Treasury Laws Amendment (Scrapping Scope 3) Bill 2026
Senator HUME (Victoria—Deputy Leader of the Opposition) (15:39): I move: That this bill be now read a second time. I seek leave to table an explanatory memorandum relating to the bill. Leave granted.
Senator HUME: I table an explanatory memorandum and seek leave to have the second reading speech incorporated in Hansard. Leave granted. The speech read as follows— I rise to speak on the Treasury Laws Amendment (Scrapping Scope 3) Bill 2026.
Australian businesses should be spending their time making things, serving customers, employing Australians and growing their businesses, not drowning in government paperwork. But under Labor, businesses are being asked to spend thousands of dollars chasing information they don't control, from companies they may never have dealt with, just to comply with another layer of regulation.
That is not how you lift productivity. It is how you make running a business harder and more expensive. Australia has a productivity problem.
And it's a problem that has gotten worse under this Government, with productivity collapsing by almost 5% since Labor came to power. There are many factors contributing to our productivity challenge, including: Taxes—which Labor is increasing, including through its changes to capital gains tax, negative gearing and trusts. Energy prices—with gas prices up 40 per cent and electricity prices up 39 per cent.
Regulation—which, you guessed it, has also increased under Labor. All three make life harder for Australian businesses. They increase costs, eat into margins and make it harder for businesses to invest, expand and employ more people.
But there is an important difference. Governments may not control every factor driving business costs, but they do control the rules they impose on businesses. And when those rules become unnecessarily complex, costly and burdensome, government has a responsibility to do something about it.
Yet under Labor, the regulatory burden continues to grow. Research commissioned by the Australian Institute of Company Directors found that the cost of complying with Commonwealth regulation rose from $65 billion in 2013 to $160 billion in 2024. That is more than double in just over a decade.
Think about what that money represents. It is money that could be spent on new equipment, extra staff, better technology or expanding a business. Instead, too much of it is being swallowed up by compliance.
Businesses do not need more forms to fill out or more consultants to pay. They need room to get on with the job. Of course, sensible regulation has a place.
It should protect people, provide certainty and serve a clear purpose. But when the costs and complexity outweigh the practical benefits, it is time to change the rules. Australia will never regulate its way to prosperity.
Of course, good regulation has a purpose. It protects consumers, supports functioning markets and provides certainty. But regulation must also be proportionate, practical and deliver benefits that justify its costs.
When compliance obligations become unnecessarily complex or expensive, it is businesses and their customers who ultimately bear the burden. What is most troubling is that the Treasurer, Jim Chalmers, knows how serious Australia's productivity problem is. Earlier this year, he said: "If Australia's productivity trajectory remains on its current course, working weeks will be 5 per cent longer and incomes will be 40 per cent lower in 2063 than would have been the case if productivity increased at its long-run average." The Treasurer understands the stakes.
But recognising the problem is not enough. The Government must be prepared to tackle the barriers holding Australian businesses back. Reducing unnecessary red tape is one practical step the Government can take right now.
This Bill is a clear example of how that burden can be reduced. It addresses two issues within Australia's mandatory sustainability reporting framework: the requirement to report Scope 3 greenhouse gas emissions and the application of mandatory sustainability reporting to Group 3 entities. Scope 3 emissions are indirect emissions generated across a business's supply chain.
They can include emissions from suppliers, transport, the materials used to make a product and even the way customers use that product. The problem is that businesses are being asked to calculate emissions generated by other people, often using information they cannot readily access or verify. Take a refrigerator manufacturer.
To calculate its Scope 3 emissions, it could need information about the steel used in the fridge, the plastics, the compressor, the electronic components, the packaging and the transport. But it may not be enough to know what those suppliers themselves emit. It could also need information about the businesses supplying the steel, the plastics, the components and the packaging.
The steel supplier has its own suppliers. The plastics manufacturer relies on chemical producers. The component makers have their own factories, materials and transport networks.
Before long, a business could be chasing emissions data from a supplier's supplier's supplier and still not have the full picture. That is the practical problem with mandatory Scope 3 reporting. Businesses can be left spending significant time and money trying to assemble data they do not control and cannot reliably obtain.
The Coalition has consistently raised concerns about whether the costs and complexity of these requirements are proportionate to the practical benefits they deliver. Labor's own Treasury estimated that Scope 3 emissions modelling alone could cost around $245,000 per entity in the first year, followed by $161,700 annually. Those are enormous sums to spend on modelling emissions across a supply chain, particularly when businesses are already dealing with high operating costs and the challenge of lifting productivity.
