CORPORATE ACTION → SUPPLY CHAIN & SCOPE 3
Supply Chain & Scope 3
Where corporate sustainability meets the real world – and where most targets succeed or fail.
In 30 Seconds
For most companies, 70-90% of their carbon footprint sits in Scope 3 – their value chain. Purchased goods, logistics, business travel, product use, end-of-life. This is where sustainability targets are won or lost.
The challenge: You don't control your suppliers. Data is hard to get. Calculations require assumptions. And increasingly, regulators are demanding due diligence on deforestation, human rights, and environmental impacts throughout your supply chain.
The opportunity: Companies that understand their supply chains – really understand them, down to specific landscapes and suppliers – can set credible targets, manage risk, and build resilience that competitors lack.
Why Scope 3 Is the Hard Part
Scope 1 (direct emissions) and Scope 2 (purchased energy) are within your operational control. Scope 3 is everything else – and it's usually the majority.
SBTi requirement: If your Scope 3 emissions exceed 40% of total emissions, you must set Scope 3 targets. For most companies, this isn't optional – it's mandatory for validation.
The 15 Scope 3 Categories
The GHG Protocol defines 15 categories of Scope 3 emissions. Not all will be material for every company – but understanding which ones matter is essential.
Upstream (Supply Chain)
Purchased goods & services
Often the largest category
Capital goods
Equipment, buildings, vehicles
Fuel & energy activities
Not in Scope 1 or 2
Upstream transport & distribution
Inbound logistics
Waste generated in operations
Disposal & treatment
Business travel
Flights, hotels, rail
Employee commuting
Home to work travel
Upstream leased assets
Assets you lease from others
Downstream (Customers & Products)
Downstream transport & distribution
Outbound logistics
Processing of sold products
Intermediate products
Use of sold products
Often huge for energy-using products
End-of-life treatment
Disposal of your products
Downstream leased assets
Assets you lease to others
Franchises
Franchise operations
Investments
Financial investments (for financial services)
Start with materiality
You don't need to measure all 15 categories with equal precision. Start by screening which categories are material – typically 2-4 categories represent 80%+ of Scope 3 for most companies. Focus your data efforts there.
The Data Challenge
Scope 3 data is notoriously difficult. You're measuring activities you don't control, often with limited visibility. Understanding the data hierarchy helps set realistic expectations.
Primary data
Highest accuracyActual data from your specific suppliers
Challenge: Hard to obtain at scale
Supplier-specific secondary
Good accuracySupplier data from databases or estimates
Challenge: Requires supplier engagement
Spend-based estimates
Moderate accuracyEmissions factors applied to spend data
Challenge: Broad averages, limited precision
Industry averages
Low accuracySector-level emission factors
Challenge: Starting point only
The journey, not the destination
Most companies start with spend-based estimates and improve over time. SBTi and reporting frameworks accept this – what matters is demonstrating a clear pathway to better data. Year-on-year improvement in data quality is expected.
Supplier Engagement
You can't reduce what you can't influence. Supplier engagement is how Scope 3 targets become achievable – and it's increasingly expected by SBTi and investors.
Engagement Approaches
- CDP Supply Chain: Request disclosure through CDP
- Supplier surveys: Direct data collection
- Contractual requirements: Embed in procurement
- Capacity building: Help suppliers measure and reduce
- Collaborative initiatives: Industry-wide programmes
SBTi Supplier Engagement Target
SBTi offers a supplier engagement target pathway:
- • X% of suppliers (by emissions) set SBTi targets
- • Typically 67% within 5 years
- • Alternative to absolute Scope 3 reduction target
- • Practical for complex supply chains
The leverage point
Focus engagement on your highest-impact suppliers first. Typically, 20% of suppliers represent 80% of Scope 3 emissions. Start there. Make it part of your procurement strategy, not a separate sustainability initiative.
Due Diligence & Regulation
Supply chain sustainability is no longer just about carbon. Regulators are demanding due diligence on deforestation, human rights, and environmental impacts throughout your value chain.
EUDR
EU Deforestation Regulation
- • Applies to commodities: cattle, cocoa, coffee, palm oil, rubber, soy, wood
- • Requires traceability to plot of land
- • Must prove deforestation-free after Dec 2020
- • Due diligence statements required
- • Phased implementation from Dec 2024
CSDDD
Corporate Sustainability Due Diligence Directive
- • Human rights and environmental due diligence
- • Applies to large EU companies and non-EU with EU turnover
- • Covers entire value chain
- • Requires risk identification and mitigation
- • Climate transition plan alignment
The convergence
Carbon accounting, deforestation due diligence, and human rights due diligence all require the same foundation: knowing your supply chain. Companies that invest in supply chain visibility now will be better positioned for all of these requirements.
Supply Chains Meet Landscapes
This is where corporate action connects to the real world. Your supply chain doesn't exist in spreadsheets – it exists in specific places, with specific ecosystems, communities, and environmental conditions.
Why landscape context matters
Water risk
Suppliers in water-stressed regions face different risks
Deforestation exposure
Commodity sourcing from high-risk jurisdictions
Climate vulnerability
Physical climate risks to supplier operations
Community relations
Social licence in sourcing landscapes
This is why we think about sustainability in layers. Your corporate targets (L5) flow through your supply chain to specific landscapes (L2) and ecosystem services (L3). Understanding these connections is what makes targets achievable.
The Pandion View
We believe supply chain sustainability is where strategy meets reality. It's easy to set targets in a boardroom. It's hard to deliver them through thousands of suppliers across dozens of countries.
The companies that succeed at Scope 3 are the ones that treat it as a supply chain transformation programme, not a carbon accounting exercise. Procurement owns it. Finance funds it. Sustainability enables it.
As a hybrid professional, we help clients connect their supply chain to the landscapes it touches. We speak the language of procurement, the language of sustainability, and the language of the places where commodities are grown and products are made.