Australia is considering changes to its mandatory climate reporting regime that could reduce compliance costs for reporting companies and businesses across their supply chains.

On August 23, 2026, the Australian Treasury opened a consultation on measures intended to improve the efficiency of climate-related financial disclosures. The proposals focus primarily on assurance requirements, clearer guidance for applying existing reporting concepts, and the burden created by climate data requests across supply chains.

The consultation closes on October 2, 2026.

Importantly, the consultation does not suspend or replace Australia's existing mandatory climate reporting requirements. The options under consideration have not yet received Government approval, and Treasury has stated that the proposed changes will not affect entities reporting for the 2026-27 financial year.

Why Australia Is Reviewing the Current Framework

Australia's mandatory climate reporting framework began applying to the country's largest reporting entities for financial years beginning on or after January 1, 2025.

The requirements are being introduced in phases:

• Group 1: Financial years beginning on or after January 1, 2025

• Group 2: Financial years beginning on or after July 1, 2026

• Group 3: Financial years beginning on or after July 1, 2027

In-scope entities are required to prepare climate-related financial disclosures in accordance with AASB S2 Climate-related Disclosures, the Australian Accounting Standards Board's climate reporting standard.

As implementation progresses, the policy discussion is increasingly focused on how Australia can maintain credible, comparable climate information while reducing unnecessary compliance costs.

Treasury's current consultation therefore focuses less on whether climate reporting should exist and more on how the framework can operate more efficiently.

Assurance Requirements Could Become Less Burdensome

One of the most significant areas under review is external assurance. Australia's current framework phases assurance requirements in over time, with different categories of climate information moving from no assurance or limited assurance toward reasonable assurance. Under the existing legislation, sustainability reports for financial years beginning on or after July 1, 2030 are required to be audited.

Limited assurance generally involves less extensive testing and provides a lower level of assurance than reasonable assurance. Reasonable assurance requires more extensive evidence, controls, documentation and auditor testing, making it closer to the assurance provided over traditional financial statements.

Treasury is considering several alternatives to the current pathway, including:

• Retaining limited assurance as the ongoing mandatory standard rather than ultimately requiring reasonable assurance across the full sustainability report.

• Delaying the broader transition to reasonable assurance from 2030 to 2035.

• Introducing a two-tier model under which more established metrics could eventually receive reasonable assurance while less mature or more estimation-dependent disclosures remain subject to limited assurance.

A two-tier model could be particularly relevant for greenhouse gas emissions reporting. Scope 1 and Scope 2 emissions are generally based on information that companies can measure more directly, while Scope 3 emissions often depend on estimates, third-party information and data from companies outside the reporting entity's direct control.

Changes to the assurance pathway could therefore have meaningful implications for reporting costs, audit preparation, internal controls and data collection systems.

Scope 3 Supplier Requests Are a Key Area of Concern

Treasury is also examining the indirect compliance burden associated with Scope 3 greenhouse gas emissions.

Scope 1 emissions are direct emissions from sources owned or controlled by a company. Scope 2 emissions generally arise from purchased electricity and energy. Scope 3 emissions cover other indirect emissions across a company's value chain, potentially including suppliers, transportation, business travel, employee commuting, investments and the use of sold products.

Under AASB S2, companies reporting Scope 3 emissions must consider their broader value chains. However, the standard also recognizes practical limitations by allowing companies to rely on reasonable and supportable information that is available without undue cost or effort.

Australia's mandatory Scope 3 disclosures have not yet appeared in published reporting because entities generally begin reporting Scope 3 emissions from their second reporting year. Treasury's concerns about supplier burdens are therefore partly preventative and informed by experience with climate and sustainability reporting frameworks in other jurisdictions.

In practice, value-chain reporting can result in large companies requesting increasingly detailed emissions and environmental information from suppliers, including smaller businesses that are not themselves directly subject to mandatory climate reporting.

Treasury is seeking feedback on whether clearer boundaries should be established around what constitutes a reasonable request for information from suppliers.

Potential measures include additional guidance for companies requesting Scope 3 information and improving access to publicly available Australian emissions factors. Better access to reputable domestic emissions factors could allow companies to estimate certain categories of emissions without requiring extensive primary data directly from smaller suppliers.

This could be particularly significant for small and medium-sized enterprises, or SMEs. Even when an SME falls outside Australia's direct climate reporting requirements, it may still experience reporting pressure because it forms part of the supply chain of a larger in-scope company.

Treasury May Clarify Existing Reporting Flexibilities

The consultation also considers whether companies need clearer guidance on concepts already contained within Australia's climate reporting framework.

Treasury is considering additional guidance on how businesses should interpret terms such as "reasonable and supportable information" and "without undue cost or effort."

These concepts are important because they recognize that climate reporting, particularly Scope 3 emissions measurement and climate scenario analysis, may involve information that is difficult, costly or impossible to obtain with complete precision.

Treasury is also examining whether additional guidance would help companies assess circumstances in which they determine that they have no material climate-related risks or opportunities.

Additional workshops, educational materials and implementation guidance could help reporting entities better understand where proportionality and flexibility already exist within the framework.

This means that some of Australia's potential reforms may ultimately involve improving how existing rules are interpreted and implemented rather than significantly changing the underlying disclosure standard.

What Companies Should Do Now

Companies should not treat the consultation as a change to their current reporting obligations.

Treasury has made clear that the options under consideration have not received Government approval and that the changes being considered will not affect entities reporting for the 2026-27 financial year. Any future reforms are expected to be sequenced in a way that minimizes disruption for organizations that have already invested in reporting systems, data collection and assurance preparations.

Companies currently preparing for Australian climate reporting should therefore continue working toward the requirements that apply under the existing framework. At the same time, the consultation is worth monitoring closely.

Changes to assurance requirements could affect reporting budgets, audit planning, internal control development and the level of evidence companies need to maintain. Changes to Scope 3 guidance could influence supplier engagement strategies and determine how much primary environmental data companies are expected to request from their value chains.

For companies outside the direct reporting thresholds, particularly suppliers to large Australian businesses, the Scope 3 proposals could be equally important. Clearer expectations for value-chain information requests may reduce some of the indirect compliance burden created by mandatory reporting.

Reporting Thresholds May Also Evolve

Separately, Australia's 2026-27 Budget included plans to increase the financial thresholds used to determine whether a proprietary company is considered "large."

The proposed thresholds would increase to A$100 million in revenue and A$50 million in assets. If implemented as proposed, the changes could remove some smaller Group 3 entities from mandatory sustainability reporting.

The timing and final implementation of those threshold changes remain subject to the legislative process, so companies should not assume that their reporting status has changed based on the Budget announcement alone.

What This Means for the Broader ESG Landscape

Australia's consultation reflects a wider trend across environmental, social and governance, or ESG, regulation globally.

Governments are increasingly reassessing how sustainability reporting regimes can provide investors and other stakeholders with useful, comparable information without creating disproportionate implementation costs.

For Australian companies, the overall direction remains toward mandatory climate transparency. The more significant question is how burdensome the supporting compliance infrastructure will ultimately become.

The consultation could result in a less costly assurance pathway, clearer expectations for Scope 3 supplier data, and greater flexibility in how companies apply certain elements of the climate reporting standards. It does not, however, represent a retreat from mandatory climate reporting itself.

Stakeholders have until October 2, 2026 to provide feedback to the Australian Treasury.