Scope 3 emissions, making up anywhere between 15% to 95% of most companies’ carbon footprints, represent the most significant blind spot in corporate climate action. More than half of companies with a Scope 3 emissions target are failing to deliver cuts in line with expectations. This spotlights a critical action gap that threatens to undermine global net-zero ambitions. The Scope 3 challenge is complex: Businesses face significant barriers to reducing emissions. While the imperative for action grows stronger, companies need practical pathways that acknowledge real-world constraints and provide routes for companies to continue fulfilling their climate ambitions.
The Business Imperative for Action
The effects of climate change are rapidly eroding the fundamental stability on which global commerce is based. Disruption to global supply chains, increasing commodity costs, degraded infrastructure, and unpredictability in business planning are creating an uncomfortable new reality in which climate certainty is being replaced by commercial instability. Over the past decade alone, extreme weather events linked to climate change have cost the global economy around $2 trillion. Change is now a non-negotiable facet of strategic planning for companies to safeguard their future.
Taking decisive action to decarbonize value chains not only contributes directly to slowing global warming but also builds much-needed resilience into business operations. However, the benefits of robust Scope 3 decarbonization strategies — those that address emissions associated with supply chains and consumption and disposal or products and services — go beyond reducing exposure to climate-related risk. Companies that are proactive can unlock significant advantages. From cost reductions to reputational benefit or strengthened relations across supply chains, addressing value chain emissions is far from simple but offers clear payback.
Addressing the Implementation Gap
However, despite the compelling case for action, progress on Scope 3 has been slow. A sizeable gap exists between where Scope 3 emissions need to be to remain on track for global climate goals and where they are today. Analysis of companies around the world with emissions reduction targets shows that the Scope 3 emissions gap stood at 1.4 gigatons of CO2 equivalent in 2022 — equal to the combined annual emissions of Germany, the UK and Italy — and this gap continues to grow. Businesses cite a range of barriers to their ability to reduce Scope 3 emissions, including high costs, lack of data transparency from suppliers, and minimal leverage over customers and indirect suppliers deep within their supply chain.
While recent research shows that most companies are confident in their ability to overcome barriers to Scope 3 decarbonization within a decade, we don’t have the luxury of time in the fight against climate change. It’s clear that companies need a pathway to continue driving climate progress now while they work on reducing barriers.
Yet the incentives for companies to continue taking action have not been as clear as they should be. Companies need high-integrity, practical solutions for closing their Scope 3 emissions gap. Instead of forcing a false choice between an unencumbered decarbonization pathway or doing nothing, we must create a pragmatic, action-oriented pathway that acknowledges the actual challenges businesses face and builds on existing commitments.
Balancing Immediate Action With Long-term Transformation
Dual-track approaches to Scope 3 decarbonization, like VCMI’s Scope 3 Action Code of Practice, address this need by incentivizing companies to act on unabated Scope 3 emissions through the use of high-quality carbon credits — or other net-zero commodity credits — in the short term while they address barriers frustrating progress on direct emission Scope 3 decarbonization.
High-quality carbon credits have an important role to play in global mitigation efforts: They provide much-needed funding for carbon reduction and removal projects, particularly in emerging markets and developing economies. By permitting companies to use high-quality credits to close their Scope 3 gap in the short term, VCMI’s Scope 3 Action Code of Practice enables companies to drive continuous, real-world climate impact while working to remove decarbonization barriers. In this way, carbon credits are used to complement rather than replace direct emission reductions. Once companies achieve their primary targets, high-quality carbon credits can then continue to be used to support efforts on beyond-value chain mitigation. By limiting the extent to which carbon credits can be used and setting a date of 2040 as the latest time by which companies should have overcome barriers and be back to their decarbonization pathway consistent with reaching net zero, the Scope 3 Action Code of Practice prevents greenwashing and ensures short-term measures do not undermine long-term climate ambition or accountability.
From Corporate Best Practice to Global Standard
Companies embracing this dual-track approach will position themselves advantageously in a carbon-constrained marketplace. By simultaneously pursuing internal decarbonization while supporting external climate initiatives through carbon markets, they demonstrate value to stakeholders by positioning themselves as climate leaders. This balanced strategy builds trust through transparent acknowledgment of challenges while showing commitment through tangible action.
This approach also yields valuable institutional knowledge, as businesses gain early-stage experience with carbon markets and diverse decarbonization strategies: expertise that becomes increasingly valuable as markets mature and regulatory frameworks evolve. With influential organizations such as the International Chamber of Commerce and the World Economic Forum signaling this direction as the future of business leadership on climate, companies that engage with the carbon market early are positioning themselves on the front foot of corporate climate action.
Countries, too, increasingly recognize the potential of high-integrity carbon credit markets to unlock private finance for climate projects. Governments including the UK, Peru, and Panama have welcomed VCMI’s approach to Scope 3 emissions, recognizing its potential to channel additional flows of carbon capital to where it’s needed most. Marking 10 years since the Paris Agreement, the French government’s 2025 Carbon Credit Charter also brings together leading businesses committed to using carbon credits to address remaining emissions on their path to net zero.
A dual-track approach to Scope 3 therefore serves as a comprehensive risk management approach, helping future-proof business operations against both physical climate-related impacts and the transition risks associated with evolving policies and market dynamics. Governments are signaling a move toward a “yes, and” approach to corporate climate action — and businesses should take stock.
A New Horizon
To close the Scope 3 emissions gap, we must focus on practical tools for meaningful climate impact. The climate action community needs to embrace multiple, complementary climate solutions, promoting corporate action over inaction. With proper guardrails and commitment to improvement, carbon credit markets are proving to be powerful tools in fighting climate change — something we need more of, not less.
Mark Kenber is the executive director of the Voluntary Carbon Markets Integrity Initiative (VCMI). The views expressed in this article are those of the author.
