Part 2 – Understanding the Scope 3 Challenge: What Procurement Must Now Own

While Scope 1 and 2 emissions have been the early focus of corporate climate strategies, it is Scope 3 – the indirect emissions that arise across the full value chain – that represent the lion’s share of the footprint.

According to multiple studies, including those from the ClimateWorks Centre and CDP, Scope 3 emissions often account for more than 70% of a company’s total emissions – sometimes as high as 90% – particularly in sectors such as infrastructure, transport, manufacturing and consumer goods. (CDP Global Supply Chain Report 2023)

These include emissions from purchased goods and services, transportation, use of sold products, end-of-life treatment, employee travel and investments. In practice, the most significant contributor to Scope 3 is usually procurement – where a company’s buying decisions directly influence emissions embedded in its supply chain.

This has three immediate implications:

1. Visibility must improve. Most procurement teams in the region do not have meaningful visibility beyond Tier 1 suppliers. Few collect emissions data from suppliers. Fewer still verify it.

   
   

2. Data will become mandatory. Under the Australian Treasury’s staged climate reporting framework, large organisations must start disclosing material Scope 3 emissions from FY25 onwards. This requires supplier data, assurance-ready.

   
   

3. Engagement models must evolve. Many suppliers, particularly SMEs do not have the right tools, budget or knowledge to calculate and report their emissions. Procurement functions may need to shift from a policing stance to an enabling one.

As highlighted in recent guidance from the Australian Climate Leaders Coalition, procurement teams will play a critical role in building the trust and data-sharing required to measure and manage Scope 3 emissions effectively.

While specific adoption rates are not publicly disclosed, the trend is clear: when procurement teams engage early with suppliers, particularly with a focus on collaboration and capacity-building, uptake of carbon reporting practices improves materially.

And this isn’t just about emissions. Scope 3 is also where exposure to modern slavery, biodiversity loss, waste management, and Indigenous engagement occurs. Under Australia’s Modern Slavery Act, Boards are already accountable for human rights violations in their supply chain. These ESG domains increasingly intersect.

Takeaway

Scope 3 is where ESG moves from policy to execution. And procurement sits right at its centre.

The challenge ahead is not trivial, but it is manageable, with the right strategy, tools and partnerships.

In the next post, we’ll explore how forward-looking procurement leaders are equipping themselves to deal with this challenge, from operating models to digital tools and supplier collaboration.