It is now widely recognized that a company’s carbon footprint extends far beyond its own operations. For many organizations, most of their emissions sit upstream or downstream in the value chain, referred to as Scope 3 emissions, which covers everything from purchased goods and logistics to product use and end-of-life disposal.
Under the Greenhouse Gas (GHG) Protocol, Scope 3 emissions are defined as all indirect emissions not included in Scope 1 or Scope 2, organized into 15 categories spanning upstream and downstream activities.
In practical terms, this means that a firm’s climate performance is potentially shaped less by what it controls directly and more by how its suppliers produce inputs, how goods are transported, how products are used and how they are ultimately disposed of at the end of life.
Presently, data is fragmented, suppliers face weak incentives to disclose emissions, carbon policies internationally are not aligned and buyers struggle with the “free-rider” problem, where one firm’s investment in cleaner suppliers benefits competitors who do not share the cost. The World Economic Forum has repeatedly highlighted how this dynamic undermines collective climate action in supply chains.
Nevertheless, the conversation is shifting. The question is no longer whether Scope 3 matters but how organizations can act on it credibly and at scale. Across sectors, a set of emerging practices is beginning to reshape what effective Scope 3 management looks like.
Rather than attempting to measure all 15 Scope 3 categories at once, leading organizations are prioritizing materiality-based approaches, targeting “hotspots.”
For most companies, emissions are heavily concentrated in a small number of categories, particularly in purchased goods and services (category 1), capital goods and upstream transportation.
By mapping emissions by category and identifying “hotspots,” firms can focus resources where the largest reductions are achievable. This approach is increasingly recommended in both policy guidance and corporate reporting frameworks, including by the GHG Protocol.
A second shift is the move from generic industry averages toward higher-quality, primary supplier data. Many companies now recognize that Scope 3 accounting based solely on generic emission factors offers limited decision value, prompting a shift toward higher-quality, supplier-specific data.
Instead, organizations are working with suppliers to improve data granularity, capturing how inputs are produced, what energy sources are used and what materials are involved. This is particularly important for non-direct production inputs, where emissions are embedded deep within supplier processes and often invisible to buyers.
Evidence from supply chain and sustainability research suggests that supplier development and collaboration are more effective than compliance-based pressure alone, particularly where suppliers face capacity constraints.
Many suppliers, especially small and medium-sized firms in emerging markets, lack the capital or technical capacity to decarbonize without support. Rather than imposing mandates, some buyers are investing upstream through training programmes, equipment upgrades, technical assistance and long-term contracts that justify investment.
These approaches acknowledge a simple reality: suppliers will not decarbonize sustainably if the costs and risks are pushed entirely onto them.
One effective approach to tackling Scope 3 emissions is through low carbon procurement practices, embedding carbon disclosure directly into procurement and market-access rules. By making emissions data availability a baseline requirement, organizations shift Scope 3 from voluntary reporting to commercial governance.
A leading example is the UK National Health Service (NHS), where Scope 3 emissions account for around two-thirds of total emissions. Through its Net Zero Supplier Roadmap, the NHS requires suppliers to publish carbon reduction plans and disclose emissions data. This includes medicines and active ingredients, as a condition of doing business.
By signalling that carbon data disclosure is non-negotiable, the NHS reduces free-riding, normalises reporting and scales impact across thousands of suppliers.
A persistent barrier to Scope 3 action is the lack of consistent methodologies and reporting formats. When buyers use different metrics, suppliers face duplication and confusion, while buyers struggle to compare performance.
In response, many sectors are increasingly using shared disclosure platforms and multi-stakeholder initiatives to standardize supplier reporting and scale Scope 3 action. This is illustrated by CDP’s supply chain programme and its global supply chain reports, which gather supplier data through standardized questionnaires across large buyer networks.
However, the most effective solutions combine technology with procurement strategy and incentive alignment. Rather than treating decarbonization as a compliance cost, some models embed emissions performance into contracts, allowing suppliers to capture value from low-carbon production and buyers to pay for verified reductions through technology.
In these cases, technology supports new market arrangements rather than operating in isolation.
The push to decarbonize is gathering pace and it is increasingly clear that success or failure will be decided in the supply chain.
For most organizations, Scope 3 emissions represent the largest share of their carbon footprint, yet they remain the hardest to influence. They reflect everyday decisions about procurement, supplier relationships and how responsibility is shared across value chains.
Progress is being made but scaling impact will require more than isolated corporate initiatives. Stronger collaboration between companies, suppliers, policymakers and researchers is needed to generate practical evidence on what works, what scales and under what conditions.
Without this, Scope 3 risks remain a reporting exercise rather than becoming a credible pathway to lasting organizational decarbonization.
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