Understanding the Australian Sustainability Reporting Standards (AASB S1 and S2)

The introduction of the Australian Sustainability Reporting Standards (AASB S1 and S2) marks a significant milestone in the nation's commitment to environmental accountability and transparent business practices. AASB S2 is now legislated in the Corporations Act 2001, these standards mandate large businesses (>$50m) to report on their environmental impacts and management of climate-related risks and opportunities. This regulatory shift signals a broader movement towards embedding sustainability into the core operations of Australian businesses, aligning with global trends in corporate responsibility and environmental stewardship.

While the immediate obligations apply only to larger corporations and do not directly impact small and medium-sized enterprises (SMEs), the ripple effects will be felt across the entire supply chain. SMEs often serve as suppliers, contractors, or partners to these larger entities, and will inevitably be drawn into the sustainability reporting process. Large corporations have the duty and responsibility to meet their compliance requirements, meaning they will require detailed environmental data from their supply chains. Data including information on greenhouse gas (GHG) emissions, resource efficiency, and sustainable sourcing practices, will be requested. As a result, SMEs will need to enhance their transparency and provide environmental data to meet the compliance requirements of large reporting entities. Beyond this, proactively adopting more sustainable practices can also position SMEs as attractive and responsible partners, helping them maintain competitiveness and strengthen business relationships. This in turn will ensure SMEs are able to maintain their business relationships and competitiveness.

The implications for architects and interior designers are particularly significant. As professionals responsible for material selection, sourcing, and energy-efficient designs, aligning with these standards can aid compliance and strengthen their value proposition. This approach appeals to clients who are increasingly prioritising responsible design specifications. This whitepaper explores the implications of AASB S2 for the design industry, offering strategies to turn compliance into a competitive advantage. It also emphasises the role of industry education and collaboration in equipping architects and designers with tools needed to navigate sustainability reporting, enhance client trust, and lead in responsible design.

Overview of AASB S1 and S2 Standards

The Australian Sustainability Reporting Standards (AASB S1 and S2) represent a major development in how businesses across Australia disclose and manage their environmental impacts. Adapted from global standards and introduced by the Australian Accounting Standards Board (AASB), these standards aim to systematise climate-related reporting by ensuring that large companies provide consistent, transparent and comparable information about their environmental practices. Currently AASB S1 is voluntary, whereas AASB S2 is legislated and is a mandatory requirement.

The standards primarily focus on the Environmental (E) and Governance (G) aspects of Environmental, Social, and Governance (ESG) reporting, with the Social (S) component expected to be mandated in the future. The implementation will occur in three phases, with the commencement for large companies on 1 January 2025.

Due to varying capabilities among entities, the phased approach provides businesses with time to adapt and prepare for compliance, particularly those without the necessary systems or infrastructure for comprehensive sustainability reporting. As the standards progressively extend to smaller businesses, it will drive industry-wide adoption of sustainability practices across the Australian market. 

At the core of the AASB S1 and S2 standards is the mandatory disclosure of Greenhouse Gas (GHG) emissions1, including Scope 1, 2, and 3 emissions. Scope 1 refers to direct emissions from owned or controlled sources, such as fuel combustion within company operations. Scope 2 emissions involve indirect emissions from purchased electricity, heating, and cooling. Scope 3 emissions include all other indirect emissions throughout the supply chain, such as those from the production of purchased goods and services, transportation, and employee commuting.5 This requirement will significantly impact those in the construction, manufacturing, and design sectors, as they must gather, measure, and disclose emissions data that encompasses their entire supply chain. 

Architects and designers are also an essential part of the supply chain. They must evaluate and track emissions associated with the materials specified, the energy used in building designs, and the emissions from construction and transportation processes across their projects. By proactively aligning their practices with these standards, architects and designers can strengthen their partnerships while establishing a competitive edge, positioning themselves as leaders in sustainable design and responsible specification.

Implications for Architects and Interior Designers

Under the AASB S1 and S2 standards, architects and interior designers need to consider all three scopes of emissions. Scope 1 covers direct emissions from sources they control, such as fuel used in company vehicles, while Scope 2 includes indirect emissions from purchased electricity or energy used in their operations. These are essential to track as part of their own business footprint.

However, the most significant area of influence lies in Scope 3 emissions. These refer to all other indirect emissions that occur along the value chain — particularly those generated by the production and transportation of materials, construction activities, supplier operations, and the end-use and disposal of specified products. In practice, this means architects and designers are not just responsible for their own operations, but must also consider the emissions impact of the materials and systems they specify.

The comprehensive reporting requirements of AASB S1 and S2 highlight the importance of transparency in material selection, energy performance, and collaboration with suppliers. By aligning with these standards, architects and interior designers can both support their clients’ compliance obligations and strengthen their own market positioning through responsible and informed design practices.

Harriet Project by Studio LHD

Photography by Pablo Velga

Coronation Drive by Punch Design

Photography by Pixel Collective

Supply Chain Transparency, Material Sourcing, and Tracking

Compliance with AASB S2 requires large corporations to report on all three scopes of emissions - Scope 1, 2 and 3. As with any other organisation, Scope 3 refers to indirect emissions across the value chain, including the Scope 1 and 2 emissions of their suppliers. The Green Building Council of Australia’s Green Star rating system prioritises transparency in material sourcing and aligns with the growing demand for low-carbon, responsibly sourced materials2.

