Nicole: Hi everyone, and welcome to Sustainability Matters - RSM’s short-clip series exploring trending sustainability topics. My name is Nicole Mohan, and I’m the National Sustainability Lead at RSM, as well as a Partner in ESG & Climate Services. 

Sam: Hi, my name is Sam Weight, and I am a Consultant within the ESG & Climate Services Team. Today, we will be recapping on the definition of Scope 3 emissions, why they’re so challenging to measure and report, and how they’re becoming a critical focus in modern sustainability and climate disclosure practices. We’ll also cover some practical steps your organisation can take to improve how Scope 3 emissions are managed and integrated into decision-making. 

Nicole: Scope 3 emissions refer to all the indirect greenhouse gas emissions that occur in a company’s value chain, both upstream and downstream. These include emissions from sources not owned or controlled by the company. Examples include purchased goods and services, employee commuting and waste disposal. 

Sam: Scope 3 includes everything from the emissions created by suppliers making the products a company buys, to the carbon released when customers use and dispose of those products. In Australia, where supply chains are vast and global, measuring Scope 3 is a crucial step in managing climate impact. 

Nicole: Scope 3 emissions are tricky to measure because they come from sources outside a company’s direct control - like the emissions from suppliers, contractors, and even customers. Unlike Scope 1 and 2 emissions, you have to rely on others to provide accurate data. 

Sam: In Australia some companies need to report their Scope 3 emissions now, especially larger corporates under investor or regulatory pressure. But many of their suppliers might not fall under schemes like the NGER Act, so these companies have never had to calculate or share emissions data before - yet they’re now a critical part of the supply chain. 

Nicole: Scope 3 reporting is no longer just a “nice-to-have” — under the new AASB S2 standards, large companies in Australia will soon be required to disclose material Scope 3 emissions. These align with international standards like ISSB’s IFRS S2, which explicitly include Scope 3 as part of climate-related financial disclosures. And Scope 3 covers a lot - there are 15 different categories defined under the GHG Protocol. 

Sam: In terms of the calculation, it depends on the data you receive. The best type is supplier-specific data, but many companies still rely on proxies — like using spend-based methods or industry averages. You’ll often see tools using NGA emissions factors here in Australia, or international databases if local data isn’t available. 

Nicole: Let’s discuss some practical steps organisations can take to improve their Scope 3 emissions reporting. 

1. Materiality – Focus on what matters most 

The first step is prioritising the categories that represent the bulk of your Scope 3 emissions — not all 15 categories will be equally relevant to every business. To help identify which categories matter most, we begin with a Scope 3 value chain mapping exercise. 

This involves working closely with internal teams to map out key upstream and downstream activities, suppliers and customer interactions to determine where emissions are generated across the value chain. 

By narrowing the scope in this way, companies can focus their efforts where they’ll have the biggest impact. This targeted approach not only helps drive more meaningful reductions but also supports clearer, more relevant reporting. 

Sam: 

2. Supplier and Consumer Engagement – Collaborate for better data A lot of Scope 3 data sits with your suppliers and consumers — and you won’t get far without bringing them along on the journey. For many, this may be the first time they’ve been asked to provide this type of information. 

Build relationships, share expectations early, and consider emissions when selecting and onboarding suppliers and consumers. Education and communication are key, especially for smaller or overseas corporations who might not be familiar with reporting standards. 

Over time, you can formalise this by requiring emissions data through contracts, tender documents, or codes of conduct. 

Nicole: 

3. Data Quality – Improve the way you Measure 

Once you've identified the material sources of Scope 3 emissions, the next step is to ensure you're using data collection methods that are appropriate for those sources. Start by understanding the quality of the data available — then choose a method that’s fit for purpose. 

Spend-based estimates are a practical starting point, especially where data is limited, but for categories that are material, aim to transition to more accurate approaches like hybrid or supplier-specific methods that better reflect actual operations. 

And be transparent — clearly document your assumptions, methodologies, and data sources so stakeholders can understand how the figures were derived and trust the integrity of your reporting. 

Sam: 

4. Technology – Use tools that make it easier 

Digital tools like ESG reporting platforms or carbon accounting software can make Scope 3 emissions tracking more manageable. They can help standardise data collection, centralise reporting, and reduce manual work. 

 Supplier portals, blockchain solutions, and traceability platforms are also emerging as powerful ways to track upstream emissions. These technologies offer deeper visibility into multi-tiered supply chains. 

5. Integration – Make it part of how you operate 

The end goal isn’t just to report emissions — it’s to influence decisions and outcomes across the business. Scope 3 emissions should become part of how you evaluate suppliers, products, and strategies. 

That means linking emissions to procurement, product design, and even long-term investment planning. 

Leading organisations use Scope 3 emissions data not just to comply but to actively drive emissions reductions and build climate resilience across their value chain. 

Nicole: Thank you for joining us in this episode of Sustainability Matters. As Scope 3 becomes a mandatory part of climate disclosures in Australia, it’s important for businesses to build capability, engage suppliers, and embed emissions into decision-making. If you have any questions or would like to discuss how this applies to your organisation, please don’t hesitate to reach out to us.