Scope 3 disclosure: from compliance relief to strategic insight

Year 1 relief and a potential strategic differentiator 

Across the reports available on 6 September, the dominant theme is that Scope 3 emissions disclosure maturity is highly uneven. Just over 80% of the first year AASB S2 reporters used the Year 1 relief, while a smaller group voluntarily reported Scope 3 data. Among voluntary reporters, the quality ranges from comprehensive category-level inventories with assurance from more established reporters to a single aggregate estimate with limited methodological explanation.  

Transition relief is the prevailing reporting position 

A large proportion of companies explicitly defer Scope 3 disclosure under the first year AASB S2 relief. This is illustrated in the table below. 

The prevalence of Year 1 relief means that many reports provide little visibility into the emissions that may sit outside operational control, even where suppliers, customers, investments or the use of sold products are likely to be strategically important. The resulting disclosure is often technically acceptable for Year 1, but does not yet give investors a complete picture of value-chain exposure. 

A meaningful minority disclose voluntarily despite the relief 

Several companies choose to publish Scope 3 emissions voluntarily, either: 

• within the Sustainability Report,
• in an ESG databook or environmental section outside the statutory AASB S2 report,
• under the GHG Protocol rather than saying the figures comply fully with AASB S2, or
• through a mixture of statutory and voluntary disclosures. 

This indicates that the relief does not prevent more mature companies from reporting. Companies with established sustainability data systems appear more willing to disclose voluntarily, even where they preserve the formal relief position.  

It should be noted that disclosure architecture is often fragmented as it appears outside the statutory disclosures. This can make it difficult for users to engage with the information provided.  

Scope 3 is frequently the dominant emissions source, but targets lag 

A noteworthy finding is the disconnect between emissions significance and target coverage. In some cases, Scope 3 represents nearly all of the reported inventory, but the company’s target applies only to Scope 1 and 2. One report explicitly notes that Scope 3 represents more than 99% of total emissions while no Scope 3 target has been established.  

Given the significance of scope 3 emissions sources to a company’s total emissions, they cannot, and should not, be overlooked as a source of transition risk. Clear consideration of scope 3 emissions will enable you to identify transition risk hotspots, potentially uncover blind spots in your risk assessments, and support vulnerability assessments under future scenarios.  

Scope 3 estimation should always look at the cost-benefit of information gathering, it should not just be information gathering for information sake, information quality should develop to ensure that there are not hidden issues in your value chain. Scope 3 emissions accounting is definitely an area where care should be taken to not throw the baby out with the bath water – care should be taken in truncating are reducing details in these aspects of disclosure. 

Sectors determine which Scope 3 categories matter 

The reports show clear sector-specific patterns: 

These sector patterns are visible in the category sets disclosed by the more mature reporters.  

Readiness for mandatory Year 2 disclosure is often unclear 

Many reports state that Scope 3 data collection, boundary setting or methodology development is underway, but do not disclose a path forward. Information on how companies plan to work through the challenge of finalising their Scope 3 emissions inventory is of interest to the primary user of the information particularly given the materiality of these emissions to the company’s overall climate risks. Ultimately Scope 3 is a strategic value-chain metric; we look forward to seeing it move from what is currently mostly a compliance exercise.