Chartered Accountants Australia and New Zealand (CA ANZ) is supporting finance professionals with an information guide to navigate one of the most complex areas of disclosure, Scope 3 greenhouse gas (GHG) emissions—indirect emissions that occur across an entity’s value chain.

Why Scope 3 Matters

Scope 3 emissions often represent the largest portion of an entity’s carbon footprint. These emissions stem from activities such as business travel, waste disposal, product use, and supplier operations. Measuring them is essential for understanding climate transition risks, identifying reduction opportunities, and collaborating with stakeholders to meet climate goals.

Regulatory Landscape

Australia

From 1 January 2025, certain entities must comply with the Corporations Act requirements to prepare and disclose a sustainability report as a part of their annual reporting package. The Australian Accounting Standards Board (AASB) issued AASB S2 Climate-related Disclosures (AASB S2), which mandates the reporting of Scope 3 emissions from the second year of reporting.

Entities are granted transition relief in their first reporting year and will face phased assurance requirements:

• Group 1 entities: Limited assurance from 1 July 2026; reasonable assurance from 1 July 2028.
• Groups 2 and 3: Limited assurance from year two; reasonable assurance from year four.

Statements about Scope 3 emissions are protected under a modified liability regime until 31 December 2027.

New Zealand

Climate reporting entities (CREs) are required to disclose all scope 3 GHG emissions in their third year of reporting. CREs that disclose scope 3 GHG emissions in their second year are exempt from assurance of their scope 3 GHG emissions for the periods ending 31 December 2024 through to 30 November 2025. 

Measurement and Data Quality

AASB S2 (which is aligned with IFRS S2 Climate-related Disclosures) allows for estimation methodologies, acknowledging the challenges in direct measurement. Entities should begin with a screening process using less specific data to identify significant emission categories, then refine estimates as needed.

Data quality is paramount. Entities must use all reasonable and supportable information available at the reporting date. Both primary data (e.g. supplier meter readings) and secondary data (e.g. industry averages) are acceptable. AASB S2 encourages prioritising:

• Direct measurements
• Specific activity data
• Timely and jurisdiction-relevant data
• Verified data

Scope 3 Categories

The GHG Protocol outlines 15 categories of Scope 3 emissions, split into upstream and downstream activities. Entities must disclose which categories are included in their reporting and apply materiality to determine relevance.

Key Takeaways

Understanding Scope 3 emissions is critical for accurate climate-related financial disclosures. While direct data collection is not mandatory, its use is expected to grow. CA ANZ encourages members to stay informed and leverage available resources to meet evolving regulatory expectations.

Resources

• AASB S2 Climate-related Disclosures
• Greenhouse Gas Protocol – Scope 3 Calculation Guidance
• ASIC Regulatory Guide 280
• IFRS S2 Disclosure Requirements