New research examining the preparedness of Australian entities and assurance providers for mandatory climate-related reporting presents an encouraging picture of progress, while highlighting areas where further work will be important as the regime expands.

The research found that most Group 1 entities are reasonably well prepared, with the 34 listed Group 1 entities that reported for the first time at 31 December 2025 achieving strong outcomes and aligning fully with AASB S2. No modified assurance conclusions were observed for these early reporters. Later Group 1 entities are also considered to have generally established the systems and processes needed, although many were waiting to learn from the experience of early reporters before finalising their own reports.

There is also evidence of a significant uplift in organisational capability. Almost all surveyed Group 1 entities had commenced collecting climate-related information, with many integrating climate-related risks into governance, risk management, strategy, metrics and targets. The research also found that the mandatory regime is prompting entities to deepen their understanding of climate risk and its implications for their businesses.

The picture is less developed for Groups 2 and 3, where preparedness is predominantly at an early or preparatory stage. Data availability, systems and internal skills are among the key challenges, while the research identifies a gap between entities’ own assessments of readiness and the perspective of their assurance provider. This suggests some entities may be underestimating the work required to achieve reporting and assurance readiness.

Across the market, current and anticipated financial effects, connectivity with financial statements, scenario analysis and Scope 3 emissions remain particularly challenging areas. Entities are seeking practical guidance, examples of acceptable reporting and more industry-specific, timely and accessible support to help translate the requirements of AASB S2 into practice.

The accompanying research into assurance preparedness is similarly positive for the largest providers. The largest 20 assurance providers appear well prepared and service the majority of Group 1 and Group 2 entities. However, preparedness is less developed among smaller and some mid-tier providers, particularly those serving later-phase Group 3 entities. Of the 309 identified assurance providers, 238 only have Group 3 clients, highlighting a potential capacity challenge as reporting requirements extend across the market.

Assurance providers are also building capability, with firms investing in tools, training and specialist expertise. However, they identify several challenging areas, including reasonable assurance over the more complex reporting areas, connectivity with financial statements and assurance over assessments that an entity has no material climate-related risks or opportunities. Independence considerations and the distinction between pre-assurance and consulting work also require further clarity.

Overall, the research suggests Australia is making a strong start. The experience of early Group 1 reporters provides an important foundation for those following, while the key priority now is ensuring that the lessons, guidance and capability developed during the first phase reach Groups 2 and 3 in time. Continued collaboration, practical guidance and early engagement between entities and assurance providers will be important to support consistent, high-quality implementation as the regime expands.