Scope 3 Showdown: Microsoft Tells Suppliers to Go Green

To cut the emissions it does not directly control, Microsoft is asking its suppliers to step up.

The company’s Scope 3 emissions – those that come from suppliers, partners and use of its products – account for more than 97% of its total carbon footprint. Almost three-quarters of that comes from just two categories: purchased goods and services and capital goods.

"Nearly 75% of Microsoft’s Scope 3 emissions come from purchased goods and services (things like raw materials, office supplies) and capital goods (these include buildings, vehicles)," explains Melanie Nakagawa, Microsoft’s Chief Sustainability Officer.

"This is an important reminder that our suppliers play a pivotal role in helping us reach our goal of carbon negative by 2030."

Singapore summit puts suppliers on the front foot

That message took centre stage in May at the first Microsoft Global Supplier Sustainability Summit in Singapore. Suppliers from across Asia and beyond gathered to compare progress, share strategies and set a path toward long-term emissions cuts.

For Microsoft, it marked the beginning of what it hopes will become an ongoing forum for driving decarbonisation through collaboration.

"Microsoft is not doing this work because decarbonisation is easy; we are doing it because it is necessary," said Will Hudson, Microsoft’s Director of Energy & Sustainability Policy, in opening remarks.

To meet its goal to become carbon negative by 2030, Microsoft must first reduce emissions it directly controls - Scope 1 and Scope 2 - to near zero.

It must then cut Scope 3 emissions by more than half and remove more carbon than it emits. Scope 3 includes everything from emissions embedded in hardware and infrastructure to those produced when customers use Microsoft products.

These indirect emissions have risen 30.9% since 2020. Much of this comes from datacentre expansion, needed to support growing demand for cloud services and AI and the materials, servers and components that power them.

Upstream manufacturing is a prime example. The production of semiconductors and electronic parts such as displays and printed circuit boards is carbon-intensive due to the materials, energy use and fabrication processes involved. Contract manufacturing, which covers assembly and testing, also adds heavily to the footprint.

To help suppliers target the worst offenders, Microsoft has identified key emissions “hotspots” in its supply chain. These areas are not only the highest emitters but also offer the most potential for meaningful reductions.

Materials like metals, glass and plastics used in datacentres are a major source due to the emissions from mining, smelting and forming processes.

Electricity: The clearest path to impact

A central theme of the summit was electricity. For many suppliers, switching to clean power is the most effective way to lower emissions. However, in many regions, reliable access to carbon-free electricity (CFE) is still out of reach.

Microsoft’s 2024 Supplier Code of Conduct now includes a clause: suppliers must, when asked, move to 100% CFE for goods and services provided to Microsoft by 2030.

To count, this electricity must be produced in the same region it is consumed and must add new CFE generation, rather than diverting from existing supply.

"This approach will drive new CFE generation into the grid and push down fossil in the power mix," adds Will.

Microsoft is also using its US$1bn Climate Innovation Fund to back technology that enables carbon cuts and removals. Investments include LineVision, which uses AI to unlock extra capacity in existing transmission lines. That means more renewables can be added to the grid without building new infrastructure.

Within its own supply chain, Microsoft has turned to AI to handle complex emissions tracking.

According to Leo Aspauza, Director of Cloud Supply Chain Sustainability: “There are tens of thousands of lines of calculations to calculate the carbon footprint of one device.”

Currently, 70% of Microsoft’s product carbon footprints are calculated using primary data from suppliers, compared to an industry average of just 20%. 

This has freed Microsoft’s sustainability teams to focus less on gathering data and more on acting on it — finding efficiency opportunities and helping suppliers get access to clean energy.

Tackling Scope 3 emissions with urgency

Still, progress is not even. Microsoft’s 2024 sustainability report shows Scope 1 and 2 emissions have fallen 6.3% since 2020. However, Scope 3 has continued to rise — largely due to datacentre buildout and the embodied carbon in construction materials and IT components.

To combat this, Microsoft has launched a company-wide initiative to reduce Scope 3 emissions. It includes more than 80 targeted actions, such as requiring high-volume suppliers to switch to 100% clean electricity by 2030 and improving emissions measurement using digital tools.

The strategy builds on four main areas: better measurement, more efficient datacentres, partnerships for new technology – such as low-carbon concrete and steel – and market-shaping procurement to help grow demand for greener materials.

The summit made clear that suppliers are central to meeting climate goals and Microsoft cannot hit its 2030 target alone.