Who Needs to Prepare a Sustainability Report in Australia? Group 1, Group 2 and Group 3

Australia’s mandatory sustainability reporting regime applies to a specific set of entities under the Corporations Act 2001. Understanding whether your business is captured — and in which phase — is the first step to assessing your obligations.

The entity types in scope

The mandatory requirements apply to entities that are required to lodge annual reports under Chapter 2M of the Corporations Act. This includes:

• Listed companies (ASX and other exchanges)
• Large proprietary companies (those that must prepare financial reports under the Act)
• Registered managed investment schemes and their responsible entities
• Other reporting entities captured by the amended legislation

Notably, the regime does not currently apply to partnerships, trusts (unless they are registered managed investment schemes), or sole traders — though supply chain pressure from larger entities in scope is already flowing down to businesses outside the mandatory regime.

The three size thresholds

For entities within scope, size determines which group you fall into and when your first mandatory report is due.

An entity qualifies for a group if it meets at least two of the three criteria at the end of its financial year:

Group 1 (FY2025 start):

• Consolidated revenue ≥ $500 million
• Consolidated gross assets ≥ $1 billion
• Employees ≥ 500

Group 2 (FY2026 start):

• Consolidated revenue ≥ $200 million
• Consolidated gross assets ≥ $500 million
• Employees ≥ 250

Group 3 (FY2027 start):

• Consolidated revenue ≥ $50 million
• Consolidated gross assets ≥ $25 million
• Employees ≥ 100

How to assess your group

The assessment uses consolidated figures — meaning you look at the group as a whole, not individual entities within a corporate structure.

Revenue is the total revenue recognised in the consolidated income statement.

Gross assets means total assets (not net assets), measured at the balance sheet date.

Employees counts full-time equivalent employees across the consolidated group, including part-time.

If you’re on the border of a threshold, consider that the assessment applies at the end of each financial year. An entity that misses the threshold for FY2025 but exceeds it for FY2026 would join the regime from FY2026 (if within the appropriate group’s start date window).

What happens if you’re just below a threshold

Being just below a Group threshold does not mean you’re free of sustainability reporting expectations indefinitely. Several factors push sub-threshold businesses toward voluntary or supply chain-driven disclosure:

Customer and client requirements. Group 1 companies reporting Scope 3 emissions will need supplier data from businesses of all sizes. If a large construction company is your primary customer, expect to provide emissions data regardless of whether you’re in Group 3.

Financial markets. Lenders and investors are increasingly using sustainability data in credit and investment decisions. Being unable to provide that data — even voluntarily — can affect access to finance.

Tender and procurement requirements. Federal and state government procurement is moving toward requiring sustainability credentials. Construction tenders already frequently include emissions reporting expectations.

Future threshold changes. The thresholds will likely tighten over time as the regime matures. What is below Group 3 today may be captured in a future phase.

A note on foreign entities

Foreign entities operating in Australia may also be subject to the reporting requirements if they are registered under the Corporations Act and meet the relevant thresholds. The geographic scope of the standard requires disclosure of Scope 1 and 2 emissions across global operations, not just Australian activities — which adds complexity for multinational businesses.

What to do if you’re in scope

If your consolidated numbers meet two of the three criteria for any of the groups, your next steps are:

1. Confirm your first reporting period (based on your financial year start date and your group)
2. Map your emissions data sources — utility invoices, fuel records, meter readings — and identify gaps
3. Assess your governance disclosures: does your board have documented climate oversight processes?
4. Engage your assurance provider early — limited assurance in the first year still requires external verification

---

Ayika can help you get structured data collection in place before your first reporting period. Book a conversation to assess your readiness.