AASB S2 is Australia’s mandatory standard requiring companies to disclose how climate‑related risks and opportunities could affect their business and financial performance. Introduced to align with global ISSB rules, it ensures investors receive consistent, reliable climate information that influences financial decision‑making. 

With the first wave of mandatory climate disclosures from Australia’s largest companies reporting under the Corporations Act currently hitting the market in early 2026, sustainability reporting has officially moved from a “nice-to-have” to a regulatory baseline. 

For not-for-profits (NFPs), the introduction of the Australian Sustainability Reporting Standards – specifically AASB S2: Climate-related Disclosures – presents a unique mix of exemptions, hidden obligations and strategic opportunities. Here is what your board and management team need to know right now. 

What is AASB S2? 

AASB S2 is the mandatory standard requiring entities to disclose their climate-related risks and opportunities. Broadly aligned with global standards, it requires organizations to report on four core pillars: 

• Governance: The processes and controls used to monitor climate risks. 

• Strategy: How climate impacts the organisation’s operating model and transition plans. 

• Risk Management: How climate risks are identified, assessed, and prioritised. 

• Metrics and Targets: Quantitative data, including Scope 1, Scope 2, and eventually Scope 3 greenhouse gas (GHG) emissions. 

While Group 1 entities (Australia’s largest corporations and emitters) commenced reporting for financial years starting January 1, 2025, Group 2 and Group 3 entities are being phased in from July 1, 2026, and July 1, 2027, respectively. 

Are Not-for-Profits Caught in the Net? 

For the NFP sector, the application of AASB S2 is nuanced. The mandatory reporting trigger applies to entities required to lodge financial reports under Chapter 2M of the Corporations Act. 

Here is how this impacts your organisation: 

The ACNC Charity Exemption  

If your organization is a charity registered with the Australian Charities and Not-for-profits Commission (ACNC), you do not lodge financial reports under Chapter 2M of the Corporations Act. Therefore, ACNC-registered charities are currently exempt from the mandatory sustainability reporting regime.

However, as climate‑related disclosure becomes more widespread across sectors, some donors and stakeholders are increasingly expecting not‑for‑profits to demonstrate transparency around their emissions and broader environmental impacts. Since formal reporting requirements may extend to NFPs over time, getting started early can help organisations build capability, reduce future compliance pressure and meet emerging stakeholder expectations. 

The Trap for NFPs that are not ACNC charities 

If your NFP is structured as a company limited by guarantee, is not registered with the ACNC, and lodges under Chapter 2M, you will be required to prepare a mandatory sustainability report if you meet the size thresholds listed below:  

		At least two of the following criteria
Group	First annual reporting period on or after	Employees	Consolidated assets	Consolidated revenue
1	1 Jan 2025	More than 500	$1 billion or more		$500 million or more
2	1 July 2026	More than 250	$500 million or more		$200 million or more
3	1 July 2027	More than 100	$25 million or more		$50 million or more

For example, a Group 3 entity with a 30 June financial year will be required to include a sustainability report in its 30 June 2028 financial reporting.

 

The “Trickle-Down” Effect (Scope 3 Emissions) 

Even if your NFP is completely exempt from mandatory reporting, you will likely still feel the impact of AASB S2 through your value chain in the near future.  

It is expected that corporate and government organisations will increasingly be requesting baseline emissions data from the NFPs they fund or partner with. Businesses, major donors, government grantors, and financial institutions are all subject to these rules. Under AASB S2, these larger entities must eventually report on their Scope 3 emissions (emissions up and down their value chain). 

If your NFP cannot provide this data, it may soon become a competitive disadvantage when applying for grants or seeking corporate sponsorships. 

What Should NFP Boards Do Now? 

If your organization is an ACNC-registered charity, you have likely breathed a sigh of relief knowing you are currently exempt from the mandatory AASB S2 climate reporting rollout. None the less, we recommend you adopt a “right-sized” approach in ensuring your organisation remains prepared: 

• Confirm Your Status: Review your corporate structure and lodging requirements to confirm definitively whether you fall into a mandatory reporting group. 
• Assess Your Value Chain: Consider reaching out to your major corporate donors, philanthropic partners, and government grantors to understand what climate data they will be expecting from you in the next 12–24 months. 
• Start Gathering Baseline Data: Begin identifying your Scope 1 and Scope 2 emissions (e.g. fuel for fleet vehicles, electricity for offices). You do not need a perfect system on day one, but having a baseline is critical for answering funder questionnaires. 
• Review Governance: Ensure climate risk is a standing item on your Board or Risk Committee agenda. 

 

How We Can Help 

While the immediate compliance burden of AASB S2 may not directly apply to all NFP and charity organisations, the broader shift toward climate accountability will undoubtedly shape future funding expectations, risk management and operational strategies across the sector. 

Whether you need to confirm your legal reporting obligations, or are interested in exploring voluntary sustainability reporting, contact us to talk to Jeff Tulk or Calvin Ho to discuss how these developments may apply to you.