In short:
The construction industry’s absolute dependence on diesel, along with carbon-intensive materials such as concrete, steel and aluminium, make the energy and climate transition an unavoidable challenge.
In Australia, construction is particularly reliant on subcontractors and gathering reliable data from them is difficult. While National Greenhouse and Energy Reporting Scheme (NGERS) experience is useful, subcontractor data is often not of financial reporting quality and NGERS don’t capture Scope 3 emissions across the supply chain.
The project-based nature of construction contracting can encourage a short-term focus. However, climate-related risks are increasingly considered material to a company’s long-term performance. This significance warrants risk disclosure to all stakeholders through sustainability reporting.
What’s more, private companies are not exempt.
What’s next?
Companies limiting themselves to bare-minimum compliance risk missing the opportunity to embed climate and transition thinking into their strategy, leaving themselves at a competitive disadvantage.
Value lies in treating the new requirements not as a one-off inconvenience, but as a prompt to integrate climate risk and transition thinking into core business strategy.
Climate reporting is expanding across construction
Mandatory climate reporting is no longer reserved for financial institutions and large listed corporations. In light of Australia’s new climate disclosure requirements, many major construction contractors are already reporting or preparing to report under AASB S2.
Contractors involved in infrastructure, energy, mining, resources and transport projects face particularly significant exposure as reporting requirements flow through owners, procurement frameworks and supply chains.
While emissions reporting remains an important component, organisations are increasingly being asked to demonstrate how climate-related risks and opportunities are identified, managed and integrated into broader business decision making.
For many businesses, this extends into areas including operational strategy, procurement, asset management and long-term strategic planning.
Why construction contractors face unique transitional risks
Construction contractors face a unique set of energy transition risks due to the nature of their operations. Many businesses rely heavily on diesel-powered fleets, mobile plant, generators and temporary power systems to deliver projects.
As regulation influences market expectation, these assets can create significant scope 1 emissions exposure while also posing fuel transition risks and increasing pressure to upgrade or replace existing assets sooner than anticipated.
Beyond operational emissions, contractors often operate within complex supply chains and project environments where embodied carbon, supplier emissions data and procurement requirements are becoming increasingly important considerations. Embodied carbon is the carbon footprint of the materials used to build a project before it is operational.
Contractors with significant exposure to major infrastructure, mining, coal, oil and gas projects may face heightened transitional risks as clients, investors and governments accelerate decarbonisation initiatives. While these sectors will continue to play a critical role in Australia’s economy, the pace of change means contractors will increasingly need to understand how evolving climate requirements may affect future project opportunities, asset decisions and commercial competitiveness, and importantly, how to navigate this.
NGERS experience does not fully prepare you for climate reporting
Many construction contractors are already familiar with emissions reporting through the National Greenhouse and Energy Reporting Scheme (NGERS). While this experience provides a valuable foundation, climate reporting under AASB S2 introduces a much broader set of governance, financial and strategic disclosure requirements.
NGERS primarily focus on operational emissions reporting, compliance data and emissions calculations.
However, climate reporting additionally requires organisations to consider how climate-related risks can impact financial decisions and short-long term business strategy, including:
- governance disclosures
- scenario analysis
- transition planning
- risk management integration
- supply chain considerations
- auditable systems and controls
Being familiar with emissions reporting does not necessarily mean organisations are prepared for financial-grade climate disclosures.
Many contractors will need to expand existing reporting frameworks to incorporate governance structure, risk processes and financial oversight mechanisms that may not currently exist in your traditional sustainability or compliance programs.
Major pressure points: Scope 3 and supply chain data
Scope 3 emissions may represent the largest portion of construction contractors’ overall emissions profile – it is also going to be the most unfamiliar territory.
These emissions can arise from:
- purchased materials
- freight
- subcontractor activities
- waste generation
- downstream project impacts
Given construction businesses often operate within fragmented supply chains involving numerous subcontractors, suppliers and project partners, data collection processes may vary considerably across projects.
