Scope 3 emissions and financial risk: how to control what you can’t see
Scope 3 emissions and financial risk: how to control what you can’t see
Scope 3: the financial risk you can’t see (yet)
Except for the quantum realm, the rules governing the physical world are relatively straightforward. If you can observe a system and measure its parameters, you normally can have some control over its effects. This is still how most organisations think about climate risk. They monitor fuel and electricity consumption and use this data to optimise their sites and fleets of vehicles. Job done. Or is it?
In reality, when it comes to Scope 3 emissions, the whole truth lies elsewhere, in what we can’t obviously see.
EcoVadis’ Carbon Action Report 2025, written in collaboration with BCG, shows that the real exposure now sits in the supply chain. For the average company, Scope 3 emissions are around 21 times higher than Scopes 1 and 2 combined. Furthermore, fewer than a quarter of companies report on them and less than 10% have set reduction targets.
There’s a compelling case for moving early. Up to 50% of supplier emissions can be abated at neutral or low cost, with a 3-6x return on investment, and about a third of emissions can be cut for less than roughly $10-12 per tonne of CO₂e.1 Doing nothing, on the other hand, could translate into more than $500 billion per year in additional liabilities for companies around the world by 20302.
So, what does this tell us? The main takeaway is that Scope 3 is no longer just an environmental issue; it’s a material financial risk and a potential opportunity to gain a competitive advantage. At Equans, we see this every day in our decarbonisation projects. When tackled effectively, reducing Scope 3 emissions protects margins and makes supply chains more resilient, and this, in turn, strengthens your position with investors and customers.
By combining subject matter expertise with insights from the report, this article aims to explain why Scope 3 is the “missing” risk on many balance sheets. Then, we set out five concrete actions to help not only cut these emissions but generate value from them.
Scope 3: the emissions that you’re not measuring (yet)
Scope 3 emissions are the indirect greenhouse gas emissions from processes in the value chain that you don’t control directly but still rely on. These include purchased goods and services to transport, business travel, employee commuting and even how customers use and dispose of your products. For most companies and industries, they form the largest share of the carbon footprint, often 70-90% of the total.
Yet many companies still rely on generic industry averages to estimate these emissions3. The EcoVadis report points out that this lack of supplier-specific data means that real carbon hotspots and financial risks are being hidden. This is because leaders are making procurement and investment decisions without a clear picture of the climate costs built into them.
From a financial perspective, a failure to properly measure Scope 3 emissions can lead to the following:
- Underestimating future costs: As carbon pricing expands and regulators move to cover more sectors and imports, emissions in your supply chain will increasingly show up in your cost base. If you do not know where they’re coming from, you can’t anticipate where costs will rise.
- Misjudging supply chain resilience: Suppliers who are not effectively managing their climate risk are more exposed to regulatory disruption and energy price volatility, not to mention extreme weather. This can lead to disruption to deliveries or quality issues that will ultimately hit your own revenues.
- Losing access to capital and tenders: Banks, investors and large buyers have ever greater expectations of transition plans and Scope 3 coverage. Companies that are unable to demonstrate a robust value-chain decarbonisation strategy risk facing higher financing costs and even exclusion from key tenders.4
- Damage to brand image and customer trust: Stakeholders increasingly look beyond corporate boundaries. If your products or services are linked to hidden emissions, one day, they will become visible, whether through ESG ratings or mandatory disclosures.
In short, Scope 3 is where climate risk meets the P&L. However, the upside is that the same data that reveals this risk can be used to turn supply chains into a source of value if we move from rough estimates to targeted action.
Five concrete actions to reduce your Scope 3 emissions
We believe that tackling Scope 3 is not about doing everything at once. It’s about sequencing the right actions, in the right places, with the right partners. Here are five practical steps we see working with our clients.
You can’t control what you don’t measure. The first step is to map your Scope 3 emissions using recognised frameworks, such as the Greenhouse Gas Protocol’s 15 categories, and identify the ones that are most relevant to your organisation.
In practice, this means:
- Combining spend-based estimates with more granular data where it matters most (e.g. critical suppliers, key materials, logistics or the use of sold products)
- Ranking categories by emissions intensity and financial impact, as well as business criticality
- Focusing on the 10-20% of activities responsible for the majority of emissions and risk
We support organisations in this diagnostic phase in a range of actions, from data collection and analysis to creating carbon inventories across all scopes. This way, they can see not just tonnes of CO₂e but how those emissions relate to strategy and costs.
