For many companies, supply chain (Scope 3) emissions are the largest portion of their carbon footprint, on average about 75% of total emissions. Decarbonising your supply chain not only reduces these emissions but also boosts transparency, builds stakeholder trust, and improves operational efficiency.
How can you cut emissions across your supply chain? Start by mapping your suppliers and collecting data, set science-aligned reduction targets, engage suppliers through incentives and training, and track progress with digital tools. Taking these four steps can significantly lower your Scope 3 emissions while strengthening your business.
Step 1: Map & Measure
Begin with a clear map of your supply chain and a baseline emissions measurement. Identify all key suppliers across supply-chain tiers (Tier 1 direct suppliers, Tier 2 suppliers’ suppliers, Tier 3, etc.) to get full visibility of where your products and materials come from. Mapping and analysing your complete Scope 3 footprint is crucial – this assessment will reveal which parts of your value chain are generating the most greenhouse gases.
Next, gather data to quantify emissions at each stage. This often means collecting data from suppliers (e.g., through surveys or using industry emission factors) to build a Scope 3 inventory. With that in hand, pinpoint your biggest emission “hotspots”. Look at both absolute emissions and relative metrics to find the outliers – for example, which suppliers or product categories contribute the highest CO₂e, and which have the highest emissions per dollar spent or per unit produced. By mapping emissions to specific sourcing categories or suppliers, you can locate where the carbon intensity is highest and prioritise those areas for action. The result of this map & measure stage is a clear picture of your supply-chain carbon footprint and a list of high-emitting suppliers or processes to target first.
Step 2: Set Targets
With a baseline established, the next step is to set clear reduction targets for your supply chain emissions and align them with your overall corporate climate goals. In practice, this means extending your company’s carbon targets to cover your suppliers’ activities. Many organisations are now doing this by requiring or encouraging their suppliers to set their own emission-reduction goals. For example, some companies have set a goal to have 80% of their suppliers (by spend) commit to science-based targets by 2030. By aligning a large share of your supply base with climate targets, you ensure that supplier efforts collectively support your path to net zero.
It’s important that these supplier targets be science-aligned – in line with limiting global warming to 1.5°C. The Science Based Targets initiative (SBTi) provides guidance here, recommending that companies prioritise the most emission-intensive suppliers or purchase categories and focus on areas where you have the greatest influence. In setting Scope 3 targets, SBTi criteria also ensure you cover the majority of your value chain emissions. Work closely with key suppliers to help them establish targets that echo your own commitments (for example, a percentage reduction in their emissions by 2025 or 2030). Defining science-based targets for your supply chain – ideally verified through SBTi or a similar framework – creates accountability. It aligns your suppliers’ efforts with your corporate goal (say, a 50% Scope 3 reduction by 2030) so that everyone is working toward the same outcome. In short, you’re extending your climate strategy beyond your own walls to encompass your entire value chain.
Step 3: Engage & Support
Setting targets is only half the battle – you also need to actively engage your suppliers and support them in reducing emissions. Remember that many suppliers, especially smaller ones, may lack the knowledge or resources to decarbonise on their own. By taking a collaborative approach, you can help build their capacity and align incentives. This can include providing training, tools, and resources to suppliers on carbon management best practices. For instance, you might host workshops on energy efficiency, offer guidance on switching to renewable energy, or share data collection templates to help suppliers measure their emissions. Some companies create supplier sustainability scorecards or forums to share best practices. The key is to turn the supplier relationship into a partnership: we’re in this together, and we (as the buying company) will help you (the supplier) succeed in cutting emissions.
Financial incentives are especially powerful. One approach is to link a portion of your procurement decisions or benefits to sustainability performance – for example, preferred supplier status or longer contracts for low-carbon performers. Another approach is supplier financing programs (see FAQ), where you or a financial partner offer improved financing terms to suppliers that meet climate criteria. A real-world example of supplier support is H&M’s Green Fashion Initiative. H&M provides funding and expertise to help its suppliers eliminate fossil fuels from their operations. Since launching in 2023, this program has funded 23 projects with the potential to cut supply-chain emissions by 148,000 tonnes CO₂e per year, of which 67,000 tonnes CO₂e are directly attributable to H&M’s own efforts. To put that in perspective, that annual reduction is roughly equivalent to powering 9,000 homes for a year. H&M measures the return on these investments in carbon terms, not just financial terms – a clear example of putting climate objectives into practice. By engaging suppliers through incentives, funding, and hands-on support, you can drive significant emissions reductions that both you and your suppliers benefit from.
