ReGen Strategic
As many Australian businesses prepare for their first mandatory AASB S2 sustainability report in 2026, many are overlooking a key detail that could cause serious compliance issues - and financial surprises.
Under ASIC’s Regulatory Guide 280 (issued March 2025), one of the most critical aspects of sustainability reporting is the concept of “crystallisation” and it happens at the end of the financial year, not at the beginning.
If you’re a CFO, board member, or director of an Australian business operating on a financial fiscal cycle, this is a potential blind spot that could expose your organisation to unnecessary regulatory risk.
What does “crystallisation” mean for you?
Under RG 280.34, ASIC clearly states:
“The sustainability reporting requirements crystallise at the end of the financial year. Entities should establish adequate systems to assess whether they may be required to prepare a sustainability report, even if they do not meet the sustainability reporting thresholds at the commencement of that financial year.”
What does this mean for businesses preparing their first AASB S2 report in 2026?
You might not be in scope at the start of the financial year, but you could be by the end and this “crystallisation” of your reporting obligation is what most businesses miss. If an acquisition, restructure, or significant market shift pushes you over the threshold mid-year, you’ll be legally required to produce a full AASB S2 report for that financial period even if you only realised the change in status in the last quarter of the year.
Why this matters: the “adequate systems” requirement
ASIC’s expectation is clear: you need to have systems in place before you know you’ll be in scope.
If a major acquisition or restructure pushes your company into the Group 1 reporting status during the financial year, you’ll be required to report, but it is very likely you won’t have the time to build a reporting system at the last minute. The reporting obligation crystallises when you go over the threshold, not when you planned for it.
The key message is this: you must have an “adequate system” to produce a sustainability report even before you know whether you will fall into scope for AASB S2 at the end of the year. This means:
- You need to have the infrastructure or tool to measure Scope 1, Scope 2, and Scope 3 emissions.
- You must be able to assess climate-related financial disclosures, risk management, and resilience metrics.
- Your systems need to be ready for assurance under AASB S2.
- You need to act now, rather than waiting for that end-of-year decision.
The hidden risk: acquisitions and restructures
For many businesses, the most common reason for unexpectedly crossing into Group 1 status is acquisitions. If a merger or acquisition pushes your organisation’s revenue, emissions, or operational footprint past the AASB S2 thresholds, you’ll have to report under the new requirements, and you may not even realise this is happening until mid-year.
For example:
- If your company acquires another business that increases revenue or impacts emissions, you may be forced to prepare a sustainability report.
- A corporate restructure could also reclassify your group’s business model, triggering the need to disclose previously unforeseen risks, targets, and governance structures.
- Changes in market conditions such as the introduction of new regulations or shifts in consumer demand could also increase your emissions profile or risk exposure.
These mid-year events could tip you into the Group 1 reporting category but unless you have the right system in place to respond quickly, you won’t be able to meet AASB S2’s stringent disclosure requirements.
What “adequate systems” really means
ASIC’s RG 280.34 isn’t just a suggestion - it’s a directive to prepare now. The systems you need in place to meet AASB S2 compliance include:
Emissions Measurement and Data Collection
You must have the ability to accurately measure and report emissions across your Scope 1, Scope 2, and Scope 3 emissions. This includes direct emissions from your operations, emissions from purchased energy, and emissions from your supply chain.
Governance and Risk Management Systems
Your company should be able to assess and disclose your climate-related risks and opportunities, as well as demonstrate your governance framework for managing these risks.
Assurance-Ready Reporting
AASB S2 requires independent assurance of your sustainability report. This means robust internal controls, documented processes, and evidence to back up your claims. Systems must be built to support this level of scrutiny.
Flexibility to Adapt Quickly
If you go into scope during the year i.e. after an acquisition, restructure, or significant market shift your systems should be able to respond instantly. You need to avoid scrambling to set up reporting capabilities after the fact.
How ReGen Strategic Can Help You Meet This Challenge
At ReGen, we’ve partnered with Avetta to offer a solution that’s designed to help you meet these requirements right out of the box.
Our solution ensures that your organisation can:
- Accurately measure GHG emissions.
- Adopt a system that is ready for independent assurance.
- Respond to any changes during the year that may push you into scope.
With our system, you can ensure compliance now, rather than risk being caught out with an inadequate reporting system when the year ends.
What this means for Boards and Executives
For boards, CFOs, and directors - you can’t afford to wait.
If you’re operating near the threshold, or if you’re undergoing any transactions, restructures, or changes in market conditions, you need to act now to ensure you have systems in place that can handle AASB S2 reporting.
Because the risk of crystallisation is real, and it’s something you won’t know until it’s too late.
Want to Learn More?
Reach out to ReGen today to understand how we can help you prepare for AASB S2 compliance in 2026 before you find yourself scrambling at the end of the financial year.