AASB S2 Group 2 Requirements for Queensland SMEs: What You Need to Know Before July 2026

If your Queensland business meets the Group 2 size thresholds, mandatory climate disclosure under AASB S2 begins 1 July 2026. That is less than three months away. Scope 1 and 2 emissions, governance disclosures, climate risk strategy, and limited assurance are all required from Year 1 of reporting. This article explains exactly what Group 2 reporting requires and what needs to be in place before your first reporting period opens.

What Is AASB S2?

AASB S2 is Australia's mandatory climate disclosure standard, adopted from the global IFRS S2 framework developed by the International Sustainability Standards Board (ISSB). It is administered under Chapter 2M of the Corporations Act 2001, overseen by ASIC.

In plain English: if your business (or your client) is above a certain size, they are now legally required to measure and report their climate-related risks, opportunities, and greenhouse gas emissions as part of their annual report. This isn't voluntary. It isn't optional. And it isn't going away.

The reporting rollout is happening in three waves: Group 1, Group 2, and Group 3, based on company size.

Who Is a Group 2 Entity?

Group 2 entities are mid-to-large Australian companies that meet at least two of these three criteria on a consolidated group basis:

You are also in Group 2 if your company is a controlling corporation required to report under the NGER Act (but not already in Group 1), or an asset owner such as a superannuation fund or managed investment scheme with $5 billion or more in assets under management.

Think: mid-market mining services companies, regional logistics operators with large fleets, food processing firms, construction contractors on major projects, and resource sector support businesses across Central and North Queensland.

When Does Group 2 Reporting Start?

Group 2 reporting begins for financial years starting on or after 1 July 2026. That means if your financial year runs July–June, your first reporting year is FY2026–27, with your first report due in late 2027.

What Does AASB S2 Require Group 2 Entities to Disclose?

AASB S2 is built on four disclosure pillars, all mandatory for Group 2 from Year 1:

1. Governance

Disclose how your board and management oversee climate-related risks and opportunities. This includes who is responsible, how often it is reviewed, and whether climate risk is linked to remuneration or decision-making. ASIC expects this to sit at board level, not buried in an environmental team.

2. Strategy

Identify transition risks such as policy changes, new carbon pricing, and market shifts away from fossil fuels, alongside physical risks such as flooding, extreme heat, and cyclones that could affect your cash flows. You must conduct climate scenario analysis using at least two climate scenarios — typically a low-emission pathway and a higher-emission pathway — commensurate with your circumstances and risk exposure.

3. Risk Management

Explain how your business identifies, assesses, and monitors climate-related risks and how this connects to your broader enterprise risk management process. ASIC is clear: climate risk should not be treated as a standalone ESG exercise; it belongs in the same framework as financial and operational risk.

4. Metrics & Targets: The Biggest Challenge

This is where most Queensland businesses will feel the pressure. The key emissions requirements are:

• Scope 1 & 2 emissions: Mandatory from Year 1 (July 2026). Scope 1 covers your direct emissions (diesel, gas, process emissions). Scope 2 covers electricity purchased from the grid. Both must be reported location-based using Australian grid emissions factors.
• Scope 3 emissions: Mandatory from Year 2 (FY2027–28). This covers all indirect emissions in your value chain: your suppliers, contractors, transport, purchased goods, and business travel. A one-year grace period applies, but supplier data collection should start in Year 1 given the complexity of preparation. Read why the grace period is not a reason to pause Scope 3 preparation.
• Climate-related targets: Disclose any emissions reduction targets set, the methodology used, and your progress against them.
• Other metrics: Internal carbon price (if used in decisions) and climate-related capital expenditure.

What About Assurance?

External assurance is mandatory from your first reporting year; this isn't self-certified. Assurance is conducted under AUASB standard ASSA 5000 and is phased as follows:

• Year 1: Limited assurance over Scope 1 & 2 emissions, governance disclosures, and selected strategy content.
• Years 2–3: Limited assurance over all AASB S2 disclosures.
• From 1 July 2030: Reasonable (full) assurance over all climate-related financial disclosures.

This means your emissions data needs to be credible, documented, and audit-ready from day one. A spreadsheet estimate won't cut it.

What Should Group 2 Entities Do Right Now?

The reporting period starts 1 July 2026. There is no phased grace period for governance, strategy, or Scope 1 and 2 emissions. Here is what needs to happen before then:

1. Establish your emissions baseline. Scope 1 and 2 data collection must be live from day one of the reporting period. Your carbon footprint baseline needs to be built to audit standard, documented and methodology-backed, not a spreadsheet estimate.
2. Document board-level climate governance. ASIC expects climate risk oversight to sit at board level. Document who is responsible, how often it is reviewed, and whether climate risk is linked to executive remuneration or capital allocation decisions.
3. Conduct climate scenario analysis. Identify your transition and physical climate risks using at least two climate scenarios commensurate with your circumstances — typically a low-emission and a higher-emission pathway. This feeds directly into your strategy disclosure and must be documented before your first report.
4. Begin Scope 3 supplier data collection in Year 1. The grace period removes your obligation to report Scope 3 in Year 1, not the obligation to prepare for it. Building supplier data programs takes 12 to 18 months. Read why the grace period is not a reason to pause Scope 3 preparation.
5. Engage an advisor who builds audit-ready data. Limited assurance is required from Year 1. That means your emissions data needs to be traceable, documented, and defensible to an independent auditor. Aethiro is ISO 14064 certified and builds emissions inventories to verification standard.

We Help Group 2 Entities in Queensland Get AASB S2 Ready

Aethiro works with Group 2 entities and businesses approaching Group 2 thresholds to build AASB S2-compliant disclosures. We are ISO 14064 Lead Verifier certified, Gladstone-based, and we understand the reporting requirements your board, CFO, and auditors will be working to. If your first reporting period starts in July 2026, the time to act is now.