AASB S1 vs AASB S2: What's Mandatory and What's Voluntary?

Australia published two sustainability reporting standards simultaneously — AASB S1 and AASB S2 — but they have very different statuses under Australian law. Understanding the distinction is important for boards, CFOs, and sustainability leads trying to scope their reporting obligations.

AASB S2 — the mandatory standard

AASB S2 Climate-related Disclosures is the operative mandatory standard under the Corporations Act 2001 (as amended). It requires qualifying entities to disclose:

• Governance arrangements for climate-related risks and opportunities
• Climate strategy, including scenario analysis and resilience assessment
• Climate risk management integration into the enterprise framework
• Quantitative emissions metrics (Scope 1, 2, and eventually 3) and any climate targets

AASB S2 applies to entities in Group 1 from FY2025, Group 2 from FY2026, and Group 3 from FY2027. These disclosures must appear in the entity’s annual report, are subject to external assurance, and fall under ASIC’s enforcement jurisdiction.

AASB S1 — currently voluntary

AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information is the broader standard, covering all sustainability-related risks and opportunities — not just climate. It is modelled directly on IFRS S1.

However, as of 2025, AASB S1 is not mandatory under Australian law. The legislation that introduced mandatory sustainability reporting into the Corporations Act only activates AASB S2 for now.

AASB S1 can be applied voluntarily. Entities that wish to report across a broader sustainability scope — covering biodiversity, water, labour practices, social factors — may choose to adopt AASB S1 for those disclosures. But there is no legal obligation to do so.

Why does AASB S1 exist if it’s voluntary?

Several reasons:

International alignment. IFRS S1 is mandatory in a number of jurisdictions and is increasingly expected by international investors and capital markets. Australian entities listed on global exchanges or raising offshore capital may face investor expectations that go beyond climate-only.

Future-proofing. Australian Treasury has signalled that broader sustainability disclosure requirements may follow as the climate-focused regime matures. AASB S1 establishes the framework that a broader mandatory regime would use.

Voluntary best practice. Some entities choose to disclose against AASB S1 to signal to stakeholders that their sustainability reporting is comprehensive and internationally consistent.

What the distinction means practically

For most businesses entering the mandatory regime for the first time, the operative question is: what must I do to comply with AASB S2?

The answer is to focus on:

1. Climate governance documentation
2. Climate strategy and scenario analysis
3. Risk management integration
4. Emissions data (Scope 1 and 2 in year one, Scope 3 to follow)

Anything beyond this — biodiversity disclosures, water metrics, social indicators — falls under AASB S1 and is voluntary unless required by another obligation (such as a contract or investor requirement).

When might you need to consider AASB S1?

If you are:

• Seeking to align with international investor ESG expectations
• Reporting under multiple voluntary frameworks (GRI, SASB) and want to integrate them
• A large business with material non-climate sustainability exposures that are already disclosed in narrative form
• Preparing for a future where AASB S1 may become mandatory

In those cases, voluntary adoption of the AASB S1 framework — or at least alignment with its principles — is a reasonable position.

The practical starting point

For the large majority of Australian businesses now entering the mandatory regime, the focus should be:

1. Understand your AASB S2 obligations (group, timeline, assurance requirements)
2. Build the data infrastructure to support Scope 1 and Scope 2 reporting
3. Develop the governance and strategy disclosures required by AASB S2
4. Once mandatory requirements are met, assess whether voluntary AASB S1 disclosures add stakeholder value

Don’t let the distinction between S1 and S2 distract from the immediate AASB S2 obligations — but do understand that S1 is the framework the broader regime will likely use when it expands.

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Ayika is focused on the data and operational layer that makes AASB S2 compliance achievable. See how it works.