This creates challenges around consistency, completeness and data quality. As climate reporting expectations increase, obtaining reliable emissions information from suppliers and subcontractors is likely to become a growing priority.
At the same time, clients are increasingly requesting embodied carbon data, supplier disclosures and emissions transparency as part of procurement and project delivery requirements. As a result, Scope 3 emissions are becoming both a reporting challenge and a commercial consideration.
Contractors that can provide credible emissions data and demonstrate supply chain visibility may be better positioned to respond to client expectations and strengthen their competitive position during tender processes.
Climate Reporting: A systems and governance challenge
Climate reporting increasingly requires the same level of governance and scrutiny expected of financial reporting. This means organisations must be able to demonstrate robust controls, clear responsibilities, reliable audit trails and confidence in the information being disclosed.
One of the most significant challenges facing construction contractors is not necessarily calculating emissions. It’s establishing reliable processes for collecting data, assigning responsibility, validating information that stakeholders, auditors and regulators can trust. Then being able to do so year-on-year.
Often operating across multiple projects, decentralised teams, varying subcontractor systems and large volumes of operational data, challenges arise around data consistency, auditability, ownership and assurance. Climate-related information may sit across finance, procurement, operations, sustainability and project delivery teams, making it difficult to establish clear accountability and reporting processes.
Organisations operating across international offices, subsidiaries or project partnerships may also face additional complexity when aligning local reporting requirements with Australian climate disclosure obligations, as well as technical matters like sourcing emissions factors for calculations.
What construction contractors chould be thinking about now
Contractors that begin preparing early will be better positioned to manage both reporting obligations and changing client expectations. While reporting requirements will vary between organisations, there are several practical areas construction contractors should begin assessing now.
The first is understanding reporting obligations, including applicable reporting groups, timing requirements, reporting thresholds and disclosure expectations. Many organisations are still determining where they sit within the evolving regulatory landscape and how future obligations may affect their business.
Contractors must also assess operational exposure, including:
- diesel dependency
- fleet transition considerations
- asset replacement planning
- potential impact of future energy costs
Understanding these risks early can help inform more effective investment and operational decisions and evaluate alternative future scenarios.
Supply chain capability is another important consideration. Organisations should evaluate supplier data availability, procurement processes and subcontractor engagement practices to identify potential reporting gaps before disclosure requirements increase.
At the same time, businesses should review governance structures, data ownership, internal controls and audit readiness processes to ensure climate-related information can be collected, verified and reported consistently. Integrating sustainability, finance, procurement, project delivery and risk functions will become increasingly important as climate reporting expectations mature.
How Losee Consulting can support construction contractors
Climate reporting requirements can present significant operational, governance and reporting challenges for construction businesses. Losee Consulting works with organisations to translate climate reporting obligations into practical actions that support compliance, operational resilience and long-term business performance.
“The recent fuel crisis has focused minds in the construction industry on something that was just considered a cost-item – diesel – and what future energy scenarios will really mean for their businesses.”
Scott Losee | Director
Our team supports construction, infrastructure, industrial and asset-intensive organisations across a range of climate reporting requirements, including climate risk and materiality assessments, carbon accounting, Scope 1, 2 and 3 emissions inventories, climate scenario analysis, governance frameworks, reporting readiness programs and audit preparation.
We understand the realities of project-based operations, complex supply chains, existing NGERS obligations and the operational risks associated with energy transition. By taking a practical and collaborative approach, we help organisations build reporting capability while supporting broader business objectives and stakeholder expectations.
Start planning for climate reporting with the right support. Contact Losee Consulting to get started today.
Have further questions?
Contact the team at Losee Consulting for more information or guidance on how to comply with the new mandatory climate reporting requirements.
Scott Losee
BES, MPhil, MEIANZ, GAICD, ISAP
30+ years’ experience, Scott specialises in sustainability, carbon and energy advice, and climate adaptation. As founder and director of Losee Consulting, he brings senior leadership experience from both private and public sectors. He has led sustainability and energy strategies for major infrastructure projects, supports decision-making, develops tools, and engages stakeholders across organisations.