How large corporates’ mandatory Scope 3 reporting affects farmers
New mandatory disclosure standards in Australia enforce large corporates to report on their scope 3 emissions, the ones caused across the supply chain. While that may seem irrelevant for anyone other than the Big Corporates, it does affect us all, especially farmers.
Scope 1, 2, 3 … emissions; mandatory scope 3 reporting
Many companies are already reporting and managing the greenhouse gas emissions they produced directly, e.g. by driving cars, operating machinery, or methane produced by cows, and their indirect emissions through the usage of electricity, heating and cooling; which are called respectively scope 1 (direct) and scope 2 emissions. Most of these emissions are within the control of the organisation and therefore relatively easy to report on, and to manage.
However, the bulk of the emissions of most companies is caused by their ‘scope 3’ emissions; or the emissions that are produced upstream and downstream in their supply chain. This includes the emissions generated when for example mining minerals, the fuel used to transport those minerals to a manufacturing plant, and the energy used to process the minerals into for example fertiliser, and then, the emissions related to the usage and disposal of that product …. You see, the list of scope 3 emissions covers an endless chain of sources from cradle to grave.
This brings us to large companies that sell agricultural produce, like large supermarket chains. To report, manage and reduce all their emissions, it won’t longer be sufficient to operate the warehouses on solar energy and electrify the fleet – which will reduce their scope 1 and 2 emissions. In addition, they will have to tackle their scope 3 emissions, or the emissions caused across the entire lifecycle of the produce they sell.
From Large company to Affected Farmers
With the newly released standards from the Australian Accounting Standards Board (AASB), S2 Climate-Related Disclosures standard, companies in Australia have increasingly to report on scope 3 emissions. Starting at first with the largest of the largest companies, and trickling down year after year to smaller and smaller entities. Whilst the chance that your farm was included in the first tier that started on the 1st of January 2025 is slim, the chance that you are selling to supplier that must meet these requirements is becoming bigger. This brings us to how large corporates’ mandatory Scope 3 reporting affects farmers.
To achieve the net zero requirements and reduce and report Scope 3 emissions, large companies rely on accurate data from their supply chain, including the farmers from whom they purchase produce. To reduce legal risk and costs, large corporates need to rely on agribusinesses to reduce their emissions and provide accurate, verifiable and accessible data to report on the emissions that are produced and reduced on the farm directly (scope 1) or through their energy use (scope 2), which together becomes part of the scope 3 data of these larger companies.
Reducing over Ofsetting to Manage Scope 3
Scope 3 emissions are the biggest emission source for these large corporates, hence it is more cost-effective for them to have all their suppliers, including the farmers, reducing their scope 1 and 2 emissions, to avoid costly offsetting in the end. Moreover, many net zero standards already are under scrutiny for allowing offsetting to reduce emissions. There is a strong preference for reduction over offsetting, from a legal, branding, and financial perspective, as well as from a sustainability point of view: isn’t prevention always the best cure?
The large corporates’ mandatory Scope 3 reporting affects farmers already. Some farmers already experience the requirement of suppliers to provide their scope 1 and 2 data as a necessary condition to enter into a purchase agreement.
Accurate data
Hence, both farmers and large corporates will need a method to generate and share high-accurate and -integrity scope 1 and 2 data to meet the scope 3 regulatory requirements to report on and reduce emissions. To that end, CAS provides greenhouse gas accounting and reporting specifically for farming businesses. This reduces risks and costs, while generating a competitive advantage and positive branding to customers, investors and supply chain partners.
Beyond Carbon
Moreover, the impact and reputation of companies go beyond their ability to reduce emissions, with increasing ESG (Environment, social, Governance) or Co-benefit (impacts beyond carbon) requirements by customers, investors and international standards.
To that end, CAS provides an agricultural-specific Co-benefit Assessment, which allows farmers and those who collaborate or buy from farmers to manage and report on the positive impacts they create by investing in sustainable agriculture (including reducing emissions). This generates a competitive advantage and positive branding to customers, investors and supply chain partners.
How we can help
In short: the large corporates’ mandatory Scope 3 reporting affects farmers by requiring their scope 1 and 2 emissions reductions and data, and beyond. Reducing supply chain emissions is a collective effort, that requires accurate, transparent and traceable data, from sequestered soil carbon to methane burbs of cows. With greenhouse gas accounting and co-benefits assessments, we can provide the accurate data to reduce, and report on your emissions, while our soil carbon measurements, mapping and program unlock the land’s carbon sequestration potential, removing emissions from the get-go. Let’s make sure that the large corporates’ mandatory Scope 3 reporting affects farmers in a beneficial way. Contact us today.
