A significant obstacle on the path to net-zero emissions is the reduction of Scope 3 emissions. While companies around the world have made notable progress in cutting their direct emissions (Scope 1) and emissions from purchased electricity (Scope 2), Scope 3 emissions—those that occur across the entire value chain—remain difficult to track and reduce. These emissions account for more than 70% of total corporate greenhouse gas (GHG) emissions, making them a critical target for decarbonization.

Product Carbon Footprints (PCFs) are emerging as vital tools in this effort. PCFs quantify the GHG emissions associated with a product throughout its lifecycle, providing visibility into carbon hotspots and opportunities for improvement. Schneider Electric and the World Economic Forum’s Industry Net Zero Accelerator have explored PCF-sharing frameworks to support collective decarbonization.

Understanding Emission Scopes

GHG emissions are categorized into three scopes. Scope 1 includes direct emissions from owned or controlled sources—such as company vehicles or on-site industrial processes. Scope 2 comprises indirect emissions from purchased electricity, heat, or steam. These are generally easier to monitor and mitigate through operational changes or switching to renewable energy.

Scope 3, however, includes all other indirect emissions that occur outside a company’s direct operations but are linked to its value chain—upstream and downstream. These include emissions from raw material extraction, supplier manufacturing, transportation, product use, and end-of-life disposal. Due to their complexity and dependence on third parties, Scope 3 emissions are significantly harder to address, yet they typically represent the largest portion of a company’s carbon footprint.

Decarbonization Initiation Strategies

To reduce Scope 3 emissions, companies must engage their entire value chain. Global value chains (GVCs), responsible for 70% of today’s international trade, are complex networks involving suppliers of all sizes. According to the World Economic Forum, eight global value chains alone account for over 50% of worldwide emissions. Given this, a multi-pronged strategy is required to drive transformation:

1. Supplier and Customer Engagement: Integrate carbon considerations into procurement by prioritizing low-carbon materials and suppliers. Volvo Trucks, for instance, partners with a Swedish steel manufacturer to source fossil-free steel. Similarly, Komatsu co-develops zero-emission mining equipment with its customers.

2. Product Specifications and Design: Modify product designs to reduce emissions across the lifecycle. This includes material substitutions, lightweighting, and shifting to bio-based alternatives. BHP is exploring direct-reduced-iron (DRI) processes with HBIS, while automakers replace metals with lighter plastics to cut use-phase emissions.

3. Strategic Collaborations: Co-developing low-carbon technologies with supply chain partners enhances decarbonization. Vale and Boston Metal are advancing molten-oxide electrolysis (MOE) to reduce steel-related emissions. Evonik and Unilever developed bio-based surfactants to reduce product-level emissions.

4. End-of-Life Solutions: Circular practices like recycling reduce both upstream and downstream emissions. Ørsted and Salzgitter collaborate to incorporate wind turbine scrap into new steel production.

5. Sustainable Investment Strategies: Companies can pivot into low-carbon markets. Schneider Electric, for example, transitioned from hardware to energy management services, and Neste invested in shifting its oil portfolio to biofuels.

6. Vertical Integration: Upstream integration (e.g., raw material processing) and downstream integration (e.g., customer usage) give firms more control over emissions. LKAB adopted direct reduced iron processes to manage upstream emissions more effectively.

PCF Methodologies

To standardize and support PCF calculations, leading organizations have developed rigorous methodologies rooted in international standards. BASF’s PCF calculation tool (SCOTT) is one such example. Built on ISO 14040:2006, 14044:2006, and ISO 14067:2018 standards, it provides a cradle-to-gate approach for assessing product-level emissions. The declared unit is 1 kg of unpackaged product at the factory gate, regardless of its state (solid, liquid, gas), with transport emissions excluded. Allocation schemes follow guidance from sources like Plastics Europe and WBCSD Chemicals.

Roland Berger’s methodology outlines a seven-step process: (1) calculating CO₂ emissions; (2) establishing a baseline; (3) identifying reduction levers and setting targets; (4) conducting workshops for strategic planning; (5) analyzing the value chain for mitigation opportunities; (6) enhancing efficiency and tracking targets; and (7) implementing and managing progress. These steps are supported by project management, team coaching, and cross-functional collaboration to ensure carbon performance is embedded into core business operations.

Conclusion

Successfully reducing Scope 3 emissions requires companies to see these challenges as opportunities for innovation and value creation. With the right strategies—supplier collaboration, product redesign, circularity, strategic investment, and value chain integration—organizations can make measurable progress toward net-zero goals. Product Carbon Footprints serve as powerful enablers for this journey. By quantifying emissions at the product level, PCFs guide targeted action and continuous improvement. When paired with standardized methodologies, digital tools, and cross-sector partnerships, PCFs not only improve environmental performance but also enhance resilience and competitiveness in a low-carbon economy. The time to act is now, and the future of sustainable business lies in mastering Scope 3 emissions through precision, transparency, and collaboration.