The Carbon Action Report 2025 is unequivocal: companies that actively engage suppliers are around nine times more likely to meet their Scope 3 targets. And yes, only about one in three currently do so.1
Effective supplier engagement goes beyond simple questionnaires. It requires:
- Setting clear expectations in contracts and codes of conduct on climate reporting and reduction plans;
- Providing tools and training that help smaller suppliers measure and reduce their own emissions;
- Using platforms and rating systems to track progress and share good practices across the supply base.
We implement the same practices in our own supply chain. Our group CSR reporting shows that most of our upstream Scope 3 emissions come from purchased goods and services, and we are working with our top suppliers so that a growing share of our spend is covered by specific decarbonisation initiatives.
Once you understand where your Scope 3 emissions are, the next step is to systematically integrate carbon criteria into purchasing and design processes. For example:
- Including lifecycle emissions and circularity requirements in tenders;
- Preferring low-carbon materials and refurbished components, as well as service-based models where they make financial sense;
- Using total cost of ownership and, increasingly, an internal carbon price to compare options.
When procurement, engineering and finance teams work together, they often discover that low-carbon options are not only environmentally superior but also financially more attractive over the life of an asset. This is where Scope 3 reduction becomes a lever to protect margins, not just a compliance cost.
For many organisations, downstream Scope 3 emissions, such as those at customer sites or derived from product use, are significant. Our teams help clients:
- Design and operate more efficient buildings and infrastructure (e.g. through advanced building management systems or electrification of heat);
- Reduce energy consumed by installed equipment over its lifetime;
- Plan end-of-life strategies that promote reuse, refurbishment and recycling, thereby lowering both emissions and resource costs.
By doing this, organisations lower their customers’ Scope 1 and 2 emissions and simultaneously cut their own downstream Scope 3 footprint. This is where climate action becomes a shared value proposition.
Finally, Scope 3 decarbonisation must be embedded into governance and investment decisions, not just treated as a one-off project. To sustain progress, organisations should:
- Set net-zero and interim targets that explicitly cover Scope 3. These should be aligned with recognised frameworks such as the Science Based Targets initiative where possible.
- Assign clear roles and responsibilities for value-chain emissions across procurement, operations, finance and sustainability.
- Invest in digital tools that capture supplier-specific emissions data and track progress over time, thereby reducing reliance on static averages.
- Explore financing solutions, such as energy performance contracts or green loans, that help de-risk and fund decarbonisation projects across their assets and supply chains.
In the UK, the Equans company Bouygues E&S is working with the SFMI (an Acclaro Advisory initiative) and industry partners on the first Scope 3 emissions reporting framework for facilities management, helping the sector benchmark and reduce value-chain emissions.
Scope 3: From blind spot to a source of value
Carbon Shift is our end-to-end decarbonisation programme that helps organisations move from ambition to implementation while managing risk and total cost of ownership. It combines multi-disciplinary decarbonisation and digital expertise and follows a clear four-step approach:
- Complete the assessment through energy monitoring and greenhouse gas quantification across Scopes 1, 2 and 3.
- Plan for decarbonisation via energy audits, feasibility studies, cost projections and a practical implementation trajectory, including support with incentives and grants.
- Take action by designing and delivering concrete projects such as recommissioning, energy management systems, electrification and carbon-free sourcing.
- Track progress using digital dashboards and environmental management information systems that provide a single, auditable view of performance for all stakeholders.
By integrating this kind of programme into your governance, you will move from ad-hoc projects to a managed transition, one where Scope 3 risk is measured, costed and progressively reduced.
Walking the walk on Scope 3
We could not credibly support our client on Scopes 3 if we did not apply the same standards in-house. We are mapping and reducing emissions across our own operations and supply chain, and working with suppliers to improve data quality and reduction plans. This experience influences the way we support our clients in their own projects.
Scope 3 is complex but not unmanageable. With the right data and support, coupled with a strong framework, it represents an opportunity to protect profitability, secure your supply chain, win over investors and customers, and accelerate the transition to net zero.
To discuss how Carbon Shift and our wider expertise can support your Scope 3 roadmap,
