For many companies working to reduce their carbon emissions, Scope 1 (direct emissions) and Scope 2 (indirect emissions largely from energy sources) have long taken center stage. Scope 3 – decarbonizing supply chains – has always been the trickiest to address, given the need to collaborate with other companies.
Yet, Scope 3 emissions are also the most important to tackle, as these can account for up to 90% of a company’s total emissions, McKinsey & Company estimates in a 2024 report.
Scope 3 emissions are usually referred to as value chain or supply chain emissions, and can include company investments, franchises, leased assets, end-of-life treatment for solid products, use of sold products, processing of sold products, according to the GHG Protocol.
Scope 3 emissions are also generated by a company’s value chain, including emissions from suppliers, material inputs, and investments.
Lowering Scope 3 emissions requires new approaches
Businesses have struggled with knowing where to start in bringing Scope 3 emissions down, as they race to meet 2030 climate objectives. Climate Insider spoke with Thibault Boiron, Director of Tech Advisory and International Business Development at Hong Kong-based RESET Carbon, to learn what companies can do to lower their Scope 3 emissions.
All companies, and often the wider industry, will need two tools to effectively cut down Scope 3 emissions, Boiron said: standardization and collaboration.
Standardization is necessary because everyone involved needs to be using the same definitions, methodologies, and tools to ensure success, Boiron said.
“Collaboration is also key,” he said. “Many brands and retailers share the same suppliers and manufacturers. Instead of having every brand dealing separately with their suppliers, you can have a collaborative approach” when working together with other companies to meet emissions reduction goals.
Companies will make the most progress when looking at their complete value chain and determine which section generates the most emissions, Boiron said.
“We help clients find the ‘hot spots’, and often we’ll find out that 20% of the suppliers are responsible for 80% of emissions,” he said.
In these situations, if clients have long-term relationships with suppliers and intend to continue doing business with them, RESET Carbon will work with the supplier. By engaging in on-site visits to suppliers’ manufacturing hubs, energy assessments can be undertaken, and opportunities for decarbonization can be identified.
“This will require ongoing monitoring and tracking to ensure we make progress,” Boiron said.
Companies also need to be careful what kinds of investments in emissions reduction technologies they make, he said.
“When investing in decarbonization, don’t focus on fancy technology that doesn’t deliver emissions savings,” Boiron said. “Everything related to energy efficiency is an initiative that you should prioritize, as it has a relatively short-term payback.”
Electrification can be a bit more complicated, he said.
“The replacement of machinery and tools usually requires some capital investment, and there is some risk in implementation,” he said.
“The idea is to focus on what has been really proven and is available, and can be developed at scale.”
Textiles make Scope 3 progress
“I can’t think of any other industry which has the same commitments to reducing Scope 3 emissions,” Boiron said when speaking about the textile industry. Some 90% of textile companies’ emissions were generated by Scope 3 activities.
“They had the knowledge of their negative impact on the environment quite early on,” and have matured over time. “Textiles is the most advanced industry when it comes to decarbonizing their supply chain.”
This enabled the fashion industry to capture data from its supply chain very early on. From there, it was relatively easy to deploy decarbonization initiatives at scale across the industry.
“It was the only industry with a high level of standardization” regarding its data, Boiron added.
“When you don’t have standardization with data, it makes analysis much harder.”
Difficulties in lowering Scope 3 emissions
The biggest challenge for companies trying to reduce their Scope 3 supply chain emissions?
“Losing focus,” Boiron said.
Most regulations worldwide do not require companies to meet specific targets in terms of their Scope 3 emissions. “Companies invest in decarbonization of Scope 3 emissions not for compliance reasons – but particularly due to pressure from stakeholders.”
Regardless of whether emissions reductions are legally mandated, most companies want to continue along their decarbonization path, Boiron said.
“If you’ve already invested a lot in decarbonization, of course you don’t want those investments to be a sunk cost,” he said.
It’s important for firms to understand that decarbonization strategies change all the time, due to changing economic or political conditions, Boiron added.
Some movements toward decarbonization in textiles may have been delayed by the recent U.S. tariffs, which affected major textile producers China, Vietnam, Bangladesh, and India, Boiron pointed out.
“What I see as the risk, is the time taken by people to have to think about this, because in the end, they really want to make sure they engage with the right suppliers, and take the strategic decisions to validate the right people to engage” in decarbonization initiatives, he said.
In the end, he said, he doesn’t see any appetite for clients to de-invest from decarbonizing their supply chains. “What we found,” he said, “is that companies are tying their sourcing strategies to decarbonization initiatives. These are now getting closer and closer, and one cannot be totally disconnected from the other.”
Climate Insider equips green economy businesses, industrial leaders, and policymakers with the clarity they need to navigate environmental demands and geopolitical pressures. Through our AI-powered market intelligence platform and expert-led advisory, users can identify commercially ready climate technologies, track policy and funding movements, and map critical ecosystem dynamics.
Ready to take the guesswork out of your climate strategy?
Get expert-backed answers at [email protected] or explore the platform at www.climateinsider.com to see how we help transform complexity into clarity.
