Sustainability reporting: What SMEs need to know and how to prepare

Outlook

February 12, 2026

Mandatory climate-related sustainability reporting started in 2025 for large entities and is phasing in through 2027. Here’s what SMEs need to know, what data to collect, and how to prepare.

Australia’s reporting landscape has shifted. From financial years commencing on or after 1 January 2025, in-scope entities must include mandatory climate-related disclosures within a statutory sustainability report (lodged alongside the annual report).

If you lead an SME, you might be thinking: “That’s for the big end of town.” In many cases, it is — for now. But SMEs are already being pulled into the new reporting era through supply chain requests, tender requirements, finance questions, and customer expectations.

This article is your “stock cube”: what the new regime is, why SMEs should care, and practical steps to get ready without overcomplicating it.

What changed: sustainability reporting has arrived

The sustainability report currently focuses on climate-related financial disclosures required under the Corporations Act, aligned to AASB S2 Climate-related Disclosures.

ASIC summarises it simply: entities that must prepare annual financial reports under Chapter 2M of the Corporations Act and meet the thresholds in section 292A will be phased into sustainability reporting over time.

The phased start dates

Sustainability reporting is being phased in over three cohorts:

Cohort 1: financial years commencing on or after 1 January 2025
Cohort 2: financial years commencing on or after 1 July 2026
Cohort 3: financial years commencing on or after 1 July 2027

Even if your business isn’t directly captured yet, your customers, lenders, insurers, and larger partners may be — and they’ll often ask you for inputs.

What businesses are expected to disclose (and what SMEs will be asked for)

At its core, climate-related reporting is about understanding and communicating:

1) Emissions (Scopes 1, 2 and 3)

Scope 1: direct emissions you control
Scope 2: indirect emissions from purchased energy
Scope 3: indirect emissions across the value chain (often the biggest—and hardest)

What SMEs feel: supplier questionnaires asking for activity data (fuel, electricity, freight), product footprints, or emissions estimates.

2) Climate risks and opportunities

How climate risks could reasonably affect the organisation’s prospects, and how management is responding.

What SMEs feel: “Tell us your climate risks, resilience, or transition approach” in tenders and procurement.

3) Strategy, governance and targets

How climate is governed, how it’s built into strategy and risk management, and how progress is tracked.

Why SMEs should care (even if you’re not legally required yet)

Here’s the reality: SMEs are increasingly being judged on their ability to provide credible sustainability and emissions information.

Staying on major customers’ preferred supplier lists

Large organisations need supply chain data to complete their own disclosures — and they’ll choose suppliers who can respond quickly and confidently.

Winning tenders and protecting margins

If two suppliers are equal on quality and price, the one with clearer sustainability info often wins. Acting early avoids last-minute “discounting for uncertainty.”

Being ready for finance, insurance and due diligence

Banks and investors are strengthening ESG and climate risk questions. Prepared SMEs move faster through approvals.

Avoiding greenwashing risk

There are liability settings and guidance around forward-looking statements, transition plans and Scope 3 during the early years — which is a signal to be careful, evidence-based, and well governed in what you publish.

Practical steps SMEs can take now

You don’t need a 60-page report to get started. You need good foundations.

Step 1: Map where requests will come from

List your top 10:

customers
distributors
large supply-chain partners
lenders/insurers
…and note what they already ask you for.

Step 2: Start with a simple data pack

Build a one-page internal dashboard (monthly or quarterly) covering:

electricity (kWh + retailer)
fuel (litres by type)
fleet and freight (kms / invoices)
waste volumes (if available)
key suppliers by spend

This makes future ESG questionnaires dramatically easier.

Step 3: Get clarity on your emissions boundaries

Decide what’s “in” and “out” for:

sites
vehicles
subsidiaries / business units
contractors

Step 4: Identify your material climate risks (and your mitigations)

Keep it practical:

physical risks (heat, flooding, supply disruptions)
transition risks (energy prices, procurement requirements)
opportunities (efficiency projects, new products, preferred supplier status)

Step 5: Turn actions into a simple 12–24 month plan

Examples:

reduce energy intensity
switch to renewable electricity where feasible
review key suppliers for emissions and resilience
update tender responses with verified sustainability information

Step 6: Communicate carefully and credibly

Avoid vague claims like “eco-friendly” or “carbon neutral” unless you can substantiate them. Focus on:

what you measured
what you changed
what you’re doing next
what assumptions you used

Why sustainability can be commercially smart

Done well, sustainability isn’t a compliance headache — it’s a business improvement program:

lower energy and operating costs
stronger supply chain resilience
better tender performance
improved brand trust and staff engagement
…and a clearer story for partners, customers and investors.

Need help building an SME-ready approach?

If you’re getting ESG questionnaires, tender questions, or requests for emissions data — but don’t have the time or internal capability to pull it together — Small and Mighty Group can help.

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