Australia’s first mandatory sustainability reports are in, and the regulator has read them. ASIC published early observations on that first wave — 259 reports lodged as at early May 2026 for the year ending 31 December 2025, from 34 listed and 225 unlisted entities. With 30 June 2026 balance dates now closed and the next round of reports in preparation, those observations matter more now than when they landed. ASIC noted the quantity and quality of climate disclosure has lifted on the old voluntary regime — but read closely, its observations are effectively a list of what it will not accept second time around.
Here are the six things it flagged — and why they matter even if your business is too small to report.
The six things ASIC pushed back on
1. Disclaimers that undercut the report. Some entities added disclaimers telling readers not to rely on the report for investment decisions, or disclaiming responsibility for accuracy. ASIC’s position: disclaimers that “conflict with the statutory framework and objectives of Chapter 2M” may confuse or mislead, and are not permitted. A sustainability report is a statutory document, not a marketing brochure with a liability shield.
2. Ignoring your own weather history. Several reports failed to connect previously disclosed financial impacts from extreme weather to their climate-risk assessment. AASB S2 requires you to weigh “past events, current conditions and forecast future conditions.” If a flood hit your numbers last year, it belongs in your risk analysis this year.
3. Assumptions with no reasoning. Judgements and estimates showed up without the thinking behind them — including how proportionality provisions were applied. If a reader can’t see the basis for a figure, the disclosure hasn’t done its job.
4. Burying the mandatory in the voluntary. Required disclosures were blended into voluntary commentary until the material information was hard to find. Extra context is welcome; it can’t obscure what the standard actually requires.
5. Cross-references that go nowhere useful. Links to external websites or to “somewhere in another report” don’t cut it. AASB S2 wants cross-references to sections that are precisely identified, and referenced reports should be lodged with ASIC.
6. Defining targets too narrowly. Some entities counted only their voluntary targets and missed ones imposed by law or regulation — including the Safeguard Mechanism and legislated emissions targets. If a target is a legal obligation, it has to be disclosed.
Why this matters if you don’t report
Plenty of small and medium businesses read that list and think: not my problem, I’m under the threshold. Here’s the catch. Climate reporting captures Scope 3 — the emissions running up and down the value chain. Large reporting entities can’t produce those numbers on their own, so they turn to their suppliers and customers for primary data.
Translation: even if you have no direct obligation, your bigger customers increasingly have to ask you for emissions and sustainability information — and they need it to hold up. Being the supplier who can answer cleanly, with defensible numbers, is quickly becoming part of keeping the contract. The businesses that get ahead of this look like easy partners; the ones that can’t will slow their customers’ compliance down.
There is relief on the horizon for smaller companies — the government has signalled it wants to ease the burden and limit what large customers can demand from suppliers. But that is still a proposal, and it won’t erase the underlying question your customers are asking.
Where this leaves you
If you report, ASIC has just handed you a pre-mortem: fix these six before 30 June. If you don’t report but you supply someone who does, the smart move is to know what “good” looks like now, so the request — when it lands — is a quick yes rather than a scramble.
Either way, ASIC’s final observations are due in the second half of 2026. The bar only goes up from here. If you want to work out where your business sits in the value chain and what you’ll realistically be asked for, that’s a conversation the Augmented Audit Co team is built for.