Climate disclosure is about to become a core part of doing business for thousands of mid-sized firms in Australia. Soon, reporting environmental risk will carry the same weight and expectation as reporting earnings – a shift that marks a fundamental transformation in the country’s corporate norms.
From July 2026, thousands of medium-sized companies will join the mandatory sustainability reporting framework, marking the second major expansion of the legislation first enacted in 2024. While that may sound distant, it is a short runway in the context of climate disclosure readiness – particularly for companies building reporting systems from the ground up.
For regulators, this mid-2026 milestone signals a shift in the scale and complexity of compliance oversight, testing preparedness across a broader swathe of the corporate landscape.
Unlike the regime’s Group 1 rollout for large entities in January 2025, the July 2026 deadline will bring in companies with less existing capacity, greater sectoral variation, and, in many cases, little prior exposure to structured climate-related disclosure. Entities meeting at least two of four criteria relating to workforce size, revenue, total assets, or assets under management will be expected to produce climate reports aligned with the new Australian sustainability standards.
The coming year presents a critical window for regulators to coordinate guidance, develop enforcement capabilities, and support industry readiness ahead of what may be the regime’s most operationally complex implementation phase.
From policy to practice
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 established Australia’s first mandatory climate disclosure framework, placing sustainability reporting on par with financial reporting for affected entities. The regime phases in coverage over three years, beginning with the largest companies and expanding to include smaller firms by July 2027.
The July 2026 deadline applies to what are classified as Group 2 entities – companies that meet at least two of the following: over 250 employees, over $200 million in annual revenue, over $500 million in assets, or over $5 billion in assets under management. While still substantial, these entities are more diverse in structure and reporting maturity than their Group 1 counterparts.
Like Group 1, Group 2 companies will be required to publish audited sustainability reports alongside annual financial disclosures. These reports must comply with AASB S2, the mandatory Australian climate disclosure standard, which builds on the Task Force on Climate-related Financial Disclosures (TCFD) framework but includes more detailed quantitative requirements. Scenario analysis under both 1.5°C and high-emissions pathways, value chain emissions data, and robust governance disclosures are among the mandated inclusions.
Regulatory preparedness and transitional relief
The rollout of Group 2 obligations comes amid efforts by the Australian Securities and Investments Commission (ASIC) to bolster regulatory capacity. In March 2025, ASIC published a detailed regulatory guide on sustainability reporting, committing to a proportionate enforcement posture and annual surveillance reporting during the transition period. While the initial focus remains on supporting compliance and identifying sectoral challenges, scrutiny is expected to increase as the regime matures.
Transitional provisions built into the legislation are designed to ease the burden of compliance – especially for entities with limited prior climate disclosure experience. Scope 3 emissions reporting, which covers indirect emissions across the value chain, is subject to a one-year deferral. Litigation protections will apply to Scope 3 disclosures for three years following each group’s start date. Directors will also be able to issue qualified declarations of assurance for the first three years.
Assurance standards to support consistent verification are under development. The Australian Auditing and Assurance Standards Board (AUASB) is expected to publish guidance later in 2024, ahead of mandatory assurance across all disclosures from July 2030. For now, auditors will focus on building internal capacity and helping companies navigate a rapidly evolving reporting landscape.
A widening compliance net
As this next wave approaches, the profile of companies coming into scope begins to shift.
Group 2 companies will likely face steeper internal adaptation challenges than the large listed entities of Group 1. Many fall outside the ASX 300 and may not yet have the governance structures, emissions data systems, or climate scenario planning capabilities that underpin effective reporting. The expansion will also pull in a more varied mix of industries, including private firms, subsidiaries of multinationals, and entities in sectors with historically lower rates of climate disclosure.
This phase will significantly increase the number of regulated entities. While precise figures are still being modelled, the full regime is expected to capture around 20,000 companies across all three groups. The July 2026 tranche will form a considerable portion of that total, putting additional pressure on regulators to deliver education, guidance, and enforcement in tandem.
Building momentum and accountability
The July 2026 deadline represents more than just a compliance checkpoint. It is a test of Australia’s ability to scale climate reporting infrastructure in line with international expectations. Though lagging European peers in baseline disclosure rates, Australia’s reforms are among the most comprehensive in the Asia-Pacific region and will position domestic firms to meet global investor and supply chain expectations.
For regulators, the focus now turns to sectoral readiness and risk-based supervision. Differences in maturity, data access, and internal expertise across Group 2 entities will likely result in uneven compliance and varied report quality. Annual surveillance and published findings will play a key role in promoting comparability and improving the usefulness of climate-related disclosures for markets and policy development.
As the deadline nears, ASIC and other bodies must balance guidance and enforcement, supporting uplift while ensuring the regime’s credibility. The July 2026 expansion will be critical in determining whether Australia’s phased approach can deliver the dual goals of improved transparency and climate-resilient market regulation.
