Australia’s Scope 3 Emissions Reporting Requirements from FY26: A Comprehensive Overview

Australia’s Scope 3 Emissions Reporting Requirements from FY26: A Comprehensive Overview

Australia is entering a new era of climate accountability with the introduction of mandatory climate-related financial disclosures, including Scope 3 emissions reporting, beginning in financial years starting on or after 1 January 2025—which corresponds to FY26 for most Australian entities. This marks a significant shift in corporate sustainability obligations, aligning Australia with global standards and reinforcing its commitment to a net-zero future.

What Are Scope 3 Emissions?

Scope 3 emissions are indirect greenhouse gas (GHG) emissions that occur in a company’s value chain, both upstream and downstream. These include emissions from:

• Purchased goods and services
• Business travel
• Employee commuting
• Waste disposal
• Use of sold products
• Transportation and distribution
• Investments

Unlike Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased energy), Scope 3 emissions are often the most significant and complex to measure—yet they provide the most comprehensive view of a company’s climate impact.

Legal Framework and Timeline

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill passed in September 2024 mandates sustainability reporting under the Corporations Act 2001. The legislation requires entities to include climate statements in their annual reports, with Scope 3 emissions forming a key component.

Effective Date:
Mandatory Scope 3 reporting applies to financial years beginning on or after 1 January 2025, meaning most entities will begin reporting in FY26.

Who Must Report?

Entities required to report include:

• Listed and unlisted companies
• Financial institutions
• Registrable superannuation entities
• Registered investment schemes

To qualify, entities must meet size thresholds similar to those defining a Large Proprietary Company under the Corporations Act. For asset owners, the threshold is more than $5 billion in funds under management.

Reporting Standards and Assurance

The reporting framework is aligned with the International Sustainability Standards Board (ISSB) and administered by:

• Australian Accounting Standards Board (AASB) – for disclosure standards
• Australian Auditing and Assurance Standards Board (AUASB) – for assurance requirements

Initially, disclosures will focus on climate-related risks and opportunities, including Scope 3 emissions. Over time, the scope may expand to include nature, biodiversity, and other sustainability topics.

Key Requirements for Scope 3 Reporting

1. Quantification of Emissions:
   Entities must measure and disclose Scope 3 emissions using accepted methodologies, such as the GHG Protocol.
2. Value Chain Mapping:
   A thorough understanding of upstream and downstream activities is essential to identify emission sources.
3. Risk and Opportunity Analysis:
   Companies must assess how Scope 3 emissions contribute to climate-related risks and opportunities across their value chain.
4. Governance and Strategy Disclosure:
   Entities must explain how Scope 3 emissions are integrated into governance structures, strategic planning, and risk management.
5. Assurance:
   While limited assurance will be phased in, entities should prepare for reasonable assurance requirements in the future.

Challenges and Considerations

• Data Availability: Many companies lack visibility into their supply chains, making data collection difficult.
• Methodological Complexity: Estimating emissions from diverse sources requires robust systems and expertise.
• Cost and Resource Burden: Smaller entities may face challenges in scaling up reporting capabilities.
• Liability Exposure: Disclosures are subject to legal liability under the Corporations Act, emphasizing the need for accuracy and diligence.

Strategic Implications

Mandatory Scope 3 reporting is more than a compliance exercise—it’s a strategic imperative. Companies that proactively engage with their value chains, invest in emissions reduction, and transparently communicate their climate strategies will be better positioned to attract capital, manage risks, and build stakeholder trust.

Final Thoughts

Australia’s move to mandate Scope 3 emissions reporting from FY26 is a bold and necessary step toward climate transparency. While the road ahead may be complex, it offers a powerful opportunity for businesses to lead in sustainability, drive innovation, and contribute meaningfully to the global net-zero transition.

If you’d like, I can help you draft a Scope 3 reporting roadmap or a checklist tailored to your industry.