The CFO's Guide to Scope 3 Emissions: Where to Start

The Scope 3 Problem

Every CFO I speak with says roughly the same thing about Scope 3: "We know we need to do it. We don't know where to start."

The GHG Protocol's Scope 3 Standard defines 15 upstream and downstream categories covering everything from purchased goods and services to the use of sold products and employee commuting. For most large organisations, Scope 3 emissions represent 70–90% of their total carbon footprint.

That's the challenge. But it's also where the material risks — and opportunities — actually live.

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The Materiality-First Approach

You don't need to measure all 15 categories in year one. The GHG Protocol explicitly allows a materiality-based screening approach:

• Screen all 15 categories using spend data or industry benchmarks
• Identify material categories (typically 3–5 categories represent 80%+ of Scope 3)
• Prioritise data collection for material categories
• Use spend-based estimates as proxies where primary data isn't available

For most Australian businesses, the most material categories are:

• Category 1: Purchased goods and services (supply chain)
• Category 3: Fuel- and energy-related activities (upstream energy)
• Category 11: Use of sold products
• Category 12: End-of-life treatment of sold products

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What "Good" Looks Like in Year One

A credible first-year Scope 3 disclosure doesn't need to be perfect. The AASB S2 transition relief provisions acknowledge this. What matters is demonstrating:

• A systematic approach to identifying material categories
• Documented assumptions for spend-based estimates
• A trajectory toward better data quality over time

The worst outcome is producing no Scope 3 disclosure at all and leaving investors to assume the worst about your value chain exposure.

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The CFO's Role

Scope 3 measurement is not a sustainability team problem — it's a finance problem. The data lives in your accounts payable, procurement contracts, and sales records. The CFO's role is to:

• Ensure finance systems can extract spend data by supplier and category
• Engage procurement to collect supplier emission factors
• Integrate Scope 3 estimates into financial risk modelling
• Oversee the disclosure in the annual report

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Starting Points We Recommend

| Timeline | Action | |----------|--------| | Month 1 | Conduct Category 1 spend analysis using AP data | | Month 2–3 | Screen remaining categories; identify top 3–5 | | Month 4–6 | Engage top 10 suppliers for emission data | | Month 6–12 | Produce first Scope 3 inventory estimate |

This is achievable. And the organisations that build Scope 3 capability now will be significantly ahead when mandatory requirements tighten for Group 2 and 3 entities.

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Upekha Atupola leads the sustainability education and advisory programs at Apex Sustainability Institute. He holds membership of CIMA and is completing doctoral research in sustainability accounting at the University of Adelaide.