Sustainability, risk and governance in supply chains: the procurement-led playbook Australia needs now
It usually starts with a short email that doesn’t feel short.
“Can you send me our Scope 3 position by category?”
Or: “Are we confident we can stand behind our modern slavery statement?”
Or the real classic: “Our disclosures need to stand up to assurance — are we ready?”
Procurement leaders are increasingly the ones on the hook, because the hard part isn’t writing a report. It’s proving what sits underneath it: supplier data, freight activity, contract terms, governance, controls, and the ability to demonstrate that the organisation actually identifies and manages risk across its value chain (not just talks about it).
Australia’s sustainability reporting regime is now real and it’s phased — which is both a blessing and a trap. It gives organisations time, but it also creates false comfort. If you wait until the year you must disclose, you’ll spend more, annoy suppliers, and still end up with a fragile dataset that won’t survive assurance.
This article is written for Australian procurement and supply chain leaders who want a practical approach: what’s changing, what “good” looks like, where teams get stuck, and how to get moving in a way that improves risk management and makes commercial sense.
What’s changing in Australia (and why procurement is in the middle of it)
Mandatory climate-related disclosures are being phased in
Australia is moving to mandatory climate-related financial disclosures for many large organisations. The reporting approach aligns to Australian Sustainability Reporting Standards, including a climate disclosure standard (often referred to as AASB S2). The intent is clear: climate reporting is becoming part of mainstream corporate reporting, not an optional ESG add-on.
Assurance expectations are rising
Even if early reporting relies on estimation, the direction of travel is toward more rigorous review and assurance over time. That means organisations need methodologies, controls and evidence trails that can be tested.
Modern slavery reporting remains in force — and expectations are lifting
The Modern Slavery Act reporting requirement applies to entities that meet the annual consolidated revenue threshold (commonly $100 million). There’s also ongoing discussion about strengthening the regime. Regardless of timing, customers, investors and boards are already expecting a more robust due diligence posture than “we published a statement”.
The takeaway: Even if the law doesn’t force every organisation to do everything immediately, the market is pushing in the same direction — and procurement is where the evidence lives.
Why procurement becomes the “data spine” for sustainability and governance
If you strip away the jargon, most of the hard sustainability questions come back to three procurement realities:
- Most value-chain impacts sit outside your four walls. Suppliers, outsourced services, freight, packaging, waste, capital goods.
- Most risk sits in the messy middle. Subcontractors, labour hire, opaque geographies, and multi-tier supply chains.
- Most controls are commercial controls. Contract clauses, onboarding rules, category strategies, supplier performance management, and governance.
That’s why an effective approach can’t be “ESG will handle it”. Sustainability reporting and modern slavery readiness are only as defensible as your procurement process design and supplier governance.
The three workstreams you need to run in parallel
To keep this practical, treat supply chain sustainability and governance as three connected workstreams (not one giant program that never ends):
1) Scope 3 visibility and defensible calculation
Scope 3 is where you’ll spend most of your time because it involves supplier and logistics data, estimation methods, and iteration.
2) Supplier risk and human rights due diligence (modern slavery and broader ESG)
Modern slavery reporting is a baseline. The real expectation is a due diligence system you can demonstrate: consistent screening, review, remediation and re-assessment.
3) Governance, controls, and assurance readiness
Assurance doesn’t only test numbers. It tests process: evidence trails, approvals, version control, methodologies, and whether governance is genuinely operating.
Run these three together and you avoid the common failure mode: a rushed Scope 3 estimate built in a spreadsheet, a modern slavery statement built from stale templates, and governance that only exists in PowerPoint.
A procurement-led roadmap that works in the real world
This five-phase structure is a strong minimum viable program that procurement teams can actually execute.
Phase 1: Confirm obligations, reporting boundaries, and what “material” means
Before you send supplier questionnaires, align internally on:
- Which entities and operations are included
- Which Scope 3 categories are likely to be material (start with spend and activity screening)
- What you will exclude (and why) — because you’ll be asked later
Procurement deliverables in this phase
- Category-by-category Scope 3 exposure map (high/medium/low)
- A shortlist of priority suppliers and key data gaps
- Documented estimation approach per major category (activity-based where possible, spend-based where necessary)
Phase 2: Set governance that matches the risk
Scope 3 and supplier due diligence touch procurement, finance, operations, sustainability, legal and risk. Without ownership, it fragments fast.
What good looks like
- An executive sponsor and clear audit committee oversight where relevant
- Named data owners for major emissions sources (purchased goods, freight, travel, waste, etc.)
- Review and approval controls that mirror financial reporting discipline
Phase 3: Build a defensible data foundation
In early years, estimation is normal. What matters is whether it’s:
- Traceable back to source systems (spend, freight invoices, supplier lists)
- Consistent year-on-year
- Documented (methodologies, emission factors, versions, assumptions)
- Rated for confidence so it can improve over time
Practical tip: Avoid “perfect data” projects. Start with the biggest categories and build an auditable backbone.
