Scope 3 Emissions for Procurement Teams

Monday, 7 September 2026

What does Australia’s mandatory reporting framework require?

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 introduced mandatory climate related financial disclosure for Australian entities. The framework follows a phased approach based on organisational size. Group 1 entities, those with over 500 employees, $1 billion in consolidated gross assets or $500 million in annual revenue, commenced reporting for financial years from 1 January 2025. Group 2 entities, with 250 or more employees or $200 million in revenue, commence from 1 July 2026. Group 3 entities follow from 1 July 2027.

Scope 3 reporting is required from each group’s second reporting year, meaning Group 1 entities needed credible Scope 3 data by early 2026. The Australian Sustainability Reporting Standards (ASRS) require entities to prepare a Sustainability Report as part of their annual statutory reporting, approved by directors, lodged with the Australian Securities and Investments Commission (ASIC) and made publicly available. The practical consequence is that by mid 2026, a large proportion of Australia’s major corporations already need auditable Scope 3 data from their supply chains.

Even organisations not directly in scope are affected. Larger customers, investors and lenders are increasingly requesting emissions data from their suppliers as part of their own reporting obligations. A supplier that cannot provide emissions information risks being excluded from procurement processes where sustainability reporting is a contractual requirement.

Why is Scope 3 a procurement problem?

Scope 1 emissions come from sources an organisation owns or controls, such as fuel burned in its fleet. Scope 2 comes from purchased electricity. Both sit within the organisation’s own operations. Scope 3, by definition, sits outside. It is generated by suppliers, logistics providers, business travellers, customers and waste processors. The data needed to measure it does not exist in the reporting organisation’s own systems. It exists in the operations of its supply chain partners.

This makes Scope 3 fundamentally a procurement and supply chain problem. The procurement function manages supplier relationships, negotiates contracts, specifies requirements and conducts market research. It is the natural point of contact for requesting emissions data from suppliers, embedding sustainability criteria in tender evaluations and progressively shifting spend toward lower carbon alternatives. A sustainability team can set the policy. A finance team can prepare the report. But the data collection, supplier engagement and category level analysis that make Scope 3 reporting credible are procurement activities.

The EcoVadis 2026 analysis notes that 79 per cent of companies cite supplier data availability as their top Scope 3 challenge. That is a procurement challenge, not a reporting challenge. The quality of an organisation’s Scope 3 disclosure depends directly on the strength of its supplier engagement and the capability of its procurement team to collect, validate and improve emissions data over time.

How do procurement teams approach Scope 3 measurement?

The GHG Protocol defines 15 categories of Scope 3 emissions. For most organisations, the categories with the largest footprint are purchased goods and services (Category 1), capital goods (Category 2), upstream transportation and distribution (Category 4) and fuel and energy related activities not included in Scope 1 or 2 (Category 3). Procurement teams do not need to tackle all 15 categories simultaneously. The accepted approach is to start with the categories that are material to the organisation’s footprint and progressively improve data quality over time.

The starting point for most organisations is spend based estimation. This method applies emissions factors to procurement spend data, converting dollars spent in each category into estimated tonnes of carbon dioxide equivalent (CO2e). It is the least accurate method but requires the least supplier engagement and can be produced from existing financial data. Industry average emissions factors, such as those published by the Australian Government’s National Greenhouse Accounts, provide the conversion rates.

The next level is supplier specific data. This involves requesting actual emissions data from key suppliers, either through direct engagement or through platforms that collect and verify supplier disclosures. The transition from spend based estimates to supplier specific data is where procurement capability becomes critical. It requires segmenting the supply base by emissions contribution, identifying which suppliers account for the largest share of the organisation’s Scope 3 footprint and prioritising data collection accordingly. Procurement teams already skilled in

supplier segmentation have an advantage here because the analytical approach is the same: concentrate effort where it creates the most value.

What does this mean for procurement capability?

Scope 3 reporting adds a new dimension to procurement work that most teams were not originally built for. It requires procurement professionals to understand what Scope 3 means, how it is measured, what data to request from suppliers and how to embed sustainability criteria into sourcing decisions. It also requires the ability to have commercial conversations with suppliers about emissions data, which can be sensitive when suppliers perceive disclosure as a risk rather than an opportunity.

The capability gap is real. Procurement teams that have operated primarily on cost, quality and delivery metrics now need to integrate a fourth dimension. This is not a minor addition. It changes how specifications are written, how tenders are evaluated, how contracts are structured and how supplier performance is measured. The organisations that are furthest ahead are those that have invested in upskilling their procurement teams rather than hiring separate sustainability specialists who sit outside the procurement function.

How can procurement professionals build this capability?

AcademyGlobal (AG), the Chartered Institute of Procurement & Supply (CIPS) Centre of Excellence for Australia, New Zealand and Southeast Asia, delivers programs that address the intersection of procurement strategy, sustainability and public accountability. AG’s Strategic Procurement Leadership program is designed for senior procurement professionals who need to lead their function through strategic challenges including sustainability integration, policy alignment and supply chain governance. It addresses how procurement leaders position their teams to respond to regulatory shifts such as mandatory climate reporting, where the procurement function’s role in data collection and supplier engagement is central. For professionals seeking internationally recognised qualifications that include sustainable and ethical procurement, AG’s CIPS Study Centre delivers the CIPS Diploma and Advanced Diploma pathways, where modules on ethical procurement and supply chain sustainability are embedded throughout the curriculum.

Scope 3 reporting is not a temporary compliance exercise. It is a structural change in how procurement value is measured. The teams that build this capability now will be better positioned as the reporting thresholds lower and the expectations of data quality increase over the coming years.

Frequently asked questions

What are Scope 3 emissions?

Scope 3 emissions are the indirect greenhouse gas emissions generated across an organisation’s value chain. They include emissions from purchased goods and services, business travel, transportation, waste and the use of sold products. For most organisations, Scope 3 represents around 75 per cent of total emissions.

Is Scope 3 reporting mandatory in Australia?

Yes, under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024. Scope 3 is required from each reporting group’s second year. Group 1 entities (the largest) began Scope 1 and 2 reporting from January 2025, with Scope 3 required from their second year. Group 2 entities commence from July 2026. Group 3 from July 2027.

Why is Scope 3 a procurement responsibility?

Scope 3 data originates in the supply chain. Procurement teams manage the supplier relationships where that data is collected, negotiate the contracts where sustainability requirements are specified and conduct the market analysis that identifies lower carbon alternatives. Sustainability policy sets the direction. Procurement operationalises it.

Do procurement teams need perfect emissions data to start?

No. The accepted approach is to start with spend based estimates using industry average emissions factors, then progressively improve to supplier specific data for high impact categories. Credible reporting requires a clear methodology and evidence of improvement, not perfection from day one.

Where can procurement professionals learn about sustainability integration?

AcademyGlobal’s Strategic Procurement Leadership program addresses how senior procurement professionals lead their function through challenges including sustainability integration and regulatory compliance.

References

1. GHG Protocol, Corporate Value Chain (Scope 3) Accounting and Reporting Standard, https://ghgprotocol.org/

2. Fair Supply, “Carbon Emissions Reporting in Australia 2026,” https://www.fairsupply.com/articles/carbon-emissions-reporting-in-australia-2026

3. EcoVadis, “How to Get Started with Scope 3 Reporting,” 2026, https://ecovadis.com/blog/build-a-credible-scope-3-reporting/

4. Acquire Insights, “Understanding Scope 3 Carbon Emissions Reporting Requirements in Australia,” https://acquireinsights.com.au/understanding-scope-3-carbon-emissions-reporting-requirements-in-australia/

5. Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth), passed September 2024