Lessons from year one of mandatory climate reporting

The first wave of mandatory climate disclosures under AASB S2 Climate-related Disclosures marks a defining moment for Australian organisations. Year one has provided a clear view of how Australian organisations have responded to the new reporting requirements, and revealed key information on what’s working, where gaps lie, and how maturity is progressing. 

In our May 2026 sustainability webinar, we analysed early observations from the first reports lodged with ASIC. While these initial disclosures demonstrate that organisations can meet the standard’s structural requirements, they also raise a deeper question: how do we move beyond compliance to truly decision-useful reporting?

Where organisations are getting it right 

Based on BDO’s analysis of first-year AASB S2 disclosures, there are several areas where reporting is already well developed: 

• Governance is well established 

Oversight is typically clearly defined at the board level, supported by audit, risk or sustainability committees. Responsibility is then delegated throughout the organisation, often to the CEO, executive leadership team, or dedicated ESG working groups, ensuring a clear line of accountability. 

• Climate risk is embedded in existing risk frameworks 

Many organisations are using established enterprise risk management processes rather than creating standalone approaches. Climate risks are assessed using familiar tools such as risk registers, likelihood and consequence matrices, defined risk owners and regular review cycles. 

• Scope 1 and Scope 2 emissions reporting is consistent 

Most entities are disclosing emissions data, supported by clearly defined boundaries, methodologies and assumptions. This reflects a relatively high level of maturity in emissions measurement and reporting. 

• Scenario analysis is widely adopted 

Most organisations are applying at least two scenarios (typically a low-warming and a high-warming scenario, as required by the Corporations Act 2001) to assess climate resilience. Some are going further by incorporating additional scenarios aligned to current policy or intermediate transition pathways. 

Collectively, these elements demonstrate that organisations can meet the structural requirements of AASB S2. However, these foundations also highlight where reporting is still evolving. 

Reporting is still largely compliance-led 

Despite strong foundations, much of the first-year reporting focuses on processes, rather than outcomes. 

Many disclosures describe how climate risks and opportunities were identified, including through workshops, longlists and scenario analysis, but fail to explain what has changed as a result. There is often limited visibility on how climate considerations are influencing strategy, capital allocation or decision-making.

Financial impacts remain largely qualitative 

One of the biggest gaps across early reports is the limited quantification of financial impacts. 

While some organisations provided examples of current financial effects, such as carbon compliance costs, extreme weather impacts or climate-related capital expenditure, many disclosures remain qualitative. A significant number of entities stated that impacts were “not material” or “not reasonably estimable”, without clearly explaining the assumptions or analysis behind that conclusion. This is evident in the market data we analysed, with less than half of organisations currently quantifying financial impacts in their disclosures. 

This lack of quantification limits the usefulness of disclosures to investors and stakeholders, particularly when assessing how climate risks may affect financial performance, cash flows, or asset values.

Climate opportunities are underdeveloped 

Climate risks are well articulated in most reports, but the climate opportunities aren’t as well developed. 

When opportunities are disclosed, they are often described at a high level and focused on operational improvements such as energy efficiency or cutting emissions. Fewer organisations clearly explain how the shift to a low-carbon economy could create new revenue streams, strengthen their market position, or support long-term growth opportunities. In several cases, organisations identified no material opportunities at all, indicating that this area is still at an early stage of development. 

This imbalance matters. Over time, stakeholders will expect organisations to demonstrate not only how they are managing risk, but how they are positioning themselves to benefit from the transition to a low-carbon economy. 

Scenario analysis is widespread, but not yet decision-useful 

Most organisations are running scenario analysis to assess climate resilience, with the majority using two scenarios based on low- and high-warming pathways as required by the Corporations Act 2001. However, the results are often quite broad and lack detail. 

A common pattern is to conclude that: 

• A low-warming scenario creates transition risks 
• A high-warming scenario creates physical risks, and
• Current impacts are not material, and future impacts remain uncertain. 

What is often missing in the scenario analysis is the “so what.” For example: 

• At what point does a site stop being financially viable? 
• When do insurance costs become material? 
• What triggers a change in strategy or investment decisions? 

Without this level of insight, scenario analysis risks being a compliance exercise rather than a useful decision-making tool. 

A clear shift is underway in 2026 

While year one was mostly compliance-led, there is already a noticeable shift in how organisations are approaching climate reporting in 2026. Climate is no longer being treated as a standalone sustainability issue, but is instead being integrated into broader business processes, including: 

• Enterprise risk management 
• Financial planning and modelling 
• Capital investment decisions, and
• Board-level oversight and governance. 

Importantly, this integration is also changing who is involved in climate reporting. Finance, risk, legal and operations teams are increasingly contributing, reflecting the need for cross-functional alignment and stronger internal processes. This transition from reporting to integration will define the next phase of maturity. 

How organisations can improve in year two

Organisations that are progressing more quickly in integrating climate into their business processes are already focusing on a different set of priorities. These include:

• Moving from narratives to numbers 

There is a stronger focus on quantifying financial impacts, particularly in the short- and medium-term. This includes linking climate risks to specific line items, revenue impacts and cost drivers. 

• Strengthening transition plans 

Leading organisations are moving beyond high-level commitments to develop detailed transition plans that include defined actions, funding requirements and timelines.

• Getting ahead on Scope 3 emissions 

Many organisations are beginning to measure Scope 3 emissions ahead of mandatory disclosure requirements, using the transitional period to identify data gaps and improve data quality. 

• Using scenario analysis to inform decisions 

Rather than treating scenario analysis to assess climate resilience as an isolated exercise, many organisations are using it to test business resilience and inform strategic choices. 

What does this mean for your organisation? 

Regulators, investors and other stakeholders are focusing less on whether disclosures exist and more on how credible, consistent and decision-useful they are. 

In practice, this means greater scrutiny on things like: 

• How clearly financial impacts are quantified and linked to disclosures 
• Whether climate risks are embedded into strategy and decision-making, and 
• The credibility, detail and deliverability of transition plans. 

Organisations that move early to strengthen data and connect climate reporting to financial outcomes will be better positioned for the next phase of reporting and assurance. 

How BDO can help 

BDO works with organisations to strengthen governance and risk frameworks, improve the quality of climate disclosures, and better link reporting to strategy, financial outcomes and decision-making. We also support organisations in preparing for assurance, enhancing data quality and advancing emissions reporting. 

To discuss how your organisation can strengthen its climate reporting approach, please contact our sustainability reporting team.