Scope 3 Emissions and the Supply Chain: Why Scope 3 Matters for Small Businesses

Australia’s corporate climate disclosure landscape is undergoing a significant shift. From January 1, 2025, climate-related financial disclosures became mandatory for many large entities, transitioning from a previously voluntary approach. This reform falls under the Federal Government’s Sustainable Finance Roadmap[1], which aims to embed climate in alignment with its Paris Agreement commitments, ESG, and broader sustainability considerations into Australia’s financial systems.

Importantly, ASIC’s Regulatory Guide 280 (RG 280) reinforces that directors' existing obligations under the Corporations Act 2001—including the duty to act with care and diligence—extend to sustainability reporting. Directors are expected to oversee the integrity of disclosures, particularly under the new Australian Sustainability Reporting Standards (AASB S1, AASB S2).

The Roadmap sets a clear policy direction: a “climate-first, not climate-only” approach. Businesses and investors must now consider a wider range of sustainability risks, including supply chain emissions, biodiversity loss, and natural capital. Capital will increasingly flow to sustainable, future-ready businesses, making Scope 3 emissions a key factor in both compliance and investment decisions.

What Are Scope 3 Emissions? Scope 3 emissions encompass indirect emissions throughout a company’s value chain—such as those from suppliers, product use, and transportation—and often represent the largest portion of a company’s carbon footprint. While complex to quantify, they are now a critical part of climate risk governance and corporate accountability.

What’s Required? Under the new climate disclosure regime, companies must assess and report climate-related risks and opportunities across their operations and value chains. While Scope 3 emissions reporting is not mandatory in the first year, and modified liability protections apply for three years, ASIC has stated the ‘safe harbour’ provisions do not offer blanket immunity and disclosures or statements that are misleading, unsubstantiated, or lack proper legal review and assurance remain subject to standard liability.

Implications for Boards and Directors ASIC’s Regulatory Guide 280 (RG 280)[2] reinforces that sustainability is now a core governance issue. Directors must apply the same diligence to climate disclosures as they do to financial reports, ensuring robust internal controls, reliable data, and credible scenario analysis.

Impact on SMEs and Supply Chains While most Australian small and medium-sized enterprises (SMEs) won’t be directly subject to mandatory climate reporting, many will be indirectly affected. As suppliers to larger entities with reporting obligations, SMEs may be required to provide emissions data and demonstrate compliance with ESG-related requirements, including diversity, Indigenous engagement, and relevant legislation.

These expectations are increasingly influencing eligibility for contracts, finance, and participation in major infrastructure and export projects. In some cases, ESG performance can account for up to 25% of a procurement assessment.

What Should SMEs Do Now?

With climate and ESG disclosure now mandatory, SMEs must take proactive steps to stay competitive and meet rising expectations from customers, regulators, and investors. Here’s how to get started:

• Build emissions reporting capability. Begin measuring and tracking your emissions—especially Scope 3—to meet data requests from larger customers.

• Strengthen data and oversight systems. Invest in systems that support accurate, auditable emissions data and sustainability reporting.

• Implement ESG policies and compliance frameworks. Establish robust social and governance policies, including compliance with key legislation such as the Modern Slavery Act and Gender Pay Gap reporting.

• Prepare for increased scrutiny from key stakeholders. Customers across sectors are raising the bar, including:

  • Government agencies and procurement panels

  • Grant providers

  • Large private and listed companies

  • Prime contractors (domestic and international)

  • Financial institutions conducting ESG risk assessments

    
    

Adapting early positions your business for long-term success and ensures you’re not left behind in Australia’s accelerating shift to a sustainable economy.

Green2View helps SMEs confidently navigate sustainability reporting through our tailored platform, Green2View Lite™ —designed to simplify compliance, boost performance, and support long-term growth.

Ready to get started? Contact us today to learn how we can support your transition to a low-carbon, future-ready business.

[1] Australian Government, The Treasury https://treasury.gov.au/publication/p2024-536290

[2] ASIC, https://www.asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-280-sustainability-reporting/