Entities in this sector typically have relatively lower levels of direct emissions. As a result, many entities reported that they were prioritising efforts to track and limit their indirect emissions.
However, scope 3 emissions remained difficult to accurately characterise, causing challenges in reporting and risking significant year-on-year changes to reported figures resulting from previously unreported emissions data. Entities within this sector remained vigilant to these issues and have increased their attempts to improve reporting accuracy by requiring substantial suppliers to disclose their emissions figures. This has allowed them to better identify high-risk suppliers and consider switching to more sustainable suppliers to reduce emissions.
Entities in this sector also continued to focus on educating and advising their consumers and suppliers on developing sustainable emissions practices and reducing their carbon footprint.
Reducing emissions
As mentioned, the focus amongst this sector is on reducing indirect emissions. That is because scope 3 emissions generally made up over 90% of total reported emissions for entities in this sector. Further, one entity reported that electricity consumption from their network, data centres, offices and other buildings accounts for around 96% of their total FY24 scope 1 and 2 emissions.
A number of entities have committed to implementing scope 1 and 2 emission reduction targets, in some cases in the very near term. For instance, one entity aims to reach net zero for scope 1 and 2 emissions by 2025, having successfully reduced their total emissions in these categories by 99% from 2022 to 2024. Another entity has committed to net zero scope 1 and 2 emissions by 2030. However, scope 3 emissions were not included in these net zero targets due to the difficulties in regulating emissions within their supply chain. By way of example, one entity had set a target to reduce its absolute scope 3 emissions by at least 50% by 2030 measured from 2019.
Since implementing their targets, many entities report having already made significant progress in reducing their emissions, whilst increasing the accuracy of their emissions data.
Meeting sector targets
Actions entities in the sector are taking to reduce their scope 1 and 2 emissions include vacating office tenancies and reducing the office footprint, while transitioning to sustainable energy powered office buildings when existing leases expire.
Although many entities do not have direct control over their scope 3 emissions, they have engaged collaboratively with suppliers to identify and reduce their emissions footprint. The last few years have seen a steady adoption of standardised climate change clauses in supplier arrangements, which requires that suppliers track, report on and reduce their own emission impacts to support the entity’s targets. For example, one entity has reported that at least 91 of its major suppliers are now regulated by its climate reporting clause, which requires the suppliers to report their emissions annually. This increased supplier reporting allows entities to more accurately capture their scope 3 emissions, and better identify and understand the emissions performance of their supply chain and any high-risk suppliers.
Some entities have also implemented a non-compliance monitoring scheme, where suppliers’ failures to log their emissions are reviewed by the entity and considered for future supply agreements.
Entities with a large consumer emissions base have also created educational content to advise consumers on the adoption of sustainable options.
Lastly, some technology entities have a mandate of preferring sustainable suppliers where possible as part of their tender process.
Government policy advocacy
Entities in the sector advocate on climate matters directly and indirectly with the government, including:
- bilateral engagement with regulators;
- submitting responses on policy development in industry consultation;
- contributing to policy work of industry groups; and
- responding to regulatory initiatives, business developments and market practices.
Global developments
Whilst 2024 generally saw an increase in climate reporting globally, global behemoths Microsoft and X (formerly Twitter) were amongst more than 200 major companies delisted by the SBTi for failing to submit approved climate targets.[1] These removals come as companies are increasingly reporting difficulties in measuring and producing tangible solutions to reducing scope 3 emissions.
However, we have also observed major global companies seeking to address and prepare for increases in future emissions, including in late 2024 when Google signed a deal to purchase energy from a fleet of mini nuclear reactors to generate the power needed for the rise in use of artificial intelligence.[2]
What’s next?
The communication services and information technology industry is focused on implementing the new mandatory climate reporting regime under the Australian Sustainability Reporting Standards, setting further scope 1, 2 and 3 financed emissions targets, progressing performance against existing targets and using technology to support climate reporting.
To learn more about climate governance and reporting trends in 2024 across other ASX50 sectors, click on the relevant sector below:
Otherwise, for further advice on navigating the Australian mandatory reporting regime, please contact a member of the King & Wood Mallesons or Owl Advisory team.
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