PwC: Scope 3 is Driving Decarbonisation Across Supply Chains

Companies across sectors are moving sustainability into the heart of their operations—and supply chains are where much of the change is playing out.

PwC’s 2025 State of Decarbonisation report reveals how firms are not only sticking with climate commitments but using them to unlock long-term value.

Drawing on more than 4,000 corporate disclosures, the report shows rising climate ambition, with the shift to Scope 3 emissions marking a clear path to climate leadership.

From solar and wind energy expansion to rethinking supplier relationships, organisations are recognising that cutting carbon also cuts inefficiency. What’s emerging is a clearer sense that sustainability can fuel growth, not just reputation.

Smaller firms, bigger commitments

One of the clearest trends is the growing number of companies making climate-related pledges.

In 2024 alone, more than 4,000 businesses disclosed emissions targets to CDP—up nine-fold compared to five years ago. These pledges aren’t limited to the corporate giants.

The median revenue of committed companies has dropped from US$3.6bn in 2020 to US$1.3bn in 2024, a shift driven by supply chain pressure from larger organisations pushing Scope 3 responsibility down the line.

That means smaller suppliers are now on the hook for emissions reduction—and many are rising to the challenge.

According to the report, 37% of companies are raising their ambitions, compared with only 16% who have scaled them back. Climate targets, once seen as corporate window dressing, are now embedded enough to survive even CEO transitions.

In PwC’s sample, not a single set of climate targets was reversed after a leadership change.

"Sustainability is an untapped frontier of competitive advantage," says Pragya Jain, Partner at PwC UK. Pragya adds that reframing climate action from a threat response to a growth strategy is key to long-term success.

Scope 1 and 2 emissions, those from direct operations and purchased energy, are seeing steady progress.

In 2024, 67% of companies are on track to meet targets, up from 64% the year before. That said, the report also notes that most progress is being made through Scope 2 changes, especially the shift to renewable energy. With solar energy growth at 24.4% and wind at 13.1%, renewables have never expanded faster.

Still, this creates its own challenge. As demand for clean energy rises, supply may struggle to keep up, pushing costs higher and testing companies’ willingness to invest in deeper operational changes. That includes electrifying machinery, upgrading facilities for energy efficiency and backing alternative fuels like hydrogen and sustainable aviation fuel.

"Technology alone can't solve the climate crisis, but it remains one of the most critical drivers of progress," says James Pincus, Corporate Finance Partner at PwC UK.

He calls for broader investment in climate technology and increased government support—especially in industries where emissions are harder to cut.

Scope 3: The supply chain challenge

Where things get complicated is Scope 3: the emissions outside a company’s direct control. That includes everything from raw materials to how products are used and disposed of. These emissions are, on average, 11 times higher than Scope 1 and 2 combined.

Yet, only 54% of companies are on track to meet their Scope 3 targets—an improvement, but still lagging.

Supply chains are both the problem and the opportunity. Reductions are currently most common in “Use of Sold Products,” especially in sectors like automotive and industrial goods. But supply chain engagement is still lacking. Only 22% of companies have mature programmes in place to manage emissions from suppliers.

That’s where deeper supplier partnerships could change the game. PwC points to the importance of smarter, more strategic engagement that looks beyond immediate Tier 1 suppliers and incorporates Scope 3 metrics into procurement decisions.

"By uncovering hidden vulnerabilities across supply chains and operations, businesses can proactively shape resilience strategies that protect value at risk, whether financial, operational or reputational," says Lynne Baber, Global Deputy Sustainability Leader at PwC.

Her message is clear: climate action is not just risk mitigation—it’s operational resilience.

Governance, investment and design

PwC’s report identifies four areas separating leaders from laggards. First is governance. Companies with clear responsibility frameworks and board-level involvement are more likely to hit emissions goals, particularly on Scope 1 and 2.

Second is capital. Firms plan to raise capital expenditure and operational spending on climate by 18% and 21% respectively by 2030. PwC encourages using internal carbon pricing and cost curves to guide investment decisions.

Third is stakeholder engagement. While 72% of companies involve suppliers and 67% engage customers, fewer have advanced strategies tailored to sector-specific needs. In energy and automotive, this might mean closer work with consumers. In manufacturing, it's the supply base that needs support.

Finally, product sustainability is emerging as a major area of value. Companies that build circularity, energy efficiency and low-impact materials into products can see revenue increases of between 6% and 25%.

By 2030, PwC estimates more than one-third of company revenues will be linked to climate transition.

Key growth sectors such as construction, chemicals, automotive and agri-food are expected to see more than 40% of revenue tied to decarbonisation—whether that’s electric vehicles, low-carbon cement or plant-based food products.