If your business doesn’t run factories, doesn’t move freight, and doesn’t touch a “dirty” supply chain in any way you can see, it’s tempting to assume your first evolution of AASB S2 reporting will be a formality. It won’t be. AASB S2 reporting applies the same core requirements to every in-scope entity, regardless of industry or perceived complexity. For IT and professional services firms in particular, that fact catches a lot of first-time reporters off guard, and it’s one of the most expensive assumptions a business can make going into its first reporting period.
Does AASB S2 apply the same way to every industry?
Yes. AASB S2, part of Australia’s mandatory Sustainability Reporting Standards (ASRS), doesn’t scale its requirements to how “simple” your operations feel from the inside. Whether you’re a logistics company with visible emissions sources or a software business with a handful of leased offices and a cloud subscription, the standard asks the same core questions: what are your climate-related risks and opportunities, how do they affect your strategy and financials, and what are your Scope 1, 2 and 3 emissions.
That last one, Scope 3, is where most IT and services businesses get caught out.
Which businesses fall into ASRS Group 2 and Group 3?
Australia’s climate reporting regime is phased across three groups by size. Group 1, the largest listed companies and major emitters, started reporting from FY2025. Group 2 entities began their first reporting period from 1 July 2026, and Group 3 follows from 1 July 2027.
This phasing matters for who’s reading this. Group 1 captures Australia’s largest companies, sitting at the top end of the ASX where Financials and Materials giants dominate. Group 2 and 3 thresholds are lower, and that’s where a very different mix of businesses sits: mid-sized and smaller ASX-listed companies, alongside large proprietary companies that have never been public at all.
Look at where the ASX 300’s smaller and mid-cap companies cluster, rather than its handful of mega-caps, and a few sectors stand out for having a deep bench of businesses likely to fall into Group 2 or 3: information technology and software, real estate and property management (particularly smaller REITs and fund managers), healthcare services, diversified financial services (insurance broking, wealth and asset management), legal, and industrials and business services. These sectors have many mid and small cap companies rather than a handful of dominant names, so a larger share of them are likely to be first-time reporters when their group’s threshold lands, rather than already-experienced Group 1 veterans.
Exactly which group your business falls into depends on your own revenue, assets and headcount against the published thresholds, not your sector. If you’re unsure which group applies to you, that’s a conversation for your accountant or reporting advisor, not something to assume from an article like this one.
Why Scope 3 emissions reporting is the real challenge for services firms
Many service-based organisations assume their emissions footprint is minimal because they don’t manufacture anything. But Scope 3 emissions, meaning the emissions occurring across your value chain both upstream and downstream, typically make up the largest share of a services firm’s footprint, not the smallest.
For an many mid-cap business, Scope 3 emissions reporting typically covers:
- Cloud and data centre usage.
Every workload you run on a hyperscaler’s infrastructure carries an emissions footprint, and getting reliable, disaggregated data out of providers is often harder than people expect. - Purchased goods and services.
Software licences, hardware procurement, and third-party contractors all sit inside your value chain. - Employee commuting and business travel.
Distributed and hybrid workforces make this genuinely difficult to estimate without proper data collection in place. - Financed or investment-related emissions,
if the business holds any investments or a client portfolio it’s materially connected to.
None of this is intuitive to quantify, and very little of it lives in a system your finance team already has open.
Why first-time AASB S2 reporting can cost more for “simple” businesses
There’s a structural irony here. The businesses that assume they’ll have an easy time are often the ones with the least existing infrastructure to draw on. A manufacturer may already track energy and materials data for cost reasons. Miners are well accustomed to the rigours of emission and climate reporting. A services firm frequently has none of that: no established data collection process, no prior emissions inventory, no internal owner for the task.
That means first-time AASB S2 reporting for a “simple” IT or services business often means building measurement and governance capability from the ground up, under time pressure, against a mandatory deadline. That’s where costs escalate. Not in the reporting itself, but in the scramble to get reliable data before you can report anything at all.
How to prepare for AASB S2 reporting before your reporting period starts
The organisations that manage AASB S2 well aren’t necessarily the ones with the simplest operations. They’re the ones that started early enough to map their value chain, put data collection in place before the deadline, and work out which climate-related risks are genuinely material to their business.
If you’re a Group 2 or Group 3 entity, particularly in IT, real estate, healthcare, financial services or industrials, the most useful thing you can do right now is get a clear-eyed view of your current readiness, well before your reporting period arrives.
We’ve put together an ASRS Readiness Checklist to help sustainability and finance teams identify the gaps most likely to cause delays or cost blowouts, before they become deadline-week problems.
If that’s not enough, you can reach out to one of our experienced consults and get a free 30 minute call and proposal (if you need one).
Frequently asked questions
Does AASB S2 apply to small or “simple” IT businesses?
If your business meets the size thresholds for Group 2 or Group 3 under the Corporations Act, AASB S2 applies regardless of how simple your operations feel. The standard doesn’t distinguish between industries or perceived complexity.
Why is Scope 3 reporting hard for IT and services companies?
Because most of a services firm’s emissions sit outside its direct operations, in cloud and data centre usage, purchased goods and services, employee travel, and financed emissions, all of which require data most businesses haven’t collected before.
When do Group 2 and Group 3 businesses need to start AASB S2 reporting?
Group 2 entities began their first reporting period from 1 July 2026. Group 3 entities begin from 1 July 2027.