Phase 4: Map the value chain and engage priority suppliers
Supplier engagement is where timelines blow out — and where capability gets built.
This is also where procurement can create genuine commercial value:
- Supplier segmentation (spend × emissions intensity × risk)
- Structured data requests with simple templates and guidance
- Updated contract terms that set expectations (data provision, improvement plans, audit rights where appropriate)
Phase 5: Prepare for assurance and integrate it into decisions
As assurance expectations increase, Scope 3 and supplier due diligence need to be embedded into:
- Enterprise risk management
- Category strategy and sourcing decisions
- Capital planning and operational trade-offs
This is where you move from “we can report it” to “we can manage it”.
Modern slavery due diligence: move beyond the statement
A strong modern slavery posture looks like a supplier governance system, not a once-a-year document.
A solid due diligence process typically includes:
- Supplier identification and segmentation
- A structured questionnaire (risk-based, category-specific)
- Consistent review rules (not ad hoc judgement by different teams)
- A remediation plan pathway
- Ongoing re-assessment (not “set and forget”)
Focus on where risk is actually inherent
Don’t spread your effort evenly. You’ll get better outcomes by prioritising categories and supply chains that are more exposed — labour-intensive production, subcontracting-heavy models, imported goods with known labour risk exposure, and complex multi-tier supply chains.
Make remediation real
A remediation plan doesn’t need to be dramatic to be effective. It needs to be:
- Specific (actions, timing, responsible owner)
- Measurable (evidence of completion)
- Commercially enforceable (contractual levers where appropriate)
The “don’t do this” list: common traps that waste months
- Leaving it to one team. Split ownership is fine, unclear ownership is fatal.
- Asking suppliers for perfection on day one. Start with material categories, provide templates, improve iteratively.
- Building an un-auditable spreadsheet monster. If factors, assumptions and approvals aren’t controlled, assurance will be painful.
- Treating Scope 3 like a separate universe. The fastest path is linking emissions to spend, contracts and category management.
- Confusing “policy” with “control.” A clause isn’t a control unless it’s embedded into processes people follow.
What “good” looks like in procurement: embed sustainability into BAU
If you want sustainability, risk and governance to stick, it needs to show up in day-to-day procurement mechanics.
In sourcing and tendering
- Data requirements in RFX packs (proportionate to supplier maturity)
- Evaluation criteria that reflect your strategy (not generic tick-boxes)
- Clear reporting and evidence expectations
In contracting
- Supplier obligations for data provision (and what happens if they can’t provide it yet)
- Improvement pathways (targets, milestones, governance)
- Audit/verification rights for high-risk categories where appropriate
In supplier management
- KPIs and reporting framework for supplier sustainability performance
- Trigger points for re-assessment (new geographies, subcontracting changes, incidents, major scope changes)
In governance
- Clear RACI for sustainability reporting and supplier due diligence
- A cadence that avoids the annual scramble
How Trace Consultants can help
Trace helps Australian organisations build practical sustainability and risk capability in their supply chains — without turning it into a never-ending compliance program.
1) Scope 3 readiness and supplier engagement
- Rapid current-state assessment of Scope 3 exposure by category and supplier tier
- Supplier segmentation and engagement approach (templates, guidance, escalation paths)
- Integration into procurement policy and contract clauses, so expectations are repeatable
2) Modern slavery and supplier due diligence uplift
- Redesign of supplier due diligence workflows (questionnaires, review rules, governance)
- Risk heatmapping by category and supply chain segment
- Remediation pathways and BAU re-assessment rhythms
3) Governance and assurance readiness
- RACI and control design aligned to climate disclosure expectations
- Evidence trail design (what you keep, where it lives, how it’s approved)
- Pre-assurance readiness reviews so you’re not learning under pressure
4) Sustainability embedded into procurement performance
- Sustainable procurement assessments (process, risk, opportunity mapping)
- KPI frameworks for real supplier management, not just reporting
A sensible starting point is often a short readiness sprint that confirms boundaries, identifies material categories, sets governance, and launches a priority supplier engagement plan. That creates momentum and sets you up for iterative improvement over the following reporting cycles.
If you’re trying to get ahead: the next 30 days (a realistic checklist)
If you’re a procurement leader and you want traction fast, focus on:
- Confirming reporting boundaries and material Scope 3 categories
- Building a supplier segmentation view (spend + risk + emissions exposure)
- Drafting a practical supplier data request template (two pages, not twenty)
- Updating RFX and contract boilerplates for ESG/data expectations
- Establishing governance: owners, review rules, evidence trail
Disclaimer
This article is general information, not legal, accounting, or assurance advice. Reporting obligations can vary based on your structure and thresholds, so get the right specialist advice for your circumstances.
