The reporting evolution accelerating into 2026
January 2, 2026
If 2024 was the year sustainability reporting gathered momentum, 2025 was the year it finally tipped into the mainstream of financial reporting.
For the accounting profession, the shift was unmistakable. What once sat in glossy standalone sustainability reports has moved decisively into the core financial reporting ecosystem, reshaping workflows, assurance practices, and the expectations placed on preparers.
The introduction of the International Sustainability Standards Board's (ISSB’s) inaugural standards, IFRS S1 and IFRS S2, set the tone. Their arrival established a long-awaited global baseline for sustainability disclosures, giving markets something they have been requesting for years: clarity, consistency and comparability.
By requiring sustainability risks to be assessed and communicated with the same discipline as financial information, these standards brought ESG out of the voluntary realm and into the regulated heart of corporate reporting.
It is difficult to overstate the significance of this shift; 2025 marked the first time sustainability information was treated as universally decision-useful rather than an optional context.
Australia moved quickly to align with this international direction. The passage of mandatory climate reporting legislation in late 2024 meant that, as of January this year, Group 1 entities were preparing their first climate-related disclosures for inclusion in the annual financial report.
Concepts such as Scope 1, 2, and 3 emissions, transition risks, physical risk analysis and climate scenario modelling, once the domain of sustainability specialists, became mainstream financial reporting considerations almost overnight.
Many organisations spent 2025 building new data pipelines, strengthening governance structures and redefining internal responsibilities as finance teams and sustainability teams increasingly converged.
The release of AASB S1 and AASB S2 cemented this alignment. These new Australian Sustainability Reporting Standards provided the domestic scaffolding that supports the legislative mandate, mirroring the ISSB approach while offering local clarity on application.
AASB S2 now forms the backbone of Australia’s climate disclosure regime, while AASB S1 offers a pathway for broader sustainability reporting ahead of the next wave of global standards.
For preparers and auditors alike, this was a year of understanding new requirements, reconciling new data demands and grappling with the practicalities of embedding sustainability into long-established reporting processes.
The implications for the profession are already evident. As climate disclosures become part of the financial report, the expectation for assurance is rising.
Limited assurance over climate information will become mandatory for many entities, transitioning to reasonable assurance later in the decade. In 2025, audit teams began integrating emissions testing, scenario analysis validation and non-financial data governance into their methodologies, marking a fundamental extension of the traditional audit skill set.
Advisory teams saw increased demand for readiness assessments, gap analysis, systems design and reporting transformation.
The rise of sustainability reporting has not created a new discipline alongside accounting; it has expanded what accounting is expected to encompass.
While climate dominated the 2025 agenda, this is only the beginning. The ISSB has already signalled its next priorities, including standards on nature, biodiversity, human capital and supply-chain resilience. Investors are openly calling for transparency well beyond emissions, and regulators in multiple jurisdictions are considering broader sustainability reporting mandates.
By this time next year, the conversation may no longer be about climate reporting readiness, but about how to operationalise a complete ESG reporting ecosystem that captures the full spectrum of financially material sustainability issues.
Looking into 2026, organisations should expect sustainability reporting to become even more integrated, more data-driven and more closely tied to financial outcomes. The profession will continue navigating new assurance requirements, evolving stakeholder expectations and the increasing interplay between sustainability and long-term value creation.
If 2025 was the year the foundations were laid, 2026 will be the year organisations start building the structures that sit on top of them.
For accountants, this presents a rare opportunity: to help shape a reporting landscape that genuinely reflects the risks and realities of the modern economy.
Sustainability is no longer a separate narrative to financial performance; it has become a critical part of understanding it.
As reporting expectations evolve again in the year ahead, the profession will remain at the centre of this transformation.
[Accounting Times]
