Companies Urged to Address Scope 3 Emissions

As companies face mounting pressure on two fronts: physical risks driven by the direct impacts of a changing climate, and transition risks arising from shifts in policy, markets, and technology as the global economy transitions toward a low-carbon future, a recent report warned of the effects of supply chain emissions. 

The report,  Scope 3: From Unmanaged Risk to Untapped Opportunity, from EcoVadis and Boston Consulting Group (BCG), said that ignoring supply chain emissions (Scope 3) could cost companies over $500 billion in annual liabilities globally by 2030.

For the average company, Scope 3 emissions are 21 times larger than Scopes 1 and 2 combined, but only 24% of companies report on them, and just 8% set reduction targets.

“The financial risks of climate inaction are clear, but so are the opportunities,” said Pierre-François Thaler, co-founder and co-CEO of EcoVadis, in a statement. “By addressing Scope 3 emissions, companies can protect profitability while building a more resilient supply chain. The time to act is now, and the most effective place to start is with suppliers, where the majority of emissions lie.”

The report finds that investing in climate action for the supply chain today could achieve up to three to six times ROI through loss aversion from avoiding costs linked to future carbon-price regulation.

The report builds on these insights with five most impactful actions that companies can use to move from awareness to action, and accelerate supply chain decarbonization:

1. Supplier engagement: Engage suppliers on ambition and need for climate action, and partner to launch joint emissions reduction activities.

2. Emissions measurement: Set up a greenhouse gas (GHG) inventory, with monitoring across operations (including product-level data as a late-stage action).

3. Climate-aligned management team: Establish a dedicated management team that sets and owns the companywide low-carbon agenda.

4. Climate transition plan: Define a companywide plan to transition to a low-carbon business model.

5. Emissions reduction budget: Allocate a dedicated budget to fund companywide decarbonization initiatives.

"In our hope to reach 1.5°C, or even stay within 2.0°C, the next five years are crucial,” said Diana Dimitrova, managing director and partner at BCG,in a statement. “Scope 3 emissions are 21 times larger than Scope 1 and 2, turning supply chain emissions from a compliance mandate into a material driver of financial performance. More than $500 billion in annual liabilities are at stake, but decisive action can unlock resilience and returns."

The report’s core analysis is based on EcoVadis data from 133,000+ carbon ratings across 83,000 companies worldwide, combined with BCG’s statistical and data-led analysis to identify the most impactful drivers of Scope 3 performance.