The Role of Carbon Accounting in Supporting Environmental Stewardship and Sustainability.

As the world moves towards the axiom that carbon has an impact on the environment, carbon accounting has emerged as an essential practice for businesses striving to understand their greenhouse gas (GHG) emissions.  With Australia’s new mandatory reporting requirements coming into effect, the role of carbon accounting has become even more of a critical process for businesses.

The Role of Carbon Accounting in Supporting Environmental Stewardship and Sustainability: Navigating Australia’s New Mandatory Reporting Rules is, at its core, carbon accounting involves tracking and reporting an organisation’s greenhouse gas (GHG) emissions, often referred to as a carbon footprint. With this data a business can then understand where emissions are concentrated and then devise strategies to reduce them.

The process usually involves categorising emissions into:

• Scope 1 (direct emissions)

• Scope 2 (indirect emissions from purchased energy)

• Scope 3 (all other indirect emissions, such as supply chain activities). 

  Some examples using the agriculture industry as the reporter are as follows:

• Scope 1 (sources directly owned or controlled):

  • Burning fossil fuels in assets owned by the business e.g. vehicles, tractors, harvesters, machinery, pumps

  • Methane emissions from livestock

  • Emissions from the use of fertilisers

  • Emissions from burning

• Scope 2 (consumption of purchased energy)

  • Emissions from electricity used to power irrigation systems, lighting, refrigeration, processing facilitates

  • Emissions from other external sources of energy to heat or cool buildings

• Scope 3 (other indirect emissions)

  • Upstream (purchased goods and services): Emissions associated with manufacturing fertilisers, pesticides and other chemicals purchased

  • Emissions from the production and transportation of feed for livestock

  • Downstream (Post farm Activities)

  • Emissions from 3rd party logistics providers transporting crops, livestock to markets, processors or retailers

  • Emissions from the disposal or treatment of waste products e.g. manure, crop residues

  • Emissions from processing of products into consumer goods, if outsourced e.g. milk, meat or crops

The Carbon accounting process, through the setup, benchmarking, setting of targets and monitoring progress over time, creates an understanding of emissions that helps identify areas that can be targeted with strategies for the greatest environmental impact e.g. efficient equipment, renewable energy usage, sustainable sourcing. This can also uncover potential operational efficiencies, cost reductions, and enhance businesses brand reputation.

Businesses in Australia will be directly impacted if at least 2 of turnover, number of employees and assets values are within the ranges stipulated in the new mandatory reporting legislation.

The key dates and ranges for mandatory carbon reporting are:

• 1 January 2025: The largest businesses—those with 500 or more employees, annual turnover of AUD $500 million or more, or assets valued at AUD $1 billion or more

• 1 July 2026: The second phase will extend mandatory reporting to companies with 250 or more employees, annual turnover of AUD $200 million or more, or assets valued at AUD $500 million or more.

• 1 July 2027: By this date, the threshold will apply to a much broader range of businesses. Companies with 100 or more employees, annual turnover of AUD $50 million or more, or assets valued at AUD $25 million or more

Even though businesses may not be directly impacted, they may find themselves indirectly impacted, as those that are increasingly require emissions data from them as a supplier.  Scope 3 emissions which cover indirect emissions from businesses supply chains will drive this as non-reporters will be asked to share their emissions data to help those that do, meet their own reporting requirements.’

With these new rules in place, carbon accounting will eventually no longer be optional for many Australian businesses. Even if your business is not immediately affected by the mandatory reporting regulations, adopting proactive carbon accounting practices now can help future-proof your operations. By getting ahead of these changes, you’ll be better positioned to respond to client demands, regulatory shifts, and the growing consumer expectation for sustainability.  This not only ensures compliance where required but also demonstrates leadership in this space.

Businesses that take early action on carbon accounting and disclosure will likely have a competitive advantage over those that wait until reporting becomes mandatory for their sector or size.  Customers, investors, and employees are increasingly aligning themselves with businesses that demonstrate clear, measurable commitments to reducing their carbon footprint.  By integrating carbon accounting into core business operations, a deeper understanding of environmental impact is gained, cost-saving opportunities can be identified, and stronger relationships with clients and consumers can be built.

Businesses should start planning for the future sooner rather than later, with the three key areas to start with being:

• Carbon accounting: Begin tracking and managing carbon emissions as this will provide the data and experience needed to meet future obligations

• Engage with supply chain: Understand the carbon footprint of suppliers and partners to be ready for any indirect impacts under the new rules

• Set Emission Reduction Targets: Establish clear, measurable goals for carbon emissions to help comply with future regulations and becoming a leader in sustainability.

Australia’s new mandatory carbon reporting rules, phased in over the next few years, represent a critical shift in how businesses are expected to approach sustainability. As these regulations take hold, carbon accounting will become an essential tool for businesses of all sizes—whether through direct reporting requirements or by being part of the supply chain for those who must report.

At DHM Partners we are committed to helping businesses navigate this new landscape in tracking emissions, setting targets, and complying with evolving regulations. 

Whether through in house expertise or outsourcing when needed, we ensure you receive the right support for your specific requirements, even if they extend beyond our core capabilities.  By embracing carbon accounting now, businesses can not only meet these challenges but also unlock new opportunities for innovation, efficiency, and long-term success.