A step-by-step guide to tracking your carbon footprint under AASB S2

Our sustainability webinar series breaks down the complex world of sustainability, making it a little easier for you to understand the basics and begin driving change within your organisation.

As organisations continue to navigate the evolving climate reporting landscape, Pillar 4 of AASB S2 Climate-related Disclosures spotlights a critical area: the measurement and disclosure of greenhouse gas (GHG) emissions.

While previous webinars have explored the governance, strategic and risk management pillars of climate disclosures, Pillar 4 shifts the focus to metrics and targets, specifically, how entities track their carbon footprint across Scope 1, Scope 2, and Scope 3 emissions.

In this article, we share BDO’s practical 10-step approach to measuring emissions, helping organisations move from principles to practice in their sustainability journey.

Turning ambition into action

While many organisations have made public commitments to reduce emissions, the practical task of measuring and reporting on their carbon footprint remains a significant hurdle. The complexity of Scope 3 emissions, the need to define organisational and operational boundaries, and the challenge of collecting reliable data across the value chain can quickly become overwhelming.

AASB S2 Pillar 4 introduces a structured framework for climate-related metrics and targets, but translating these requirements into meaningful, auditable disclosures requires more than technical knowledge; it demands a clear, methodical approach.

BDO’s 10-step approach to measuring your carbon footprint

To support organisations in navigating the complexities of carbon measurement and disclosure, BDO has developed a practical 10-step approach. This framework helps entities move systematically from understanding their obligations to producing credible, decision-useful emissions data aligned with AASB S2 requirements.

Step 1: Determine if disclosure is mandatory or voluntary

Understanding whether your emissions reporting is driven by regulatory requirements or voluntary commitments will shape the scope, methodology, and level of assurance needed.

Step 2: Set the organisational boundary

Define which parts of your business are included in the emissions inventory, using either the equity share or control approach, with the latter based on either financial control or operational control.

Step 3: Set the operational boundary

Identify which emission sources are associated with your operations and categorise them as direct (Scope 1) or indirect (Scope 2 and 3) emissions.

Step 4: Identify the sources of emissions

Map out all relevant activities across your value chain that generate emissions, from fuel combustion and purchased goods and services, to end-of-life treatment of sold products.

Step 5: Determine emissions to be included in the measurement

Use a screening process to decide which categories are material and relevant. This helps prioritise efforts and focus on high-impact areas.

Step 6: Select appropriate calculation approach and collect underlying data

Choose the most suitable method for calculating emissions and begin gathering the necessary data inputs.

Step 7: Determine emissions factor

Apply appropriate emissions factors to convert activity data into carbon equivalents.

Step 8: Apply calculation tool

Use your chosen technology to calculate emissions across all relevant categories and scopes.

Step 9: Roll up data to corporate level

Aggregate emissions data across business units or geographies to produce a consolidated carbon footprint.

Step 10: Report emissions

Disclose your emissions in line with AASB S2 and other applicable frameworks, ensuring transparency around assumptions, boundaries, and methodologies.

Understanding Scope 1, 2 and 3 emissions

A foundational step in measuring your carbon footprint is understanding the three categories of greenhouse gas (GHG) emissions defined by the GHG Protocol. These scopes help organisations classify emissions based on their source and level of control.

Scope 1: Direct emissions

These are emissions from sources that are owned or controlled by the entity. Common examples include:

• Fuel combustion in company-owned vehicles or equipment
• Emissions from manufacturing processes
• Fugitive emissions from leaks or refrigeration systems.

These are typically the most straightforward to measure, as they occur within the organisation’s direct operational control.

Scope 2: Indirect emissions from energy

Scope 2 covers emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the organisation. Although these emissions occur off-site, they are a direct result of the entity’s energy use and are essential to include for a complete footprint.

Two calculation methods are permitted:

• Location-based: Uses average emissions factors for the region
• Market-based: Reflects emissions from specific energy contracts or suppliers.

Scope 3: Other indirect emissions

Scope 3 emissions represent the most extensive and challenging category of greenhouse gas emissions. Unlike Scope 1 and 2, which are relatively straightforward to measure, Scope 3 requires organisations to look beyond their direct operations and into their entire value chain, both upstream and downstream. There are 15 categories of Scope 3 emissions.

For many organisations, Scope 3 emissions account for the majority of their total carbon footprint. These emissions arise from activities not owned or directly controlled by the entity but are a consequence of its operations. Examples include:

• Emissions from purchased goods and services
• Transportation and distribution
• Waste generated in operations
• Business travel and employee commuting
• Use and disposal of sold products
• Investments and franchises. 

Scope 3 emissions require careful mapping of the value chain and often rely on estimation techniques and third-party data. They are critical for understanding an organisation's full climate impact.

The challenges of Scope 3 measurement

Measuring Scope 3 emissions involves several layers of complexity:

• Value chain mapping: Organisations must identify all relevant activities across their supply chain and customer lifecycle.
• Screening and prioritisation: Not all categories will be material. Entities must screen based on qualitative and quantitative factors to focus on high-impact areas.
• Data availability and quality: Scope 3 often relies on third-party data, industry averages, or estimation techniques, which can vary in reliability.
• Estimation techniques: Depending on the category and data availability, spend-based, activity-based, and hybrid approaches may be used.
• Frequency of review: IFRS S2 and ESRS standards require Scope 3 screening at least every three years, or more frequently if there are significant changes in operations or value chain relationships.

How BDO can help

There are a number of ways we can support organisations in their climate reporting journey.

1. Our one-day carbon accounting masterclass provides an understanding of carbon accounting and the practical knowledge to get started.
2. Our sustainability reporting expertscan help you develop or refine your risk identification process, align disclosures, integrate scenario analysis, and even engage stakeholders.

Contact us for help.