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What happens if we do not report?

If your entity meets an ASRS reporting threshold, not producing a sustainability report is a Corporations Act breach in the same way missing a financial report is, and ASIC has named it as one of only two circumstances where it says enforcement investigation is more likely. It cannot be fixed afterwards, because relief is prospective. The exposure for an imperfect report is a much smaller thing than the exposure for no report.

What this means in practice

The obligation sits inside the Corporations Act, not beside it. The sustainability report is prepared, audited and lodged under the same Chapter 2M framework as your financial report, so failing to produce one is not a novel kind of breach, and whether you are in scope is set out here.


Non-reporting is one of only two things ASIC has singled out. Its stated posture while the requirements phase in is pragmatic and proportionate. But RG 280 names two circumstances where enforcement investigation is more likely: misconduct of a serious or reckless nature, and a reporting entity failing to prepare a sustainability report for the financial year.


The transitional declaration lowers the standard of outcome, not of engagement. For financial years beginning between 1 January 2025 and 31 December 2027, section 1707C means directors declare they took reasonable steps to ensure the report complies rather than that it does comply. From financial years beginning on or after 1 January 2028 it becomes a statement of compliance. The relief goes to effort versus outcome, not to whether the board engaged: section 344 still requires each director to take all reasonable steps to secure compliance, so a board that delegated the report and never oversaw it has nothing to point to.


Relief is prospective, and the grounds are narrow. It must be applied for before the lodgement deadline, ASIC has said an application lodged close to that deadline may be refused for want of time to consider it, and no relief will cure a year already breached. Private ownership or a small external user base will not, on their own, justify relief.


The modified liability settings need a lodged report to attach to. Section 1707D restricts who may bring proceedings on a protected statement to ASIC and criminal prosecutors, and it reaches only statements made in compliance with AASB S2, the climate standard within the Australian Sustainability Reporting Standards (ASRS). Voluntary ESG commentary therefore sits outside it, which is where greenwashing exposure concentrates. And there is no protected statement at all where there is no report.

The commercial consequences usually arrive before the regulatory ones. Assurance providers will not sign off on processes assembled after year end, because assurance tests process and methodology and not only numbers. Lenders and insurers ask for climate disclosures at credit and renewal reviews, and Group 1 and Group 2 customers need Scope 3 data from their supply chain, so a supplier who cannot produce it becomes a procurement risk.

What evidence you need

  1. A board or committee minute recording that the entity considered its ASRS obligations and when, including where it concluded it was out of scope
  2. The records behind the directors' declaration: the resolution minute, management representations, pillar sign-offs, and a record of when the work was done
  3. Where you rely on a parent's consolidated sustainability report, the reference to it and the basis on which it covers you
  4. Any relief application correspondence with ASIC and the resulting instrument

The evidence for the scope conclusion itself sits with the group determination, covered here

Common mistakes

  • Reading ASIC's transitional posture as a grace period. The latitude is about the quality of your disclosure, not about whether you produce one.
  • Treating the transitional declaration as a lower bar for board engagement. It changes what directors declare, not whether the board had to do anything.
  • Assuming a scope conclusion reached early in the year still holds at year end. The size test is applied at each financial year end, so late growth or an acquisition can bring you into scope for a year you have already spent. The tests are here.
  • Assuming voluntary ESG commentary carries the same protection as the report. It sits outside the modified liability settings and expands what your auditor tests.
  • Treating this as a reporting task rather than a governance one. Oversight, risk processes and scenario analysis have to exist during the reporting period, and cannot be reconstructed afterwards. 

Trace's viewpoint and approach

The distinction that matters is not between a good first report and a bad one. It is between an imperfect report and no report at all.


We do not expect ASIC to hand down heavy penalties for imperfect first-year reports. The regime is new, the transitional declaration standard is deliberately lower, and ASIC has said it will be pragmatic and proportionate while the requirements phase in.


What we do expect is that ASIC will need to demonstrate the regime has teeth. That means visible signals early, and rising expectations each year.


That makes the risk asymmetric. The upside of doing slightly more than the minimum is small. The downside of becoming the early example is not.


So lodge, document how you got there, and treat the first year as the baseline you will be measured against. Minimum Viable Compliance (MVC) is the smallest report that fully complies, and a report that exists is the precondition for every protection the regime offers. If you are approaching a threshold rather than over it, a readiness assessment shows the gaps while there is still a reporting period in which to close them.

Frequently asked questions

Q: We think we may already have missed a year. What now? Get advice quickly. Relief will not fix a past breach, so the questions become what you lodge now, how you disclose the position, and how you show ASIC that reasonable steps are being taken from here. Speak to your auditor and your legal adviser, and stand up the governance and data so the current year is not a repeat.


Q: Has ASIC penalised anyone for not reporting yet? Not as at August 2026, so far as we are aware, and the timing explains why. The first mandatory reports came from Group 1 entities with a 31 December 2025 year end, ASIC published early observations on those in May 2026, and Group 1 entities with a 30 June year end are lodging now. The regime has not run long enough for a non-lodgement case to work through.


This is general information about the ASRS regime and is not legal advice. Directors' liability and relief applications should be discussed with your legal adviser and auditor.