Scope 3 Emissions: Make Supplier Decarbonization a Commercial Priority

Companies often treat Scope 3 emissions as the hardest part of their climate plans. My read is that the real obstacle is how they manage them: emissions sit across supplier networks, but the data, ownership and incentives often stay inside central sustainability teams. Procurement can change that equation by making carbon part of the commercial choices suppliers already respond to.

Supply chains have repeatedly moved technology from possibility to scale. They helped take mobile phones from bulky handsets to pocket computers, supported the rapid distribution of mRNA vaccines, and drove down the cost of utility-scale solar. IRENA reports that solar electricity costs fell 85 percent between 2010 and 2020.

Those examples depended on clear commercial signals, the spread of know-how and the removal of bottlenecks. That same machinery could help suppliers cut emissions. Yet Scope 3 is usually framed as a measurement and reporting burden, even though the underlying work often involves established steps such as renewable electricity, energy efficiency, electrification and lower-emission process heat.

The challenge is how companies organize the work

For most companies, Scope 3 accounts for 65 to 95 percent of total emissions, with most of that footprint upstream, according to PwC. It is also the part of the footprint that companies tend to measure least precisely and control least directly. Many executives doubt they will meet their 2030 targets.

But the scale of the footprint doesn’t make reductions inherently unattainable. Upstream emissions are largely the sum of suppliers’ own Scope 1 and Scope 2 choices. In 2025, more than 90 percent of new utility-scale renewable power was cheaper than the cheapest new fossil-fuel alternative, according to IRENA (2026). The World Economic Forum’s 2024 report, The Cost of Inaction, finds that many industries can reduce emissions by 10 to 60 percent at no additional cost.

Climate impacts also carry economic costs. Warming is projected to add up to 1.2 percentage points to headline inflation annually by 2035. For agriculture and food, the projected effect is greater still, at 0.92 to 3.23 percent. Corporate calculations often don’t compare the cost of action with those future costs of inaction.

The gap between available solutions and corporate progress points to three management failures: companies use reporting data to direct supplier cuts, assign the work to teams without procurement authority, and offer suppliers little commercial reason to act.

Reporting data has limited value in procurement

Scope 3 programs grew in part from disclosure requirements. Many companies responded by building small central teams to measure and report emissions. That information can serve reporting purposes, but spend-based estimates and industry averages rarely tell a buyer what matters in a tender: the emissions associated with a specific product, service or production facility.

A supplier’s parent company may have a high footprint for its sector while the site supplying a particular customer is unusually efficient. The reverse can also happen. Company-level averages obscure that difference, making it difficult for buyers to compare suppliers or connect a purchasing decision to a real reduction.

Reducing emissions through procurement calls for data tied to what the company buys: ideally, the actual product or service, and at minimum the facility that produces it. More specific information gives buyers a basis for setting expectations and lets suppliers show the results of investments they have made.

Give responsibility to the people who manage suppliers

Data alone won’t shift supplier behavior if the people setting purchasing terms have no role in the effort. Sustainability teams are often overextended and lack direct commercial influence over suppliers. Procurement teams, by contrast, already manage cost, quality, risk and capacity, and they regularly negotiate with the businesses responsible for emissions.

Nicole Anderson Brodin, Sustainable Procurement Manager at Essity, describes the opportunity plainly: “Give these guys responsibility for one more parameter, in the right way, and they will get it done.” That approach puts carbon alongside established purchasing concerns, where buyers can include it in supplier selection and ongoing performance discussions.

Suppliers need a reason to invest

Assigning the work to procurement still leaves a central question: what does a supplier gain by cutting emissions? David Croft, former chief sustainability officer at Reckitt, describes the limitation of a compliance-only approach: it “is always a race to the bottom... once you've met the requirement, the next question is 'can you do it cheaper next year?' Not can it be used to create value?”

Suppliers weigh the effort of change against its return. That effort can include investment, operational disruption, risk and learning. If the reward is only a scorecard point or a vague prospect of preferred status, doing the minimum is a rational response. Companies need to reduce the burden of action and make the business value more tangible.

Schneider Electric has supported suppliers with free tools, training and regional workshops. In some regions, suppliers’ average emissions-reduction targets doubled in ambition within a few months. Support helps suppliers understand what they can do; purchasing incentives can give them a reason to do it.

Haleon puts carbon into tender economics

Haleon offers a concrete example of carbon entering the buyer’s commercial calculation. In tenders for high-emitting categories such as raw materials, suppliers report the carbon footprint of what they sell alongside cost and quality. Haleon converts that footprint into a monetary figure using the EU Emissions Trading System carbon price, then adds it to the unit price to compare total cost of ownership.

Suppliers without reliable emissions data don’t receive an assumed advantage. Haleon applies an industry average plus 50 percent, giving suppliers a financial reason to improve their data and reduce their footprint. A lower reported footprint can improve a supplier’s relative position in the tender.

This has been applied at substantial scale. According to the Sustainable Procurement Pledge’s coverage, Haleon has included carbon pricing in tenders covering more than $800 million of business since January 2024. The company estimates the approach alone could unlock nearly half the abatement levers it needs to meet its 2030 goal. Buyers were allowed a small amount of price inflation; in practice, inflation was close to zero.

Anderson Brodin calls carbon pricing within total cost of ownership “the clearest way to signal commercial materiality to suppliers.” The point is that emissions affect the purchasing decision through a transparent calculation, rather than through a separate request that carries no consequence.

Build the business case around total value

A market carbon price can set a baseline, but the business case for decarbonization may also include lower energy bills, more predictable costs, supply security, resilience to climate shocks, access to customers and avoided regulatory or border-tax costs. The value varies by category, so buyers need to assess it with finance and product teams rather than assume one incentive works everywhere.

The Total Value of Decarbonization approach makes that assessment explicit. Procurement, finance and product teams build a category-specific case to establish what incentives the business can offer while preserving value. That could answer questions such as whether a two-point price premium is justified, or whether moving payment terms from 90 days to 45 days makes sense if a supplier halves emissions from process heat.

For companies ready to act, the practical sequence is direct: add a carbon price to a major tender in a high-emitting category; work with finance to set the category’s incentive budget before negotiations; and update buyer performance measures so they account for both carbon costs and the value of supplier reductions.

Scope 3 cuts depend on thousands of supplier decisions. The technologies are often familiar; the missing piece is a purchasing system that rewards progress, supports suppliers and uses relevant data. When carbon changes the economics of doing business, supply chains can become a force for reducing emissions at scale.