Estimate the size first. Then decide. An exclusion holds up when you can show what it is, how big it is, how you estimated it, and why leaving it out does not change a reader's view of your emissions.
Is there a threshold below which you can leave something out?
No. The GHG Protocol Corporate Standard (2004) has no de minimis threshold for a complete inventory. The Scope 3 Standard (2011) lets you exclude an activity only if you disclose and justify the exclusion.
The 5% threshold in Set a base year and recalculate it is for base year recalculation. It is not a threshold for exclusions. Your auditor's materiality is not an exclusion threshold for you either. Your auditor sets it for the engagement.
How do you size something before you decide?
Screen first. The Scope 3 Technical Guidance (2013, introduction) says to estimate each category with rough data, then decide where to refine and where an exclusion is justified. Rough data includes spend with a spend-based factor, floor area with an intensity, or headcount with an average. You can combine methods: better data for large items, spend-based figures for small ones.
Bluegum screened four items. Each is sized against the line it would sit in. All four are in Scope 3, so the base is FY26 Scope 3 of about 15,935 tCO2e:
Item | Where it sits | Rough estimate | Size | Decision |
Teleworking | Category 7 (optional extra) | 40 staff x 92 home days x 4 kWh x 0.8 kg CO2e per kWh | 12 tCO2e (0.08%) | Exclude and record |
0.05% holding in a listed retailer | Category 15 | 0.05% x the investee's reported Scope 1 and 2 of 18,000 tCO2e | 9 tCO2e (0.06%; 2.9% of Category 15) | Exclude under Bluegum's 1% equity threshold, confirm it is not material, and disclose it |
Washing and drying jackets sold | Category 11, indirect use phase (optional extra) | 25,000 jackets x 10 washes x 0.5 kWh x 0.8 kg CO2e per kWh | 100 tCO2e (0.63%) | Exclude from the figure, record it, and describe it in words |
Customers who collect from Dandenong | Category 9 | 2,400 collections x 120 km x 0.45 kg CO2e per km | 130 tCO2e (0.81%) | Include. The dispatch system already counts collections. |
If an estimate comes back larger than you expected, include the item. A category you cannot size cannot be called immaterial.
How do you decide that something is not material?
Answer three questions:
How big is it? Use your screening estimate.
Could it become large? An item that grows each year needs a review each year.
Would a reader expect to see it? A franchisor that leaves out its franchise stores will be challenged, whatever the number.
Size each exclusion against the line it would sit in: Scope 1, Scope 2, or Scope 3 and its category. Do not size it against your combined total. Scope 1, Scope 2 and Scope 3 are separate amounts in your report.
Then add up all exclusions and all estimates in each line and test the total. Several immaterial items can be material together. Bluegum's Scope 3 exclusions are teleworking (12 tCO2e), listed shares (9 tCO2e) and jacket washing (100 tCO2e). Together they are 121 tCO2e, or 0.76% of Scope 3. That is still not material.
What changes under AASB S2?
Scope 3 is required. The main relief is C4(b): you need not disclose Scope 3 in your first AASB S2 year. C5 then lets you leave out that year's Scope 3 comparative in your second year.
Other provisions affect how you measure, not whether you measure. B19 covers data from value-chain entities with a different year end. B57 covers the rare case where Scope 3 cannot be estimated.
Consider all 15 categories (B32). Materiality decides what you include (Appendix D paragraphs 17 and 18). Disclose which categories you include (29(a)(vi)(1)).
Where the GHG Protocol calls something optional, include it if it is material.
"Reasonable and supportable information that is available without undue cost or effort" governs the information you use to measure (B39). It does not let you leave out a material category. If the data is poor, estimate it. See Estimate what you cannot measure.
AASB S2 presumes that you can estimate Scope 3 with secondary data and industry averages. Scope 3 is impracticable to estimate only if you cannot estimate it after every reasonable effort. Then disclose how you are managing those emissions (B57). Keep the evidence of the effort you made.
Does something left out of Scope 1 and 2 move to Scope 3?
No. Each emission belongs in exactly one place. If Bluegum left out the test runs of Summit Packs' standby generator (0.8 tCO2e of diesel), that is an excluded Scope 1 source. It does not move to Category 1 or Category 3. Record it as a Scope 1 exclusion.
This is different from an asset that the boundary test puts outside Scope 1 and 2. Bluegum's leased stores are not exclusions. Under financial control they belong in Category 8. See Leased premises, vehicles and equipment.
Can you describe an item in words instead of measuring it?
Not in place of a figure. Under AASB S2, your Scope 3 figure is your absolute gross emissions (29(a)(i)). An item that you describe in words is not in that figure. An optional element that you judge not material is left out of the figure. Record it in your exclusion record with its estimate, like any other exclusion. You can also describe it in words in your disclosure.
Bluegum's jacket washing is part of Category 11. Bluegum reports Category 11 with a figure for gas canisters and headlamps. Jacket washing is optional in the GHG Protocol, and the screening estimate is 100 tCO2e, 0.63% of Scope 3. Bluegum leaves it out of the figure, records it in its exclusion record, and describes it in words.
"Does not occur" is different again. Bluegum does not sell intermediate products, so Category 10 does not occur. Record the reason. No size estimate is needed.
What goes in an exclusion record?
Record six things for each exclusion. They go in your boundary document and your Basis of Preparation.
Field | Bluegum: listed shares |
What is excluded | 0.05% holding in a listed retailer, held at fair value |
Where it would sit | Scope 3, Category 15 |
Size estimate | 9 tCO2e: 0.06% of FY26 Scope 3, and 2.9% of Category 15 if included (9 of 309 tCO2e) |
Basis of the estimate | 0.05% x the investee's reported FY26 Scope 1 and 2 of 18,000 tCO2e |
Reason | Below Bluegum's 1% equity threshold. The Scope 3 Technical Guidance (Table 15.1) allows a threshold if it is disclosed and justified. Under AASB S2, materiality is the test, not the threshold. Not material under AASB S2: 0.06% of Scope 3 and 2.9% of Category 15, with no transition-risk significance. Bluegum has no influence over the investee. |
Review | Each year, and when the holding rises above 1% |
Apply the same rules each year. If an excluded item grows until it is material, include it and record the change.
What this means in Avarni
Accounts. To leave a whole ledger account out, set its category to Excluded in your chart of accounts. Write the reason in the Justification column. Rows for an excluded account are not loaded with your general ledger.
Ledger lines. To leave out some lines in an account, use a classification rule that sets the GHG Category to Excluded.
Rows in the Emissions Hub. Select a row and choose Exclude. The row stays in the Emissions Hub but drops out of your Overview totals.
None of these is an exclusion record. Keep the record for each excluded item or category in your boundary document. See What goes in your boundary document and What a Basis of Preparation is.