Ignoring value chain emissions could cost companies over $500 billion in annual liabilities globally by 2030, according to new research from EcoVadis and Boston Consulting Group. This isn’t some hypothetical future risk. It’s a financial reality already taking shape through carbon pricing, regulatory compliance costs, and supply chain disruption.
The numbers are stark. For the average company, Scope 3 emissions are 21 times larger than Scopes 1 and 2 combined. Yet only 24% of companies report on them, and just 8% set reduction targets. For members of the World Economic Forum's Alliance of CEO Climate Leaders, downstream emissions alone account for 67% of their total footprint — roughly equivalent to India's annual CO2e emissions from fossil fuels and industry.
The gap between the scale of the risk and corporate action is a strategic vulnerability as much as a sustainability concern.
Why downstream emissions are hard (and why that matters):
Scope 3 emissions — those generated throughout your value chain, both upstream and downstream — present challenges that Scopes 1 and 2 don’t:
Limited influence over partners. Whether it's a supplier's manufacturing process or how a customer uses your product, you can't directly control emissions that occur outside your operations.
Complex, interconnected value chains. Products pass through multiple players before reaching end users. You may never see how your steel becomes a car part, or how your chemical becomes an ingredient in someone else's product — but you're accountable for those emissions.
Measurement across organizations. Understanding your Scope 3 footprint requires gathering data from suppliers, customers, and partners who may not track emissions the same way you do, though industry-specific estimates and established methodologies do exist.
Unclear commercial incentives. It's often uncertain whether customers will pay more for lower-carbon options or suppliers will invest in cleaner processes without guaranteed demand.
The complexity is real, but so are the solutions. Companies across industries are proving these challenges can be overcome with the right approach.
What's actually working:
The World Economic Forum's recent Scope 3 Downstream Handbook identifies 12 strategic levers organized into four categories. Here's what companies are doing right now:
1. Design for sustainability
Product design decisions create emissions that ripple through your entire value chain. The materials you choose, the energy your products consume during use, and how they're disposed of all determine your Scope 3 footprint before a single unit is sold.
Schneider Electric, a global energy technology leader, eliminated sulphur hexafluoride (SF6) — a greenhouse gas with 24,300 times the warming potential of CO2 — from their medium-voltage switchgear by replacing it with air and vacuum technology. The result: 1.2 million tons of CO2e avoided, reduced regulatory risk, lower long-term costs, and improved worker safety.
Beko, a global appliance brand, opened two dedicated recycling plants and launched take-back campaigns for old appliances. From 2014 to 2023, they recycled 1.75 million units, cutting landfill waste while recovering valuable materials.
The principle: Design-stage interventions deliver multiple benefits simultaneously. When you eliminate high-impact materials or extend product lifecycles, you're cutting emissions and reducing costs.
2. Attract customers to lower-carbon options
You can't force customers to choose greener products, but you can make it easier and more compelling.
BASF partnered with Citroën to co-design a new car based on "less is more" principles, achieving a 20% weight reduction through advanced materials like honeycomb glass-reinforced cardboard roofs and waste-reducing interiors. Material uniformity and innovative design were key: one primary material for interior design, identical panels for both doors.
The principle: Collaboration with customers — whether B2C or B2B — creates opportunities to reduce emissions while improving product performance and appeal.
3. Manage financial flows strategically
Capital is the unlock. Targeted financing helps suppliers and customers invest in cleaner processes and equipment.
BBVA developed an internal methodology to align lending portfolios with net zero by 2050, establishing sector-specific emissions reduction targets. The result: 37% reduction in emissions intensity in power generation within their portfolio between 2020 and 2024.
Their Sustainable Ecosystems initiative integrates advisory services, supplier classification, and targeted financing. In automotive coatings, they structured financing that enabled downstream garages to install solar panels and energy-efficient equipment — reducing emissions while improving competitiveness.
The principle: Finance isn't just about funding your own transition. It's about enabling decarbonization across your value chain.
4. Optimize transport and distribution
Transportation is visible, measurable, and increasingly expected by customers, making it a natural starting point.
DHL's GoGreen Plus embeds emission reductions across air, ocean, road, and warehousing using sustainable aviation fuel, bio-LNG, hydrotreated vegetable oil, and battery-electric vehicles. In 2024 alone, it reduced 1,598 kilotons of CO2e, verified by independent third parties. The book-and-claim model makes it globally scalable — already used by more than 300,000 customers.
The principle: Logistics improvements offer quick wins that demonstrate commitment while building momentum for harder interventions.
Where to start:
If you're early in your Scope 3 journey, the EcoVadis/BCG research offers a practical sequence:
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Engage suppliers. You need their buy-in before anything else works. Start conversations about ambition and launch joint emissions reduction activities.
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Set up measurement systems. Establish a GHG inventory with monitoring across operations. Imperfect data is better than no data.
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Establish internal ownership. Create a dedicated management team that sets and owns the company-wide low-carbon agenda. This can't live in one person's inbox.
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Build a climate transition plan. Define how your business model will transition to low-carbon operations. Connect measurement to action.
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Allocate budget. Fund company-wide decarbonization initiatives. This signals the work is real, not aspirational.
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Start with estimates, refine over time. You don't need perfect data to begin. Industry-specific emission factors and established methodologies (like the GHG Protocol's Scope 3 guidance) can help you build an initial baseline. As you engage suppliers and customers, you'll gather more precise data.
The future is now
The next five years are critical. More than $500 billion in annual liabilities are at stake, and the companies moving now are avoiding risk, building supply chain resilience, unlocking ROI, and differentiating in markets where customers increasingly expect climate action.
Scope 3 emissions are complex, but the path forward is becoming clearer. Companies across industries are proving that decarbonization is already happening. The question is whether to move now or wait until the costs become unavoidable.
