Scope 3 emissions have become a defining challenge in corporate environmental strategy. While most organisations have developed reliable systems to measure and reduce their direct (Scope 1) and energy-related (Scope 2) emissions, the majority of their carbon impact lies elsewhere. In many cases, over 70%—and often more than 90%—of total emissions originate in the supply chain.
Aerial view of a large warehouse and delivery trucks, illustrating a modern supply chain in operation. AI generated picture.
Scope 3 emissions include both upstream and downstream activities—from raw material sourcing and manufacturing to product use and end-of-life disposal. This article focuses on the upstream portion of that footprint, which covers emissions from supplier and logistics networks. These Scope 3 supply chain emissions are among the most difficult to measure, verify, and reduce. The complexity increases significantly beyond first-tier suppliers, where visibility drops and data becomes sparse or unavailable.
Tier 2 emissions, generated by suppliers’ suppliers, represent a critical but frequently overlooked risk. These indirect contributors are not typically captured in procurement systems or emissions reports, yet they form a significant part of your business’ carbon footprint. As expectations around transparency grow—driven by investors, regulators, and customers—organisations must find ways to close this gap.
This article outlines why upstream Scope 3 emissions remain the most complex emissions category to address and why Tier 2 is emerging as a new focal point for risk and opportunity. We explore the challenges of supplier engagement, the importance of traceability, and the tools available to improve data quality and support credible decarbonisation across multi-tiered supply chains.
What are scope 3 emissions?
Corporate greenhouse gas (GHG) emissions are typically divided into three categories under the Greenhouse Gas Protocol: Scope 1 (direct operational emissions), Scope 2 (indirect emissions from purchased energy), and Scope 3 (all other indirect emissions across the value chain). While Scope 1 and 2 are generally easier to measure and manage, Scope 3 emissions account for the majority of a company’s environmental impact, often constituting more than 70% of a business’ carbon footprint.
Scope 3 includes fifteen distinct categories, ranging from business travel and waste to downstream product use. However, in most industries, the largest contributor by far is Category 1: Purchased goods and services—which make up the upstream supply chain. According to CDP’s analysis of disclosures from over 35,000 companies, just two Scope 3 categories—Category 1 (supplier emissions) and Category 11 (use of sold products)—account for more than 70% of all reported Scope 3 emissions.
Illustration of the categories of emissions.
This means that, for most organisations, the supply chain—particularly upstream activities like raw material extraction, manufacturing, and logistics—is where the bulk of emissions are generated. These emissions are outside a company’s direct control, but very much within its sphere of influence. And that influence matters.
Research by the World Economic Forum and Boston Consulting Group reinforces this point. Just eight global value chains—food, construction, fashion, consumer goods, electronics, automotive, professional services, and freight—collectively account for over 50% of global GHG emissions. For large corporations operating in these sectors, decarbonising their supply chains offers one of the most impactful environmental interventions available.
Read more: Uncovering the impact of Scope 3 emissions
The supplier footprint can be remarkably concentrated. For example, Unilever has reported that over 60% of its total value-chain emissions originate from raw materials and packaging alone—activities entirely upstream, and often subcontracted to Tier 1 and Tier 2 suppliers.
Understanding this scope category, therefore, requires more than a working knowledge of Scope 3 emissions categories. It requires a strategic focus on upstream value chain emissions, data transparency across suppliers, and the right mechanisms to collect, verify, and act on carbon data that currently exists outside core operational systems.
Read more: How do carbon footprints work?
In the sections that follow, we explore why this is so difficult in practice, what companies are doing to address it, and how procurement and sustainability teams can begin to close the visibility gap.
The supply chain carbon trap
Collecting data on Scope 3 emissions presents a fundamental challenge: The majority of emissions come from supplier activities that companies neither own nor operate—and often cannot directly observe. While reporting frameworks have advanced, the ability to obtain consistent, verifiable emissions data from suppliers remains limited.
A lack of transparency and standardisation is the core issue. Many suppliers, particularly in lower tiers of the value chain, either do not measure their own emissions or are unwilling to disclose them. According to recent research, 43% of companies report little to no visibility into their Tier 1 suppliers’ emissions performance, and visibility into Tier 2 is even more limited. For most organisations, this creates a fragmented and incomplete picture of their upstream carbon footprint.
Even when suppliers do provide data, formats vary widely. Some report activity-level data; others offer aggregated, estimated figures based on sector averages or spend categories. This lack of consistency makes it difficult to build a reliable carbon model, benchmark performance, or assess risk across the supplier base.
As a result, many companies default to using industry-average emission factors or spend-based estimates for Scope 3 categories like purchased goods and services. While these methods may satisfy baseline reporting requirements, they fall short when it comes to setting reduction targets or identifying carbon hotspots.
Read more: SME sustainability tools: How they help your business grow
The data gap is even more pronounced beyond Tier 1. Tier 2 suppliers—those who supply your suppliers—are rarely visible in procurement systems. Without direct contractual relationships, companies must rely on indirect engagement or collaboration with Tier 1 partners to obtain Tier 2 emissions data.