Step 4: Track & Optimise
Finally, decarbonising your supply chain is an ongoing journey, you need to track progress and continuously optimise. What gets measured gets managed. Implement a robust monitoring system to keep an eye on emissions across your supply chain in real time. Modern digital tools (like carbon management software or supplier data platforms) make this easier. For example, SustainZone’s platform uses advanced analytics and real-time dashboards to monitor emissions reductions and provide transparent updates to stakeholders. By tracking key performance indicators (KPIs), such as total supply chain GHG emissions, emissions per unit of product, percentage of suppliers with targets or renewable energy, and year-over-year Scope 3 reduction percentage, you can see whether you’re on course.
Use these insights to optimise your approach. If data shows a particular supplier or region is falling behind, you can intervene with additional support or adjust your strategy. Conversely, if certain initiatives are delivering outsized reductions, you can double down on them or replicate those successes elsewhere. Regularly reviewing progress (for instance, through quarterly reports or an interactive emissions dashboard) keeps everyone accountable and allows you to celebrate wins with your suppliers. It also helps identify new opportunities – maybe switching to a lower-carbon material, redesigning a product for easier recycling, or collaborating with logistics providers to streamline transportation. The tracking tools themselves can be a form of engagement: many companies share emissions data back to their suppliers via scorecards or portals, creating a healthy competition to improve. In sum, tracking and optimising ensure that your decarbonisation plan stays dynamic and effective over time. And it’s not something you have to do alone; we use these digital tracking tools in our work with clients. With local teams on the ground in London, across Europe, and in Africa, we’re able to work side by side with you and your suppliers to monitor progress and fine-tune strategies as needed. This local presence means we understand regional challenges and can help turn data into actionable solutions, ensuring your supply-chain decarbonisation stays on track for 2025 and beyond.
Conclusion
As global regulations tighten and stakeholders demand greater accountability, integrating ESG into your supply chain is no longer optional; it’s essential. From reducing Scope 3 emissions to improving supplier transparency and resilience, businesses that embrace ESG as a core supply chain function are building more agile, trusted, and future-ready operations.
Whether you’re a global enterprise or an SME just starting your sustainability journey, the path is clear:
✅ Map your emissions hotspots
✅ Set science-aligned targets
✅ Engage and empower your suppliers
✅ Track performance with digital tools
At SustainZone, we’ve seen firsthand how even modest changes like digitising supplier declarations or launching ESG onboarding pilots can deliver measurable impact. The key is to start now, start small if needed, and scale with clarity.
Supply chain ESG integration is not just a compliance box; it’s your competitive advantage. And the companies that act today will lead the market tomorrow.
🔹 Ready to transform your supply chain into an ESG success story? [Book your custom integration assessment →]
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FAQs
What are supply-chain tiers?
Supply-chain tiers refer to the hierarchy of suppliers based on their proximity to your business. Tier 1 suppliers are your direct suppliers, the companies that sell goods or services straight to you. Tier 2 suppliers provide goods/services to your Tier 1 suppliers (they are one step removed from you). Tier 3 suppliers in turn supply the Tier 2 companies, and so on down the chain. Lower tiers (like Tier 4 and beyond) often include the raw material providers at the very start of the chain.
Defining suppliers by tiers helps you map out where each part of your product comes from. For example, in the fashion industry a Tier 1 might be the garment factory, Tier 2 the fabric mill, Tier 3 the yarn producer, and Tier 4 the cotton farm. Understanding your supply-chain tiers is important because it highlights how far your visibility and influence extend – it’s usually easy to manage Tier 1, but deeper tiers can be harder to trace. However, by gradually mapping and engaging these tiers, you get a complete picture of your value chain and where the biggest sustainability risks or emissions are occurring.
What is supplier financing?
In a sustainability context, supplier financing (often called Sustainable Supply Chain Finance) means using financial incentives to encourage suppliers to improve their environmental performance. Essentially, a large buyer leverages its stronger credit or resources to help suppliers access capital on better terms if those suppliers meet certain sustainability goals. For example, retail giant Walmart partnered with HSBC to offer a programme where Walmart’s suppliers can get paid faster and borrow at preferential interest rates, but only if they set and work toward science-based emissions targets. In this way, suppliers who commit to cutting carbon or hitting ESG benchmarks are rewarded with lower financing costs or early payments.
Supplier financing aligns economic incentives with climate action: it reduces the financial barriers for suppliers to invest in cleaner technology or energy, because achieving sustainability milestones directly benefits their bottom line. This approach has been gaining traction as companies seek to embed decarbonisation into procurement. By linking loan rates or payment terms to emissions reductions, buyers send a clear signal that we are all accountable for climate progress, and they help their partners make the necessary investments to decarbonise the supply chain.
🌐 Curious why ESG integration is the biggest challenge facing global supply chains today? Explore the strategic landscape in our companion article → Read: [Beyond Compliance: Tackling ESG Ratings Integration]
