Blog by Arteh CEO Thomas Key

AASB S2 is the new bogeyman of sustainability reporting in Australia for some; for others, just more nonsensical acronyms and jargon seemingly thrown around to prove that consultants know what they’re talking about. The reality of it could be either, both, or neither, depending on your business.

For large businesses (ASX200 level and private equivalent) it’s the former. As part of their annual reporting processes, they’re now required to include information on their emissions, their potential risks and exposures due to climate change, how they manage them, the governance procedures in place for assessing and analysing them, and their targets for reducing both risks and emissions.

For the rest of us — not a peep out of government. Arguably this makes sense in a lot of ways, particularly for business-to-business operations — small consulting, accountancy, lawyering, exploration drilling, human resourcing. Our businesses actually become the missing elements of other businesses, including the larger ones captured by this legislation.

But why care — the government still hasn’t told me to?

The answer depends on what the specialists call “Scopes”. In climate science, every emission source is categorised into a Scope based on where, how and why it occurs in the product cycle.

Scope 1 — direct emissions from doing the thing, making the product, mining the ore. In mining, for example (and most other businesses), this is most likely to be diesel or petrol: trucks moving ore, blasting rock, utes moving people, trucks moving food, and so on. For manufacturing and processing firms, this could be more nuanced, around the emissions from chemical processes such as calcination.

Scope 2 are the ones most often in the media — market-based, i.e. purchased electricity, heat and steam from the grid.

Scope 3 is where the magic/pain/risk occurs. This is the rest of the potential supply chain for a product. Mine workers FIFO to site, shelf stackers commuting to work, accountants and lawyers using reams of paper as monitor stands so they can more ergonomically assist their clients, consultants and land managers driving around the countryside. It’s where we fit into the scheme.

For the very largest companies captured by AASB S2 (Group 1, as they’re legally called) they only had to report on Scope 1 and Scope 2 last financial year. This is all data that they had on hand within their organisations. Group 2 (still large, but just not BHP or CBA scale) will have the limited reporting requirements this financial year.

However, this year, Group 1 has to start exploring their Scope 3 exposure. This doesn’t mean Rio is going to be breathing down your neck right now for your diesel spend on that waste rock dump inspection just yet, but we can’t pretend they’ll do the work for us forever either. For large enough small enterprises, you may already have started receiving these requests from clients as part of their own reporting obligations. This is not to mention international investors, financial institutions, governments and their corporations, all increasingly requiring similar.

Ultimately, this is an informative pitch for the Arteh platform — getting across what this information means within your business. The platform has been specifically designed so that it can adjust to your business requirements and present the information you want to see, without requiring additional budget for consulting and advisory.