The one-year Scope 3 deferral under AASB S2 exists for a sensible reason: measuring your entire value chain's emissions is genuinely complex, and a grace period gives Group 2 businesses room to get organised. Most businesses are treating it as exactly that — a year off. That is the wrong read.
The deferral removes a reporting deadline. It does not remove the preparation work. And for most businesses with a real supply chain, that preparation work takes longer than one year.
What the Deferral Actually Gives You
From 1 July 2026, Group 2 businesses must report Scope 1 and 2 emissions, governance decisions, climate strategy, and risk management as part of their first AASB S2 report. Scope 3 does not need to be in that first report. That is the deferral.
That is all it does.
It does not pause the data collection work you will need to complete in Year 1 to have credible Scope 3 numbers ready for Year 2. It does not stop your large clients — many of whom are already reporting under Group 1 rules — from asking for your emissions data right now as part of their own reporting obligations. And it does not give you an established baseline figure, which is the starting point every emissions reduction target depends on.
The grace period is a pressure-relief valve on reporting. It was never intended as a signal to put Scope 3 on hold.
Why Supplier Data Takes Longer Than You Expect
Scope 3 is not a calculation problem. The numbers are straightforward once you have the right inputs. The challenge is getting those inputs, because most of them sit outside your business.
Common Scope 3 categories for Queensland businesses include purchased goods and services, upstream freight, business travel, and the emissions generated when customers use your products or services. Each of these requires data from someone else: a supplier, a freight provider, a contractor. You cannot collect 12 months of that data in the final quarter of a reporting year, and you certainly cannot do it at the same time as preparing your first full AASB S2 climate report.
Businesses that begin supplier engagement in Year 1 will understand their data landscape before they are required to report on it. They will know which suppliers can provide figures and which cannot, which Scope 3 categories are manageable and which need more work, and where spend-based estimates are a defensible starting point. That kind of practical knowledge takes time to build and cannot be rushed.
No Baseline Means No Story
Your first Scope 3 figure becomes your baseline. It is the number every future reduction target, trend, and progress claim will be measured against. If that number first appears in a mandatory Year 2 disclosure, you have a single data point with no history and no comparison.
Doing even a partial internal Scope 3 measurement in Year 1 changes that picture significantly. By the time Year 2 reporting is due, you will have a documented methodology, a tested process, and a prior-year figure to compare against. Your board will have already seen the numbers and will understand what they mean. That is a meaningfully stronger position than walking into your first mandatory Scope 3 report with nothing to reference.
Your Large Clients Are Not Waiting
Group 1 entities have been reporting under AASB S2 since 1 January 2025. Their Scope 3 reporting obligations cover emissions in their supply chain, which includes the goods and services they buy from businesses like yours.
When a large client sends you a supplier sustainability questionnaire asking for your emissions data, they are not waiting for your Year 2 grace period. They have their own reporting cycle, their own assurance requirements, and their own deadlines. Your grace period is irrelevant to their process.
Businesses that can respond to those requests with documented figures, a clear methodology, and consistent data will stand out against competitors who say they are planning to start measuring next year. That is a direct commercial advantage in tender and contract situations, and it compounds over time. Clients remember which suppliers made the process easy.
What Early Movers Are Already Doing
Larger Australian businesses with complex supply chains have not waited for the grace period to expire. They have used the pre-mandatory window to map their supplier base, run early data collection rounds, and confirm their methodology before assurance expectations tighten. Some are already publishing partial Scope 3 figures voluntarily, using the lower-pressure environment of Year 1 to test and refine their approach.
The gap this creates is practical and measurable. A business that begins Scope 3 measurement in Year 2 will publish its first figure at the same time that early movers are publishing their third year of data, complete with reduction trends and supplier programs already running.
💡 The grace period gives you a safer year to measure Scope 3. It was not designed to give you a year to avoid it.
What Starting in Year 1 Actually Looks Like
Starting early does not mean publishing a complete Scope 3 inventory in your first AASB S2 report. It means doing the groundwork so Year 2 is manageable:
- Map your supply chain — identify which Scope 3 categories are likely to be material for your business, and which suppliers account for the majority of your spend and emissions exposure
- Run a first round of supplier data requests — keep it short and focused; the goal at this stage is to understand what data exists, not to produce a final inventory
- Confirm your methodology — decide where spend-based estimates are appropriate, where you need actual activity data, and which suppliers are worth engaging directly
- Record an internal baseline — even an imperfect first-year figure gives your board and future auditors a documented starting point with clear assumptions
None of this requires expensive software or a dedicated sustainability team. It requires someone in the business taking ownership of the process in Year 1, rather than having it compressed into an unworkable timeframe in Year 2.
Where to Start
If you are a Group 2 business and have not yet looked at your Scope 3 exposure, the first useful step is understanding which categories are material for your type of operations. From there, a structured data collection program can be run across Year 1 at a pace that produces usable results.
If your business is on the receiving end of Scope 3 data requests from large clients, Aethiro's Supplier Data Response service helps SMEs understand what is being asked, prepare a credible response, and build the documentation needed to answer those requests consistently going forward.
If you are starting from scratch on carbon measurement altogether, a Carbon Footprint Analysis establishes your Scope 1 and 2 baseline first. That foundation needs to be in place before adding Scope 3 to the picture.
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