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Understanding Scope 3 Carbon Emissions Reporting Requirements in Australia

As climate accountability increases, organisations in Australia are now required to report their Scope 3 carbon emissions as part of the mandatory climate reporting framework.

These regulations aim to enhance transparency and support national climate goals, particularly the commitment to reducing greenhouse gas (GHG) emissions by 43% by 2030 and achieving net zero by 2050.

What Are Scope 3 Emissions?

Scope 3 emissions encompass all indirect greenhouse gas emissions that occur within an organisation’s value chain, both upstream and downstream. These include emissions from purchased goods and services, business travel, transportation and distribution, waste disposal, and the use and disposal of sold products.

Unlike Scope 1 (direct emissions from owned sources) and Scope 2 (indirect emissions from purchased electricity), Scope 3 emissions are more complex to measure and require extensive data collection from suppliers and partners.

Mandatory Reporting Timeline

The Australian Government introduced mandatory climate reporting under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which was passed in September 2024. The reporting requirements follow a phased approach based on organisational size and significance:

  • Group 1 (Reporting from 1 January 2025):

    • Entities with 500+ employees

    • Companies with $1 billion+ in consolidated gross assets

    • Companies with $500 million+ in annual revenue

    • Entities reporting under the National Greenhouse and Energy Reporting (NGER) Scheme

  • Group 2 (Reporting from 1 July 2026):

    • Entities with 250+ employees

    • Companies with $500 million+ in gross assets

    • Companies with $200 million+ in annual revenue

  • Group 3 (Reporting from 1 July 2027):

    • Entities with 100+ employees

    • Companies with $25 million+ in gross assets

    • Companies with $50 million+ in annual revenue

    • Only those with material climate-related risks must disclose, otherwise, they must provide a justification statement.

For further details on these reporting phases, visit the Australian Accounting Standards Board (AASB) official site: AASB Climate Reporting.

Key Reporting Obligations

Under AASB S2, organisations must:

  • Disclose Scope 3 emissions from their second reporting year onwards.

  • Identify which of the 15 categories under the Greenhouse Gas Protocol’s Corporate Value Chain Standard are included in their calculations.

  • Explain assumptions, methodologies, and uncertainties associated with data collection.

  • Ensure disclosures align with international climate agreements and best practices.

The Australian Securities and Investments Commission (ASIC) has provided guidelines on compliance and enforcement, available at: ASIC Sustainability Reporting.

Challenges and Compliance

Measuring Scope 3 emissions is complex due to reliance on external data. To facilitate compliance, organisations should:

  • Develop robust data management systems.

  • Engage with suppliers and stakeholders for accurate reporting.

  • Consider contractual requirements to obtain necessary emissions data.

  • Leverage industry benchmarks and emissions factors from the Climate Active Carbon Neutral Standard: Climate Active.

  • Use tools designed for Scope 3 reporting, such as Acquire Insights’ Scope 3 Carbon Emissions Reporting Solution.

Answering Key Questions for Business Leaders

  1. How should we calculate Scope 3 emissions for our specific industry?

  2. What level of accuracy is required in reporting, and how do we handle data gaps?

    • Businesses must use reasonable estimates and clearly document methodologies. Acquire Insights’ tool helps ensure compliance by automating emissions data collection and calculations.

  3. What penalties exist for failing to report accurately?

    • ASIC enforces compliance with civil penalties, and failure to report could also impact investor confidence and market reputation.

  4. What tools or software can assist in tracking Scope 3 emissions?

  5. How will Scope 3 reporting be audited and verified?

    • External auditors will assess methodologies, assumptions, and data quality. Companies should establish internal validation processes to strengthen their reporting.

  6. What are the best practices for engaging suppliers to obtain emissions data?

    • Effective engagement includes contractual obligations, supplier surveys, and collaboration on sustainability goals.

  7. Are there any financial incentives for early or voluntary reporting?

    • While government incentives are limited, businesses demonstrating strong sustainability performance often attract investment and enhance brand reputation.

Why Scope 3 Matters for Businesses

Scope 3 emissions often account for the largest share of an organisation’s total carbon footprint. Failure to measure and disclose these emissions accurately can result in reputational damage, investor concerns, and regulatory penalties. Moreover, businesses that proactively integrate carbon accounting into their corporate strategy can achieve cost efficiencies, secure long-term investment, and build stakeholder trust.

The Task Force on Climate-related Financial Disclosures (TCFD) provides a global framework that aligns with Australia’s mandatory reporting: TCFD Framework.

Future Trends and Final Thoughts

With regulatory enforcement set to increase, businesses must take proactive steps to align with these obligations. Future updates to the Australian Sustainability Reporting Standards may include expanded requirements on nature-related risks and biodiversity, signaling a broader shift toward comprehensive environmental accountability.

For a complete overview of Australia’s climate reporting framework, refer to the Department of Climate Change, Energy, the Environment and Water (DCCEEW): DCCEEW Climate Reporting.