While Group 1 entities are starting to report, many other organisations will use 2026 to start preparing for mandatory sustainability disclosures in the years ahead.

For Group 2 and 3 entities, 2026 is a critical preparation year. This is when the governance, data and reporting foundations will be built to support repeatable, assurance‑ready disclosures that can withstand increasing levels of scrutiny.

This article, based on the January Sustainability webinar, outlines what’s changing in 2026 and what organisations should be focusing on now to prepare with confidence.

What’s changing in 2026

In 2026, expectations are maturing quickly. Sustainability reporting is continuing to shift from a standalone exercise to something that is more integrated, data‑driven and closely linked to financial outcomes and long‑term value. Boards and finance teams are increasingly including climate‑related information as part of the broader organisational story about performance, risk, resilience and long‑term outlook.

For many organisations, this means sustainability information is increasingly expected to:

• Demonstrate clear links to financial performance and long-term outlook
• Be supported by consistent, traceable data and documented processes
• Withstand increasing scrutiny from auditors, regulators and other stakeholders.

The reality is that at the same time, assurance expectations are becoming clearer. Recent Illustrative Corporations Act Sustainability Assurance Reports show how assurance will be phased in, progressing from reviews (Limited assurance) to more detailed audits (reasonable assurance) in future years. Even so, in early reporting years, assurance providers still read the whole sustainability report to ensure the information is consistent and not materially misstated.

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Using illustrative reports to support early-stage sustainability reporting

To support preparers, illustrative sustainability reports, like this one from BDO, show how sustainability reporting can be approached. These examples help organisations translate reporting requirements into practical structures for disclosures, documentation and evidence, particularly where internal capabilities are still developing.

Global developments are still shaping local expectations

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At the same time, recent amendments to Australia’s climate-related disclosure requirements are helping to clarify how this information should be prepared. These changes, which align closely with international standards, reduce unnecessary complexity, especially around greenhouse gas emission disclosures. With ongoing global developments, these changes bring greater comparability and consistency in sustainability information for investors and other primary users, a trend that will continue in 2026 and beyond.

What “assurance‑ready” means for first‑time reporters

One of the biggest changes in 2026 is that sustainability reporting moves from simply getting something on the page to being able to stand behind what’s reported. Being “assurance‑ready” in 2026 doesn’t mean having perfect data or a full audit – it means being able to explain, support and evidence your disclosures.

Even where assurance remains limited in the early years, organisations should expect reviewers to look for clear documentation, traceable data and consistent approaches that can be applied year after year. In practice, assurance providers will still read the full sustainability report and test whether the information makes sense and is not materially misstated.

To meet these expectations, many organisations should use 2026 as a time to build or strengthen a small number of practical foundations, including:

• A clearly defined organisational boundary supported by a Boundary Setting Policy
• A documented Basis of Preparation for Scope 1, 2 and 3 emissions that should be updated year to year
• Clear reconciliation between emissions activity data and the general ledger of the organisation
• Transparent documentation of assumptions, calculations and data sources.

Tip: Starting this work early can make future assurance processes much more efficient.

For an in-depth look at what auditors will expect and how to prepare your disclosures, systems and documentation, read Ensuring your mandatory sustainability report is assurance-ready.

Group 2 and 3 preparations in 2026

While Group 1 entities refine and strengthen their approach after the first reporting cycle, 2026 is a pivotal year for Group 2 and 3 entities preparing to enter the mandatory reporting regime. Under the reporting timeline:

• Group 2 entities will be required to begin sustainability reporting for financial years starting on or after 1 July 2026.
• Group 3 entities will follow the next year, from 1 July 2027.

The priority for the first year of reporting should be on building the right foundations to support sustainable reporting processes for years to come. Organisations that transition well will use 2026 to put the basics in place – setting governance, confirming reporting boundaries, improving data processes and documenting key decisions. That groundwork makes reporting easier to repeat and puts organisations in a much stronger position in the coming years, when assurance really counts.

Materiality: applying the two‑step approach early

Under AASB S2, materiality is assessed using a two‑step approach.

Step 1: Organisations identify climate‑related risks and opportunities that could reasonably be expected to affect their prospects, i.e. prospects assessment.

Step 2: They determine what information about those risks and opportunities is material and needs to be disclosed, i.e. materiality assessment.

Understanding this distinction early helps organisations focus their efforts appropriately, even before detailed materiality assessments are performed.

What organisations should focus on in 2026

For Group 1 entities, 2026 is a chance to build on what they have already started. The focus should be on using the year to put better controls in place, strengthen oversight and make reporting more consistent from year to year. Doing this early has many benefits, including building trust with stakeholders and reducing the risk of last-minute issues.

For Group 2 and 3 entities, key actions for the year ahead should include:

• Confirming whether your organisation is Group 2 or Group 3 and then determining when reporting begins.
• Establishing or improving governance and risk management structures for climate reporting
• Developing core carbon accounting documentation early
• Conducting an initial climate risk and opportunity assessment across the value chain.

Whilst doing this, organisations should document processes, decisions and assumptions. BDO’s experience working with organisations at different stages of the reporting journey shows that those who prioritise governance, traceability and consistency early are better placed to manage increasing scrutiny over time.

How BDO can help

As sustainability reporting becomes more embedded and assurance expectations increase, organisations need reporting that is robust, repeatable and defensible. BDO’s sustainability reporting specialists help organisations assess readiness, strengthen governance processes and build reporting that stands up to scrutiny.