Last updated: May 14, 2025
Your company is considered Group 3 if it meets two of these three criteria:
First reporting period: For annual reporting periods beginning on or after July 1, 2027.
Group 3 entities are only required to make climate-related financial disclosures if they face material climate-related risks or opportunities.
Establish governance processes, create management accountability, implement internal controls, and document decision-making processes.
Australia has implemented a comprehensive mandatory sustainability reporting framework that affects thousands of entities across the country. Group 3 entities represent the final phase in Australia's three-tiered approach to implementing mandatory climate-related financial disclosures.
Group 3 represents the final phase of Australia's three-tiered approach to implementing mandatory climate-related financial disclosures. These companies are defined as smaller organisations that still meet specific financial thresholds while being required to prepare and lodge financial reports under Chapter 2M of the Corporations Act 2001.
Your company is considered Group 3 if it meets two of these three criteria:
Note: Your company must also be required to prepare and lodge financial reports under Chapter 2M of the Corporations Act 2001.
Group 3 entities have the longest preparation runway among the three groups, giving your organisation time to implement proper systems and processes.
First reporting period: For annual reporting periods beginning on or after July 1, 2027
For organisations with standard financial year reporting (ending June 30), this means their first mandatory sustainability report would be due following the June 30, 2028 year-end.
Entities should recognise that this timeline, while seemingly distant, requires substantial preparation given the comprehensive nature of climate disclosure requirements
This timeline remains unchanged despite some adjustments made to the Group 1 schedule, which was delayed from the initial July 1, 2024 start date to January 1, 2025. The implementation period before Group 3 reporting becomes mandatory provides a valuable opportunity for smaller entities to observe best practices established by larger organisations in Groups 1 and 2.
Group 3 entities will need to prepare a standalone "Sustainability Report" that will become part of their annual reporting suite. This report will sit alongside the traditional financial report, directors' report, and audit report. The sustainability report must include climate-related financial disclosures in accordance with the Australian Sustainability Reporting Standards (ASRS) issued by the Australian Accounting Standards Board (AASB)
However, Group 3 companies have simplified reporting obligations compared to larger organisations, with key concessions to reduce the reporting burden.
The primary standard governing climate-related disclosures is AASB S2 Climate-related Disclosures, which aligns with the international IFRS S2 standard.
Group 3 entities benefit from a key concession in the form of a materiality exemption. Unlike larger entities in Groups 1 and 2, Group 3 entities are only required to make climate-related financial disclosures if they face material climate-related risks or opportunities.
If your company assesses that it does not have material climate-related risks or opportunities, it is only required to disclose a statement to that effect.
For Group 3 entities, a crucial first step will be developing a robust process for assessing the materiality of climate-related risks and opportunities. This assessment will determine whether the entity needs to provide full climate-related disclosures or simply a statement that no material risks or opportunities exist.
The materiality assessment should be thorough and documentable, as regulators may scrutinize determinations that climate risks are not material, especially in sectors known to be sensitive to climate change.
The Australian Securities and Investments Commission (ASIC) has emphasized the importance of director oversight in sustainability reporting. As indicated in their guidance published on March 31, 2025, directors should focus on establishing appropriate internal systems and critically reviewing climate-related disclosures.
For Group 3 entities, a crucial first step will be developing a robust process for assessing the materiality of climate-related risks and opportunities.
Even with the materiality exemption, Group 3 entities will need systems to:
organisations should evaluate their existing data collection processes and determine what additional systems might be needed to support sustainability reporting requirements.
The ASRS are the new standards for sustainability reporting in Australia, developed by the Australian Accounting Standards Board (AASB). They set out the requirements for climate and sustainability-related disclosures for entities captured under the Corporations Act.
AASB S2 is the specific Australian Sustainability Reporting Standard that mandates climate-related financial disclosures. It is based on the international IFRS S2 standard, adapted for the Australian context.
The Australian Securities and Investments Commission (ASIC) administers the sustainability reporting requirements under the Corporations Act.
Our team can help you develop a Climate Action Plan that meets B Corp requirements and drives meaningful environmental impact.
Your company is considered Group 3 if it meets two of these three criteria: consolidated revenue of $50 million or more, consolidated assets of $25 million or more at the end of the financial year, or more than 100 employees at the end of the financial year. Additionally, your company must be required to prepare and lodge financial reports under Chapter 2M of the Corporations Act 2001.
Group 3 companies need to prepare their first sustainability reports for annual reporting periods beginning on or after July 1, 2027. For organisations with standard financial year reporting (ending June 30), the first report would be due after June 30, 2028.
If your Group 3 company determines it has no material climate-related risks or opportunities, you only need to include a statement to that effect in your sustainability report. This is a key concession for smaller entities compared to Group 1 and 2 companies, which must provide comprehensive disclosures regardless of materiality assessment.
Start by establishing governance structures with board oversight, create management accountability for sustainability data, implement internal controls, and document your decision-making processes. While 2027 may seem distant, creating robust systems for assessment and reporting takes time, especially for first-time reporters.
CO₂ LAB's AI Sustainability Analyst can help you build the foundation for compliance with Australia's mandatory sustainability reporting framework.
