AASB S2 does not suddenly require every Australian supplier to publish a climate report.
It does something more commercially immediate: it requires large reporting entities to understand climate-related risks, opportunities and greenhouse gas emissions across their value chains. Those entities will ask suppliers for data.
Wholesalers and distributors can therefore be affected in two ways:
- The company may meet the legal thresholds and need to prepare its own sustainability report.
- Its larger customers may report under the regime and request better information about purchased products, freight, packaging and suppliers.
The second effect reaches much further than the first.
If your customer needs purchased-goods emissions, a corporate statement that "sustainability is important to us" is not useful. They need numbers, units, boundaries, methods and evidence that connect to what they bought.
What AASB S2 is
AASB S2 Climate-related Disclosures is the Australian sustainability standard for climate-related financial disclosure.
It requires an entity within scope to disclose material information about climate-related risks and opportunities that could reasonably be expected to affect its prospects. The disclosures cover:
- Governance
- Strategy
- Risk management
- Metrics and targets
The sustainability report sits within Australia's mandatory reporting framework under the Corporations Act. ASIC regulates the regime.
Climate is currently the required subject. This is not a general licence to label any ESG metric as AASB S2 reporting.
Who must report, and when?
An entity needs to meet the legal conditions, including being a Chapter 2M reporting entity, as well as the applicable size or NGER-related criteria. The following is a practical summary, not legal advice.
Group 1
First annual reporting periods beginning from 1 January 2025 to 30 June 2026. An entity can be in Group 1 if it meets at least two of:
- Consolidated revenue of $500 million or more
- Consolidated gross assets of $1 billion or more
- 500 or more employees
Relevant large NGER reporters can also be included under the legislation's criteria.
Group 2
First annual reporting periods beginning from 1 July 2026 to 30 June 2027. An entity can be in Group 2 if it meets at least two of:
- Consolidated revenue of $200 million or more
- Consolidated gross assets of $500 million or more
- 250 or more employees
Group 2 also brings in other specified entities, including remaining NGER reporters and asset owners meeting the applicable $5 billion threshold.
Group 3
First annual reporting periods beginning on or after 1 July 2027. An entity can be in Group 3 if it meets at least two of:
- Consolidated revenue of $50 million or more
- Consolidated gross assets of $25 million or more
- 100 or more employees
Check the current Corporations Act provisions and ASIC guidance against the entity's structure and financial year. Do not decide scope from a blog article or one revenue number.
Group 3 also has a specific proportionality mechanism. If a Group 3 entity determines that it has no material financial risks or opportunities relating to climate for the period, its climate statements can explain that determination instead of presenting the full set of disclosures. The assessment still needs to be made in accordance with AASB S2; "we are small" is not the test.
Why suppliers outside the thresholds still care
A reporting customer needs information about its value chain.
For a bank, retailer, manufacturer, government contractor or large corporate buyer, climate exposure can sit in:
- Purchased goods and services
- Capital goods
- Freight and distribution
- Product use
- End of life
- Supplier transition risk
- Concentration in vulnerable locations
The customer may therefore add climate questions to:
- Supplier onboarding
- Tender schedules
- Contracts
- Annual questionnaires
- Product data requests
- Category reviews
- Procurement scorecards
A supplier does not need to be directly regulated for these requests to become commercially important.
This is the pattern to understand: reporting obligation → buyer data need → supplier requirement.
AASB S2 and Scope 3 emissions
Scope 3 covers indirect value-chain emissions outside a company's Scope 1 and 2 inventory.
For many product businesses, purchased goods and services are material. The buyer may currently estimate these emissions using spend multiplied by an industry-average factor. That is relatively easy but poor at distinguishing between two products with the same price.
Better methods can use:
- Product mass and material factors
- Supplier-specific cradle-to-gate data
- Product carbon footprints
- Hybrid methods combining primary and secondary data
AASB S2 gives priority to higher-quality measurement inputs where they are available and practical. Supplier-specific information can be more representative of the actual transaction than broad averages. That creates an incentive for buyers to improve data over time.
The first-year Scope 3 relief
AASB S2 includes transition relief so an entity is not required to disclose Scope 3 greenhouse gas emissions in its first annual reporting period applying the standard.
This is a delay, not a cancellation.
Reporting entities still need to build governance, strategy, risk management and other metrics. They also need enough preparation to calculate and disclose Scope 3 after the relief period.
Suppliers should not interpret first-year relief as permission to wait. Data collection, supplier engagement and product mapping take time. A buyer that starts requesting information only after the relief ends will be late.
What customers are likely to ask suppliers
Requests will vary in maturity.
Basic company information
- Scope 1 and 2 emissions
- Relevant Scope 3 categories
- Reporting year and boundary
- Calculation standard
- Climate targets
- Renewable electricity information
- Transition plan
Product and order information
- Product carbon footprint per saleable unit
- Cradle-to-gate boundary
- Materials and weights
- Manufacturing country or site
- Product and distribution packaging
- Inbound or outbound freight
- Quantity purchased
- Calculation method and date
Risk information
- Exposure to climate hazards
- Reliance on vulnerable materials or locations
- Supplier concentration
- Transition risks from regulation or technology
- Adaptation and continuity measures
Do not promise all of this in the first response. Establish a controlled data set and explain its limitations.