This is where proactive supplier onboarding becomes essential. Organisations that build emissions reporting into their procurement processes are better equipped to close the transparency gap over time. It also signals to suppliers that carbon performance is no longer optional; it is a prerequisite for a long-term partnership.
In short, the supply chain carbon trap is not simply a measurement problem—it is a visibility problem. And until organisations can consistently request CO₂ data from Tier 2 suppliers, they will struggle to take meaningful action on their largest emissions source.
Beyond tier 1: Why tier 2 is your new risk zone
In the context of supply chain management, Tier 1 suppliers are those with whom a company has a direct contractual relationship. These are typically the businesses that provide finished goods, components, or key services directly to the buyer. Tier 2 suppliers, by contrast, supply goods or services to those Tier 1 suppliers. They are further upstream in the value chain—less visible, and often not engaged in the buyer’s procurement or sustainability processes.
While emissions from Tier 1 suppliers are already difficult to measure, Tier 2 emissions represent an even greater blind spot. These upstream suppliers are often responsible for carbon-intensive processes such as raw material extraction, component manufacturing, and high-emissions subcontracted production—yet they rarely appear in sustainability reports or data models. Their emissions are frequently embedded in products long before they reach Tier 1.
Close-up of a tree sapling growing in front of a large warehouse, symbolizing sustainability in logistics. AI generated picture.
This presents two critical challenges. First, companies typically lack visibility into Tier 2 supplier networks. Most procurement systems are not designed to trace emissions for Tier 2 suppliers in vendor relationships.
Read more: Unveiling hidden carbon footprints: overlooked emissions sources in business operations
Second, Tier 2 suppliers are rarely required to report emissions data, either because they are not contractually bound to the purchasing organisation, or because their Tier 1 customers are not passing on the expectation. As a result, even companies that are collecting carbon data from their direct suppliers often fail to account for a substantial portion of upstream Scope 3 emissions.
The risk here is both operational and reputational. Without a clear understanding of Tier 2 emissions, businesses are unable to model their full climate impact accurately. This can lead to underreporting, missed reduction opportunities, and exposure to supply chain carbon transparency risks, especially as regulations like the EU’s CSRD begin requiring Scope 3 greenhouse gas reporting.
Moreover, in sectors where product claims or low-carbon credentials are used in marketing or investor communications, an inability to account for sub-tier emissions can undermine credibility. For example, carbon-neutral product claims based on incomplete data are increasingly being scrutinised by regulators and watchdog groups.
Moving forward, organisations will need to trace emissions from Tier 2 suppliers with greater accuracy. This may involve mapping multi-tier supplier networks, working with Tier 1 partners to gather emissions data upstream, and using digital traceability for supply chain platforms to visualise and manage supplier relationships beyond the first tier.
Recognising Tier 2 as a distinct risk zone—not just a supply chain footnote—is the first step. The next step is establishing the systems and expectations to bring those emissions into focus.
Building visibility into your supply chain emissions
For most companies, Tier 2 suppliers remain a black box, structurally hidden from procurement systems and inaccessible through traditional data collection methods. Yet, gaining visibility into these upstream contributors is essential for accurate Scope 3 reporting and meaningful decarbonisation efforts.
A warehouse employee is using a tablet to input data. AI generated picture.
Digital tools are now emerging as a key enabler. Organisations are moving beyond manual surveys and spreadsheets to adopt digital traceability platforms, capable of mapping multi-tier supplier relationships and collecting emissions data upstream. These technologies are designed to function even when companies lack direct contracts with Tier 2 entities, offering a scalable way to trace environmental impact deep into the value chain.
Examples include blockchain-based traceability systems that track material flows from the source to the finished product, and supplier portals that standardise emissions reporting across vendor networks. Others are using API-integrated dashboards that connect carbon accounting software directly with procurement and logistics data, enabling near real-time monitoring of supply chain emissions.
According to recent studies, more than two-thirds of global enterprises have now adopted digital platforms in their supply chains, ranging from low-code applications to end-to-end supply chain ‘control towers’. The carbon-accounting software market alone is projected to grow by $33 billion by 2029, reflecting rising demand for tools that can measure and manage Scope 3 emissions across complex supplier ecosystems.
These systems are already delivering measurable outcomes. CDP reports that suppliers working through its buyer engagement platform reduced 70 million tonnes of CO₂ in 2022, followed by an additional 43 million tonnes in 2023, much of it attributed to better data sharing and emissions visibility. This demonstrates that the best tools for Scope 3 carbon accounting are not just technical upgrades; they are strategic levers for emissions reduction.
Critically, these technologies also make it possible to trace emissions from Tier 2 suppliers, even without full control. By integrating data expectations into Tier 1 contracts and enabling shared access to reporting platforms, companies can extend their influence further upstream, building a more complete and resilient understanding of their value chain impact.