The Australian Chamber of Commerce and Industry has also raised concerns about the administrative burden, complexity and legal and reputational risks associated with Scope 3 reporting. As ACCI chief executive Andrew McKellar said: "Reporting Scope 3 emissions creates significant compliance costs and administrative burdens that flow through supply chains and traps small businesses in a regulatory nightmare." And that is precisely the problem: the burden does not stop with the businesses directly subject to mandatory reporting.
Large businesses required to report Scope 3 emissions may seek information from smaller suppliers to calculate their own emissions. Those suppliers may lack the resources, systems or expertise needed to provide detailed emissions data. As a result, reporting obligations imposed on large businesses can flow down through supply chains, placing additional pressure on small and medium-sized enterprises that are not themselves required to report.
Smaller businesses may face additional costs to meet the demands of larger customers, with potential commercial consequences if they cannot provide the requested information. ACCI have also warned: "Many small businesses will be expected to provide complex emissions data, despite having little ability to measure it accurately and no clear evidence that the additional reporting will lead to better environmental outcomes." The Coalition Senators' dissenting report on the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 highlighted these concerns, including the significant data and methodology gaps associated with Scope 3 emissions and the potential for compliance costs to be passed on to smaller suppliers.
The United States Securities and Exchange Commission also identified concerns about the costs, reliability and collection of Scope 3 emissions information when developing its climate disclosure rules. These concerns demonstrate why the practical operation of reporting requirements matters. A reporting obligation should not impose substantial costs on businesses simply because information is theoretically desirable, particularly where that information is difficult to obtain and the benefits are uncertain.
These costs are not limited to Scope 3 reporting. The Bill also removes Group 3 entities from the mandatory sustainability reporting regime by raising the relevant reporting thresholds. The costs of compliance are particularly significant for these businesses.
Evidence cited in the Coalition's dissenting report estimated first-year implementation costs for Group 3 entities of between $30,000 and $70,000, with ongoing reporting costs of between $20,000 and $40,000 per year, before additional assurance costs. For many businesses, those are significant sums to spend on a new reporting regime, particularly when resources could otherwise be directed towards employees, equipment, expansion and day-to-day operations.
The dissenting report also cited Treasury's estimate that only 5 per cent of Group 3 companies would have material climate risks requiring disclosure. That raises a legitimate question about proportionality. Where businesses must undertake substantial work to assess their climate risks, prepare reports and obtain assurance, even when they ultimately have little material information to disclose, the costs can be difficult to justify.
The issue is not whether businesses should understand the risks relevant to their operations. It is whether every business captured by the regime should face the same mandatory reporting framework regardless of its size, resources and circumstances. The removal of Group 3 entities recognises that regulatory obligations should be proportionate to the businesses required to meet them.
For small businesses in particular, compliance costs can be difficult to absorb. Larger businesses may have dedicated legal, finance and compliance teams. Smaller operators often have to manage these obligations alongside running their business and serving their customers.
The Coalition is not the only ones making the case for reform. The Australian Institute of Company Directors has also identified the removal of Group 3 entities from climate reporting as a practical reform that could make a meaningful difference to Australia's productivity. In its report, The Stagnant Nation: Lifting Australia's Dynamism, the AICD recommended removing Group 3 entities from the climate reporting regime.
It estimated that doing so would benefit approximately 3,000 organisations and deliver savings of $2 billion over four years. That is a substantial reduction in compliance costs for Australian businesses, and a clear example of how targeted deregulation can free up resources for more productive uses. The case for this Bill is straightforward.
Australian businesses should be focused on producing goods, serving customers, employing Australians and finding ways to grow, not spending hundreds of thousands of dollars chasing emissions data they cannot reliably obtain. This Bill removes mandatory Scope 3 emissions reporting and removes Group 3 entities from mandatory sustainability reporting. It is a practical step towards reducing unnecessary compliance costs and freeing up resources for more productive uses.
It does not prevent businesses from measuring or voluntarily reporting their emissions. Nor does it tell businesses to ignore risks relevant to their operations. It simply recognises that regulation must be practical, proportionate and worth the cost.
At a time when Australia needs stronger productivity growth, we should be making it easier for businesses to invest, employ and grow, not adding more paperwork and expense. The Coalition will cut the red tape holding Australian businesses back, so they can spend less time complying with government rules and more time getting on with the job. I commend the Bill to the Senate.
Senator HUME: I seek leave to continue my remarks later. Leave granted; debate adjourned.