Supply chains are possibly the most powerful engines of change we have ever built. When incentives line up, they can do in years what policy struggles to do in decades, or, in the case of climate change, perhaps fails altogether.
Think about mobile phones: in little more than a decade, global supply chains took us from brick-sized handsets to a computer in every pocket. mRNA vaccines went from lab to billions of arms at a speed that looked impossible a year earlier. And IRENA reports that the cost of electricity from utility-scale solar fell 85 percent between 2010 and 2020, driven by scale, technology and competitive supply chains.
The science in each case was hard. Yet the supply chains did what they are designed to do. They sent clear commercial signals down the tiers, spread know-how and removed bottlenecks one by one.
However, when the subject turns to carbon, we stop seeing supply chains as the means to a solution and see them as the problem.
Why Scope 3 is seen as the problem
For most companies, 65 to 95 percent of emissions sit in Scope 3, the majority of which is upstream. Scope 3 is the largest, least controllable and worst-measured part of the footprint. Most executives now openly doubt they will hit their 2030 targets.
The usual diagnosis is that Scope 3 is simply too hard. I think that is wrong. Compared with smartphones and vaccines, most of what we need for 2030 is not rocket science. Upstream Scope 3 is the sum of thousands of suppliers' Scope 1 and 2 decisions: renewables, efficiency, electrification, process heat. These are engineering solutions we largely understand already. In 2025, more than 90 percent of new utility-scale renewable power was cheaper than the cheapest new fossil-fuel alternative (IRENA, 2026), and the World Economic Forum’s report "The Cost of Inaction," published in 2024 finds most industries can cut 10 to 60 percent of emissions at no extra cost. (Inaction is not free either: warming is projected to add up to 1.2 points to headline inflation a year by 2035. And for agriculture and food the impact is greater still, between 0.92 and 3.23%. In corporate financial calculations, comparisons are generally not being made against this future cost of inaction.)
The facts tell us that Scope 3 reductions are achievable. Scope 3 feels impossible because we have made three fundamental mistakes.
Mistake one: we have been using reporting data to manage reductions
Scope 3 grew up as a disclosure challenge. CSRD, ISSB and a wave of US state rules told companies to measure and report, so companies built small, central sustainability teams to do just that. But reporting data, while valuable for other reasons, is next to useless for managing supplier performance. It is generally spend-based, built on industry averages and calculated at enterprise level. It tells you roughly what a supplier's whole company emits, but almost nothing about the emissions associated with the product or service you actually buy. A supplier's holding company might have a larger-than-average footprint for its sector, while the facility you buy from might be its most modern and efficient, or vice versa.
If we are going to use data to drive emissions down fast, it needs to be specific to what we are buying: the footprint of the facility we buy from, and ideally of the actual product or service.
Mistake two: the wrong people are managing supplier reductions
So first we collected data that is unsuitable for driving reductions. Then we left responsibility for Scope 3 with under-resourced, overworked central sustainability teams who have no leverage with suppliers. Wrong data and wrong people.
If Scope 3 stays in the sustainability team, progress will be glacial. It belongs with the people who already manage cost, quality, risk and capacity, and who have considerable commercial leverage over suppliers. As Nicole Anderson Brodin, Sustainable Procurement Manager at Essity, says, "Give these guys responsibility for one more parameter, in the right way, and they will get it done."
Mistake three: we never made carbon reduction commercially powered
This is the critical fault line. We can collect the right data and give responsibility to the right people, but we will make no material progress if decarbonization is not treated as commercial. Historically, we have treated carbon as compliance, and as David Croft, former CSO of Reckitt, told me, compliance "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?"
Smartphones and vaccines moved fast because the reward for suppliers to solve the problem dwarfed the cost. In most companies today, action on carbon reduction offers suppliers almost no material reward, and there is almost never any material sanction for inaction.
Tip the seesaw
Picture a seesaw. On one side sits the effort a supplier must make: investment, risk, learning, disruption. On the other sits the value they receive if they reduce emissions: margin, revenue, resilience, licence to operate, career reward.
For most suppliers, the Scope 3 seesaw is stuck firmly on the ground on the effort side. They are asked to measure, set targets, re-engineer and sometimes absorb cost, in exchange for a tick in a scorecard and a vague promise of "preferred status," a featherweight on the value side. Rational suppliers therefore do the minimum.
You can tip the seesaw two ways. The first is to take weight off the effort side. Schneider Electric, for example, gave suppliers free tools, training and hands-on regional workshops. In some regions, average supplier carbon reduction targets doubled in ambition within a few months because suppliers were supported and shown what was possible.
The second, and the bigger prize, is to add weight to the value side.
Haleon: carbon as part of total cost of ownership
Haleon shows what adding value looks like. In tenders for high-emitting categories, such as raw materials, suppliers provide the carbon footprint of what they are selling alongside the usual commercial factors of cost and quality. Haleon converts the carbon footprint into money using the EU ETS carbon price and adds it to the unit price. Buyers then compare total cost of ownership, including the cost of the carbon.
Suppliers without decent data do not get a free pass. Haleon applies the industry average plus 50 percent. Do nothing, and you are priced as worse than average. Invest in data and decarbonization, and you lower your relative cost and probably win the business.
This is no pilot. According to the Sustainable Procurement Pledge's coverage of the program, Haleon has tendered more than $800 million of business with carbon pricing since January 2024. The company estimates this approach alone can unlock nearly half of the abatement levers it needs for its 2030 goal. Buyers were given room for a very small amount of price inflation. In practice, inflation was close to zero.
Read that again: supplier decarbonization at near-zero cost. As Anderson Brodin puts it: "Carbon pricing embedded in total cost of ownership is the clearest way to signal commercial materiality to suppliers."
Beyond the carbon price
A market carbon price should be the floor, not the ceiling, of your ambition to commercialize carbon. The full value of decarbonizing a category is far larger once you layer up the different ways value can be released: avoided regulatory and border-tax costs, lower energy bills, supply security, predictable costs, resilience to climate shocks and preferred access to customers.
That is the idea behind an approach I call the Total Value of Decarbonization (TVD): a category-specific business case, built by procurement, finance and product together, that tells buyers how far they can go to incentivize change without destroying value. Is a two-point price premium justified? Is it worth moving payment terms from 90 days to 45 if a supplier halves its process-heat emissions? TVD gives the answer and turns carbon reduction from an ask into something commercial you can trade.
Three ways to start accelerating your supply chain reductions:
- Put a carbon price into your next major tender in a high-emitting category.
- Build a TVD business case for that category with finance, and agree on the incentive envelope before negotiating.
- Change buyer KPIs so that cost includes the cost of carbon and value includes the value of decarbonization, and use that calculation to reward supplier action.
The supply chains that make your products or deliver your services are no different from those that gave us smartphones, vaccines and cheap solar. They are waiting for the same signal. Make carbon commercial, tip the seesaw, and Scope 3 stops being the problem. It becomes our biggest hope for change.
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Author
Martin Chilcott is the author of ‘Get Sh*t Done! Real lessons from the superheroes decarbonizing global supply chains’ (thescope3book.com) and the co-founder of Need-2-Know.com
Published Nov 5, 2026 8am EST / 5am PST / 1pm GMT / 2pm CET