For architects and interior designers, this presents several key implications:

• Material Choices: Architects and designers will increasingly focus on selecting low-carbon, responsibly sourced materials to align with the sustainability expectations of regulatory-conscious clients. Environmental Product Declarations (EPDs) are a globally recognised tool that enables comparison of the environmental performance of building materials. These independently verified documents provide transparent data on lifecycle emissions — from raw material extraction through manufacturing, use, and end-of-life disposal — supporting informed, low-impact material selection.³
• Supplier Collaboration: Transparency in the supply chain will become crucial. Architects and designers will need to collaborate closely with suppliers to gather accurate ESG data and compare performance. While this includes environmental metrics such as a product’s carbon footprint, it also extends to social considerations like modern slavery risks and the use of locally manufactured products. Their contribution can support builders and clients in meeting compliance obligations and strengthen partnerships across the project team.
• Tracking of Operational Data: Architect and designer firms also have a footprint. To help key stakeholders report on their Scope 3 emissions, architects and designers will need to be diligent in tracking and documenting operational emissions data linked to Scope 2 emissions and their own Scope 3 emissions, including purchased goods, waste generated in operations, business travels, employee commuting, etc5. This will require implementing new systems to capture emissions data, ensuring that reports are readily available when clients or regulators request them.

The Role of Industry Education and Collaboration

Industry education and collaboration are vital for equipping architects and designers with the knowledge and resources necessary to navigate the evolving landscape of sustainability reporting and compliance.

Raising Awareness and Knowledge Sharing

Building industry-wide awareness and fostering knowledge sharing are essential for helping architects and designers navigate sustainability reporting. As regulations evolve, professionals must stay informed about the latest requirements, methodologies, and tools for emissions reporting and compliance. Structured training sessions and workshops hosted by industry bodies can break down Scope 1, 2, and 3 emissions reporting, helping professionals understand direct and indirect emissions across the supply chain. By providing practical guidance, these programs empower architects and designers to make informed design and material choices that align with sustainability goals.

Industry organisations such as the Australian Institute of Architects (AIA) play a key role in supporting sustainability education. Through initiatives like the Climate Action and Sustainability Taskforce, AIA provides resources, policy guidance, and professional development programs to help architects incorporate sustainability principles into their work4. These efforts ensure that professionals stay informed about best practices and evolving regulatory requirements.

Making key resources more accessible is equally important. Online databases, guides, and templates can simplify compliance and enable professionals to evaluate materials confidently. Centralised sustainability data can streamline decision-making and support the adoption of standardised reporting practices.

Industry-led Standardisation

While AASB S2 provides a legislated and structured framework, its effectiveness in achieving key outcomes - such as transparency and comparability - depends on active industry participation. Compliance may be mandatory for large entities, but without broad engagement across the supply chain, reporting inconsistencies and data gaps may persist - ultimately limiting the standard’s intended impact.

To drive meaningful change, the industry must actively engage with existing standards and work collectively to develop resources that simplify compliance. For instance, industry-wide databases of Environmental Product Declarations (EPDs)3 and material carbon footprints can provide a centralised source of verified data, reducing duplication of effort and ensuring consistency. Standardised reporting templates and digital tools can further streamline compliance with AASB S2, making it easier for manufacturers and suppliers to provide transparent and accurate information.

Existing resources such as the Products Aware website, developed by Architects Declare, exemplify how industry-led initiatives can facilitate better decision-making6. By aggregating sustainability-related product information, these platforms help architects and designers access reliable data, ultimately allowing them to communicate material impacts more effectively to clients. Expanding and integrating such initiatives across the sector will be critical in ensuring that sustainability reporting becomes a seamless and widely adopted practice.

The introduction of the Australian Sustainability Reporting Standards (AASB S1 and S2) represents a significant step forward for businesses, including architects and designers, as they align with a global move towards environmental responsibility. While these standards initially target large corporations, their impact will extend across the entire supply chain, encouraging businesses to adopt more responsible practices and report transparently on their environmental impacts.

For architects and designers addressing Scope 3 emissions of major clients – those linked to projects (including embodied carbon) and supplier operations – presents challenges and opportunities. By collaborating with suppliers to obtain accurate environmental data, prioritising transparency in material sourcing, and integrating energy-efficient solutions into their projects, architects and designers can position themselves as leaders in sustainable design and responsible specification. Aligning with AASB S1 and S2 ensures compliance and strengthens their competitive advantage by meeting the growing demand for environmentally responsible design choices.

References

1 Australian Accounting Standards Board. AASB Sustainability Reporting Standard S2: Climate-related Disclosures. Australian Accounting Standards Board. https://standards.aasb.gov.au/sites/default/files/2024-10/AASBS2_09-24.pdf (accessed 3 March 2025).

2 Green Building Council of Australia. The Responsible Products Program: A Vision for a Better Future, for Buildings and Products. Green Building Council Australia. https://new.gbca.org.au/green-star/the-responsible-products-program/ (accessed 3 March 2025).

3 EPD Australasia. EPDs and the Green Star Responsible Products Program. EPD Australasia. https://epd-australasia.com/2024/09/epds-and-the-green-star-responsible-products-program/ (accessed 3 March 2025).

4 Australian Institute of Architects. About the Institute. https://www.architecture.com.au/about/institute/ (accessed 3 March 2025).

5 Greenhouse Gas Protocol. Scope 3 Calculation Guidance. https://ghgprotocol.org/scope-3-calculation-guidance-2 (accessed 3 March 2025).

6 Product Aware. Architect’s Declare - Product Aware Website. https://www.productaware.au/ (accessed 3 March 2025).