Climate reporting used to be something big listed companies did by choice. That has changed in Australia. Large companies must now include climate information in a sustainability report each year. The rules are being phased in over several years, and their reach goes well past the companies that lodge the reports.
For a small business, the main effect is indirect. A big customer may start asking about your energy use, your emissions or your plans. Knowing why those questions arrive makes them far easier to answer. This post covers who must report, what the reports contain and how a smaller supplier can respond.
Who has to prepare a sustainability report
The rules sit in the Corporations Act and are administered by ASIC. An entity must prepare a sustainability report if it already prepares an annual financial report under Chapter 2M and meets a size threshold. The climate content follows an Australian standard known as AASB S2. ASIC says climate is the first and, at this stage, only part of the sustainability report.
Companies are sorted into three groups by size. A company falls into a group if it passes two of three tests on revenue, assets and employee numbers. Each group starts reporting at a different time. The current thresholds are set out below.
- Group 1: revenue over $500 million, assets over $1 billion, more than 500 employees. Reporting began with financial years starting on or after 1 January 2025.
- Group 2: revenue over $200 million, assets over $500 million, more than 250 employees. Reporting applies to financial years starting on or after 1 July 2026.
- Group 3: revenue over $50 million, assets over $25 million, more than 100 employees. Reporting applies to financial years starting on or after 1 July 2027.
Sole traders, partnerships and trusts are not directly covered, according to ASIC’s guide to sustainability reporting for small business. A small company is not directly covered either unless it grows past the Group 3 tests. ASIC also notes that the Government is consulting on raising the thresholds that define a large proprietary company. The proposal would lift the revenue figure from $50 million to $100 million and the assets figure from $25 million to $50 million. Until any change is made, the current thresholds apply.
What goes into the climate statements
The climate statements must disclose the material financial risks and opportunities the entity faces from climate. They must also cover governance, strategy and risk management linked to those risks. Metrics and targets are required as well, including Scope 1, 2 and 3 greenhouse gas emissions. ASIC sets this out in its page on what a sustainability report should contain.
Companies must also test their climate resilience against at least two scenarios. ASIC says the two current scenarios are a rise of 1.5°C and a rise well above 2°C, both measured against the period before industrialisation. These are linked to the Climate Change Act 2022. For a supplier, this may lead to questions about how heat, floods or storms could affect your deliveries.
Directors also sign a declaration about the report. For financial years starting from 1 January 2025 to 31 December 2027, they declare that the entity has taken reasonable steps to comply. After that period, the usual declaration on compliance applies. Large companies therefore have good reason to want accurate information from the businesses they deal with.
Why large customers ask small suppliers for data
ASIC explains that large businesses and financial institutions must consider climate risks and opportunities across their value chain. That chain includes the suppliers they buy from. As a result, customers or suppliers may ask a small business for information to help work out value chain emissions. This is why a small firm with no reporting duty of its own can still be asked questions.
The request might come as a short survey, a question in a tender or a line in a contract renewal. It may ask for a few figures or for a description of what you already do. Some requests are simple and some are detailed. Either way, it helps to understand what the customer is trying to report before you reply.
The good news is that ASIC does not expect large entities to chase every small supplier for exact figures. It says larger entities are generally expected to use estimates and industry averages. ASIC says the requirements make some allowances for these situations. So a request for data is often a request for whatever you can reasonably provide.
How a small business can respond
Start by reading the request closely and working out what is actually being asked. Some customers want a few figures, such as electricity use or fuel bills. Others want to know if you have any plans to cut emissions. If something is hard to provide, ASIC suggests speaking directly with the customer about the specific issue.
Gathering basic records now can save time later. Energy bills, fuel receipts and freight invoices are a sensible place to start. Keep them in one folder so you can answer the next request quickly. It also helps to bring your staff into the conversation, since they often see where waste happens.
Be careful with what you say in your answers. Give figures you can support and say plainly where a number is an estimate. A clear and honest reply is more useful to a customer than a polished one that falls apart under questions. Directors of large companies have to stand behind their reports, so accuracy matters to them.
Using public reports to plan ahead
Sustainability reports from large companies will be available to the public on ASIC’s register. ASIC suggests small businesses can use these public reports to see how customers, suppliers, competitors and insurers approach climate risk. That can help with planning for extreme weather. It can also point to opportunities, such as products or services that big buyers now want.
If your business does make changes, tell people about them in a measured way. Your website is a good place to explain what you have done. Current trends in web design make it easy to add a simple page or section. A short update shared as part of your social media strategy can reach customers too. Keep the tone factual and avoid big promises.
Blog posts work well for longer explanations. A post that sets out what you measured and what you changed is easy for a customer to find and share. Our guide to making your blog posts more effective covers how to keep that kind of content clear and readable. Update it once a year so it stays accurate.
Getting advice on your own position
Growing businesses should keep an eye on the Group 3 tests. A company that passes two of the three tests will have its own reporting duty. ASIC suggests asking your accountant, tax agent or adviser if your business is likely to cross a threshold. ASIC also plans to release free learning materials on sustainability reporting for those who want to learn more.
Frequently asked questions
Does my small business have to prepare a sustainability report?
Sole traders, partnerships and trusts are not directly covered, according to ASIC. A company is only covered if it passes two of the three Group 3 tests and prepares an annual financial report under the Corporations Act. If you are unsure, ask your accountant.
Why is a customer asking about my emissions?
Large businesses must consider climate risks across their value chain, which includes their suppliers. Your information may help them estimate value chain emissions for their report. They can use estimates where data is too hard to get, so ask what level of detail they need.
When do the rules start?
Group 1 reporting began with financial years starting on or after 1 January 2025. Group 2 follows from 1 July 2026 and Group 3 from 1 July 2027. The dates refer to the start of the company’s financial year.
Can the thresholds change?
Yes, they can. ASIC notes the Government is consulting on raising the large proprietary company thresholds. Check ASIC’s website for the current position before relying on any figure.
This article is general information only and is not legal, financial or accounting advice. Rules and thresholds can change. Speak with a qualified accountant or adviser about your own business.