In the next section, we explore how procurement teams can use that visibility to drive action, not just reporting.
Smart procurement for Scope 3 impact
Gaining visibility into supplier emissions is only the first step. To make real progress on Scope 3 targets, companies must translate data into action, and this is where procurement teams become central to the strategy.
Unlike sustainability departments, which often operate with limited influence over purchasing decisions, procurement sits at the intersection of supplier onboarding, contracting, and performance monitoring. This makes it a critical function for driving engagement and accountability across the supply chain.
One of the most effective levers is embedding carbon disclosure and reduction requirements into procurement processes. Organisations can start by requesting basic emissions data from suppliers, including energy use, material inputs, and transport emissions. From there, they can introduce more advanced requirements, such as life cycle assessments (LCAs), product-level carbon footprints, or third-party verification.
Read more: Preparing for the future: How SMEs can align with net-zero targets
However, collecting emissions data is not enough. The most effective companies also work to collaborate with suppliers on decarbonisation targets. This might include co-developing reduction roadmaps, offering incentives for low-carbon innovation or carbon compensation, or providing tools and templates to support suppliers’ own reporting efforts. Supplier training programmes and engagement platforms are also gaining traction, particularly in sectors with complex global supply chains.
To track Tier 2 emissions effectively, companies must work through their Tier 1 suppliers to pass down expectations. Leading companies are using procurement clauses, standard onboarding templates, and supply chain codes of conduct to request CO₂ data from Tier 2 suppliers, even when direct relationships do not exist.
In parallel, digital tools make it easier to track which suppliers have submitted data, whether targets have been set, and where emissions hotspots persist. When connected to procurement platforms, this information can inform sourcing decisions, enabling buyers to choose suppliers with stronger environmental performance or clearer reporting capabilities.
The opportunity is considerable. According to CDP, organisations that actively engage their suppliers have seen significant results, including over $13.6 billion in collective cost savings and tens of millions of tonnes of CO₂ avoided. As climate disclosure becomes a business expectation in addition to a competitive advantage, smart procurement is poised to become one of the most powerful instruments for Scope 3 emissions reduction.
In the next and final section, we look at how to operationalise this shift—and what it takes to move from fragmented efforts to integrated value chain management.
Tools that scale: Why you need more than Excel
For many organisations, Scope 3 reporting still begins and ends in spreadsheets. While spreadsheets offer flexibility, they are not built for scale, nor are they suited to the demands of modern supply chain emissions management.
Robust emissions management requires dedicated software capable of category-level reporting and automated data integration. Effective Scope 3 data collection software manages multiple data streams: energy consumption, emissions factors, transportation distances, production volumes, and material inputs—all from a dispersed network of suppliers.
These systems allow companies to standardise data requests, track supplier responses, and maintain audit-ready records over time. More importantly, they can adapt as supplier networks grow, methodologies evolve, and reporting obligations increase.
Read more: Our favourite carbon-tracking apps, tools, and plugins (2025 edition)
This is especially critical when tackling Tier 2 emissions, where data must often be collected indirectly through intermediaries or mapped using digital traceability tools. Without centralised systems, even well-intentioned sustainability programmes struggle to gain traction beyond the first tier.
Organisations that move beyond Excel can improve both the accuracy and efficiency of their reporting. More importantly, they gain the ability to trace, measure, and act on Tier 2 emissions at scale—a capability increasingly demanded by regulators, investors, and clients alike.
If your business is ready to replace manual reporting with a solution built for complexity, we can help. Our platform is designed to streamline Scope 3 data collection, enhance supplier collaboration, and unlock actionable insights across your value chain.
DGB’s CO2 Expert tool: from blind spot to advantage
Scope 3 emissions represent the largest and most complex category in corporate carbon accounting. The majority of a company’s climate impact lies in its supply chain, particularly upstream, where Tier 2 suppliers often go unmonitored and unmeasured. Without visibility into this critical layer, emissions data remains incomplete, and reduction strategies fall short.
But this complexity is not a reason to delay action. It is a reason to act strategically.
Read more: SME carbon footprints: a practical guide
Organisations that invest in transparent supply chain relationships, structured data collection, and scalable digital tools are not only meeting compliance expectations; they are gaining a clearer picture of their operational footprint, building resilience, and strengthening supplier accountability. They are turning emissions data into competitive intelligence.
At DGB, we’ve developed a solution designed specifically for this challenge. The CO₂ Expert tool offers a simple yet powerful way to calculate and understand your company’s carbon footprint, including the indirect emissions that fall under Scope 3.
DGB’s CO₂ Expert tool.
With our online CO₂ Expert carbon calculator, you can:
DGB’s CO₂ Expert tool specialists.
Whether you're exploring how to measure Scope 3 emissions in your supply chain or are ready to scale your emissions management strategy across multiple tiers, our easy-to-use carbon calculator offers the visibility and functionality required to move from intention to impact.