Product carbon footprints and purchased goods
The GHG Protocol's supplier-specific method for purchased goods uses cradle-to-gate greenhouse gas data from suppliers for the products purchased.
That does not mean any number labelled "product footprint" is fit for purpose. The record should include:
- The product or declared unit
- Lifecycle boundary
- Included gases and stages
- Primary and secondary data
- Emission-factor sources
- Allocation method
- Exclusions
- Reporting period
- Verification status, if any
The buyer also needs to map the result to purchasing quantity. A footprint per individual liner cannot be multiplied by the number of cartons unless the pack relationship is known. The data model must connect product identity, unit and order.
What wholesalers and distributors should do now
1. Determine whether the company is directly in scope
Work with finance, legal and assurance advisers. Check entity type, consolidated group, revenue, assets and employees, NGER status, financial year and reporting group. Document the conclusion and review it annually.
2. Map customers likely to report
Identify large customers, listed entities, financial institutions, NGER reporters and major government contractors.
Ask account teams:
- Which tenders already include climate schedules?
- Which customers request emissions data?
- Which have supplier portals?
- What contractual requirements are appearing?
This creates a commercial priority list.
3. Establish a corporate inventory
Even if the immediate request is product data, customers may ask for company emissions and targets. Define organisational boundary, operational boundary, base year, data owners, emission-factor sources, recalculation policy, and review and assurance plan. Avoid mixing the distributor's corporate footprint with a product footprint. They serve different purposes.
4. Build a product data model
For purchased-goods data, capture:
- Stable SKU
- Supplier and manufacturer
- Saleable unit and pack hierarchy
- Materials and weights
- Manufacturing geography
- Packaging
- Freight assumptions
- Product footprint and boundary
- Source and data-quality status
Start with the categories that dominate customer spend or emissions.
5. Set a data-quality ladder
Not every product will have verified primary data. Use clear levels, for example:
- Supplier-specific, independently verified product data
- Supplier-specific product data not independently verified
- Activity-based model using product attributes
- Category-average estimate
- Spend-based estimate
- Unknown
The labels should be visible to internal users and customers. Data quality can improve without rewriting history.
6. Put climate fields into procurement
Supplier data collection should become part of onboarding and range review. Request information in a standard format, define evidence requirements and avoid asking for the same document through five teams.
Contract terms may cover:
- Data provision
- Method changes
- Evidence retention
- Notification of product or factory changes
- Right to query
- Approved claim use
Do not demand verified PCFs from every small supplier tomorrow. Segment the requirement by materiality and give suppliers a workable improvement path.
7. Prepare controlled customer outputs
Create a repeatable response containing what is available, unit and boundary, method, data quality, limitations, contact and version date. This is better than emailing a spreadsheet with a CO2e column and no explanation.
How AASB S2 changes tenders
Climate reporting encourages procurement teams to ask questions that help both reporting and transition planning.
A tender may score:
- Availability of product emissions data
- Reduction initiatives
- Supplier climate targets
- Lower-carbon product options
- Evidence quality
- Reporting capability
Avoid claiming that AASB S2 legally requires every tender to request this information. It does not. The more accurate statement is that reporting entities need climate information about material value-chain exposures, which increases the commercial value of suppliers that can provide it.
Common mistakes
"We are under the threshold, so it does not affect us"
Your customer may be in scope.
Sending a corporate footprint for a product question
The buyer cannot derive the purchased product's emissions from your office-and-warehouse inventory.
Sending a product number without a unit or boundary
It cannot be interpreted or compared.
Treating a spend estimate as a product claim
Spend-based Scope 3 screening is useful for prioritisation. It generally does not support a public statement that one SKU is lower carbon than another.
Waiting for perfect primary data
Use the best available method, disclose quality and improve the material categories first.
Assuming first-year relief removes the work
It only changes the disclosure timing for Scope 3.
What good supplier data looks like
Good data are not necessarily perfect. They are:
- Relevant to the product and transaction
- Defined
- Traceable
- Consistent
- Versioned
- Honest about estimates
- Suitable for the stated use
A product footprint that says "2.4 kg CO2e per carton of 100, cradle-to-gate, calculated July 2026 using supplier-specific product weight and secondary manufacturing factors" is useful. "Low-carbon product" without a benchmark is not.
Where Zilch fits
Zilch helps suppliers and distributors build the product-level layer needed for customer Scope 3 and climate-data requests. It connects SKU, unit, materials, product footprint, evidence and quantity so data can move into tenders, quotes, invoices and reports.
It does not determine whether a company is legally in scope, prepare the complete statutory sustainability report or replace assurance advice. It solves the catalogue problem that sits beneath purchased-goods reporting.
If reporting customers are asking for product emissions your current systems cannot produce, see how Zilch works for distributors or book a call with the team.