By Daniel Usifoh, Co-Founder of Axiom Sustainability Software.
For many industries, the natural path towards decarbonisation is to look inwards at their own operations – the manufacturing plants, heavy equipment fleets and energy grids over which they maintain direct control. And historically, that’s how it’s played out: after all, reducing Scope 1 (direct operational emissions) and Scope 2 (purchased energy) is often the ‘easiest’ to work with as they’re within the business’s control.
However, by focusing exclusively on localised operations, industry misses the far larger environmental reality. Across the manufacturing, heavy engineering, processing and industrial sectors, indirect Scope 3 emissions embedded within the supply chain routinely account for 80% to 90%+ of an organisation’s total carbon footprint.
If you want to make genuine progress towards decarbonisation, the broader value chain represents the true battleground for industrial Net Zero.
The Scope 3 Paradox
When it comes to decarbonisation, Scope 3 is something of a paradox: it’s where you can make the greatest environmental impact, yet it’s also the area where companies have the least direct control.
To complicate things, industrial supply chains are inherently fragmented and multi-tiered. A single industrial product or machinery assembly depends on a global network of Tier-1, Tier-2 and Tier-3 suppliers. Working out the carbon footprint of your supply chain can mean navigating an ecosystem largely populated by Small and Medium-sized Enterprises (SMEs). Many of these suppliers lack the time, money, expertise or dedicated ESG personnel required to measure their emissions accurately.
This vast, distributed network creates significant blind spots. Yet, because Scope 3 accounts for the overwhelming majority of total industrial carbon intensity, it also offers the largest opportunity to drive genuine progress towards Net Zero and decarbonisation. Those industrial operators that can unlock this Scope 3 data across their value chain not only meet compliance targets; they also gain operational control, mitigate supply chain risk and uncover structural efficiencies.
Regulation and Double Materiality
Of course, much of this progress is being driven by a wave of rigorous regulatory frameworks, transforming supply chain transparency into a strict legal and compliance necessity.
Central to this shift are the European Union’s Corporate Sustainability Reporting Directive (CSRD), the UK’s mandatory climate-related financial disclosures and broader global frameworks aligned with IFRS S1 and S2 standards. These mandates force industrial enterprises to apply the same data rigour, governance and auditability to ESG metrics as they do to financial reporting.
Crucially, compliance rests on the principle of double materiality. Industrial operators are now legally required to evaluate sustainability across two distinct channels:
- Financial Materiality: How climate risk, resource scarcity and carbon pricing directly impact the financial health and operational stability of the business.
- Impact Materiality: How the organisation’s wider value chain, including upstream suppliers and logistics, impacts ecosystems, communities and global carbon budgets.
Under these mandates, industrial operators can no longer insulate themselves from supplier performance: non-compliance risks severe financial penalties, restricted access to capital and exclusion from major commercial tenders.
The Death of the Spreadsheet
To meet these audit-grade mandates, industrial businesses need to rethink how they gather supply chain data. And they need to do so now.
Historically, organisations relied on spend-based modelling – multiplying procurement costs by industry-average emission factors. While this provides a workable baseline, it’s a blunt instrument. Because emissions are tied strictly to financial outlay rather than real-world data, purchasing premium low-carbon commodities like green steel or certified palm oil fails to show any carbon savings on paper. Paradoxically, if sustainable alternatives command a higher price, spend-based models can actually inflate your reported footprint – actively penalising green investment.
To satisfy auditors and stay compliant, industry must transition from financial guesswork to primary, activity-based data sourced directly from operational sites. As you can imagine, trying to make this shift using spreadsheets is a major compliance liability – and headache!
Manual spreadsheets are prone to human error, lack audit trails and create fragmented data silos. If a procurement team sends spreadsheets to hundreds of suppliers, they will no doubt receive a wide range of responses with unverified figures and missing data. Under CSRD audit conditions, third-party auditors require a secure, verifiable chain of custody from origin to board report.
Digital carbon accounting platforms change that, allowing you to quickly and easily calculate, map, report and analyse your emissions data.
Sustainability software can connect directly with ERP platforms and vendor portals to standardise emissions factors. Automated systems allow industrial firms to apply standard emission factors from the GHG Protocol, flag anomalies and establish Digital Product Passports that trace carbon intensity from raw material extraction to final delivery.
A Practical Blueprint for Procurement
Transitioning a global supply chain to Net Zero means moving your procurement strategy into the digital world. Here are four ways industry leaders can do that…
- Engage High-Carbon Suppliers: Identify high-impact suppliers generating the bulk of Scope 3 emissions.
- Support SME Vendors with Digital Tools: Equip lower-tier suppliers with cloud-based carbon-calculation tools. Standardising reporting removes technical barriers for SMEs while delivering audit-grade data.
- Benchmark Against the GHG Protocol: Ensure all collected supply chain metrics strictly align with the Greenhouse Gas Protocol Scope 3 Standard to guarantee auditability under CSRD scrutiny.
- Integrate Sustainability KPIs into Tenders: Move beyond price and lead time by incorporating weighted carbon performance criteria into future industrial tenders and assigning contractual value to low-carbon vendors.
Building Resilient Industrial Value Chains
The industrial sector is at a tipping point, with supply chain transparency no longer optional. To move ahead, businesses need to abandon manual spreadsheets, embrace cloud-based ESG automation, and establish collaborative, data-driven supplier partnerships. In doing so, industrial leaders can not only stay one step ahead of incoming regulation, but also turn decarbonisation into a lasting competitive advantage.
This article first appeared in the Q3 2026 edition of Industrial News magazine. Click here to read the magazine.
