s first certified PRiSM™ Green Project Management trainer, Monique brings a unique combination of technical expertise and practical implementation experience.
Visit mjcsustainability.com or connect on LinkedIn to learn more.
