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Is your supply chain ready to meet Australia’s new mandatory climate reporting standards?
On September 9th, the Australian House of Representatives passed legislation introducing mandatory climate-related reporting for large and medium-sized companies. This includes disclosures on climate risks, opportunities, and GHG emissions across the value chain, with the largest companies required to comply by 2025.
These signal a major shift for businesses—particularly for supply chain, operations, and procurement leaders as they will be required to understand/track and disclose their environmental, social, and governance (ESG) risks, with a strong focus on Scope 3 emissions—the hidden, yet largest, part of a company’s carbon footprint.
In this blog, we’ll break down what the legislation means, who is affected, and how leaders can turn compliance into an opportunity for a more sustainable, competitive supply chain.
The new legislation requires businesses to transparently report how they manage ESG risks, particularly in relation to their greenhouse gas (GHG) emissions. A significant emphasis is placed on Scope 3 emissions, which include indirect emissions across the entire supply chain, from sourcing materials to transporting goods.
Australia’s approach aligns with global standards, particularly the guidelines set by the International Sustainability Standards Board (ISSB). This alignment ensures that businesses are not only compliant but also competitive in global markets.
This legislation goes beyond compliance—it’s a critical step towards securing a place in the future of global trade and investment. By embedding ESG factors into financial reporting, Australian companies position themselves as sustainable choices for investors and global partners.
According to the CDP, supply chain emissions (Scope 3) are, on average, 11.4 times greater than operational emissions (Scopes 1 and 2). Hence, increased collaboration along the supply chain is essential to attaining net zero.
For supply chain and operations leaders, the focus on Scope 3 emissions means that every stage of the supply chain— from raw material procurement to final product delivery—must be accounted for. Failing to address Scope 3 emissions can result in not only non-compliance but also loss of competitive edge.
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Studies by BCG reported that only 10% of businesses were accurately and comprehensively reporting Scope 3 emissions. Showing the scale of the compliance challenge ahead for Australian businesses.
The legislation is set to take effect the day after Royal Assent, which is expected in December 2024. From January 1st, 2025, businesses will need to start preparing for compliance. However, not all companies are immediately affected. There will be a phased rollout, starting with large corporations and financial institutions.
Initially, the law will apply to large businesses, financial institutions, and companies that meet certain thresholds. This includes businesses that are required to lodge financial reports with the Australian Securities and Investments Commission (ASIC) and meet at least two of the following criteria:
Additionally, entities registered under the National Greenhouse and Energy Reporting (NGER) Act and asset owners with over $5 billion in assets will need to comply.
For supply chain leaders, particularly those managing large-scale operations or international trade, this means the onus is on tracking emissions across all parts of the supply chain, especially Scope 3 emissions. It’s no longer enough to report on direct emissions; every supplier and partner’s impact must be measured and disclosed.
The new reporting requirements will have far-reaching implications across multiple departments, particularly in:
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To thrive in this new regulatory environment, businesses need to focus on standardising data collection, accurately measuring emissions, and optimising their operations for sustainability.
Here’s how your supply chain and operations teams can prepare:
Fortunately, there are tools and frameworks available to simplify compliance. The GLEC Framework, for example, provides a global methodology for calculating and reporting logistics emissions, which is invaluable for companies with complex supply chains. Additionally, digital platforms like Explorate offer end-to-end visibility, helping you track emissions and optimise your supply chain in real-time.
By leveraging the right tools and partners, supply chain leaders can ensure compliance with ease while unlocking opportunities for improved sustainability and performance.
The path to compliance doesn’t have to be daunting. By standardising your data collection, automating emissions tracking, and optimising your operations, you can not only meet the new regulations but also position your company as a sustainability leader.
Need help navigating this transition? Get in touch with us at Explorate for expert guidance on tracking emissions, optimising your supply chain, and thriving in the new regulatory landscape.
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