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In this section, you will discover why taking early and decisive action puts your company in a position of strength:
Nearly three decades ago, voluntary climate initiatives began motivating companies to manage their climate impacts. The most prominent of these initiatives was the Greenhouse Gas Protocol standards. Served as a foundation for measuring and disclosing emissions, it paves the way for corporate accountability for climate impacts. By the mid-2010s, programs like Carbon Disclosure Project (CDP) and Science Based Targets Initiative (SBTi) surged in popularity, pushing companies to make public climate pledges that showcased their ambitions. More recently, rising stakeholder scrutiny has shifted the focus of voluntary programs beyond transparency and commitments and toward delivering concrete reduction outcomes.
Mandatory efforts are quickly catching up. Net-zero mandates increasingly reference science-based targets (SBTs). New regulations, like the EU’s CSRD and California’s SB 253, extended disclosures to include Scope 3 emissions while using the GHG Protocol as the backbone for reporting. This convergence signals rising expectations on corporate climate actions with greater ambition and stringency. It also clearly shows that the cost of non-compliance is no longer minimal (Exhibit 1).
| Regulation | Description | Companies under mandate | Non-compliance cost | Effective date |
|---|---|---|---|---|
| Corporate Sustainability Due Diligence Directive (CSDDD) | Requires companies to address human rights and environmental impacts in their operations and supply chains | Companies operating in the EU with over 500 employees and over €150 million in annual turnover | Fines determined by member states (e.g., up to €5 million, 5% of global annual revenue) | From 2028 (varies by member state) |
| Corporate Sustainability Reporting Directive (CSRD) | Expands sustainability reporting requirements for large companies, including supply chain impacts | Companies in the EU (or with EU subsidiaries) or companies generating over €150 million in annual revenue in the EU | Include fines (e.g., up to €50k or €200k by company size) or sanctions | Financial Year FY 2024 (large companies), FY 2027 (smaller companies) |
| Carbon Border Adjustment Mechanism (CBAM) | Imposes carbon pricing on imports of certain goods to prevent carbon leakage | Importers into the EU of cement, iron and steel, aluminum, fertilizers, electricity, and clinker (for cement) | Payment of carbon certificates (estimated €30–€100 t/CO2e); fines for incorrect declarations / non-compliance | 2026 |
| German Supply Chain Due Diligence Act (LkSG) | Mandates due diligence for human rights and environmental protection in supply chains | Companies based in Germany or with German operations employing 1,000+ staff | Fines up to 2% of annual global revenue | January 2023 |
| California Climate Corporate Data Accountability Act (SB 253) | Requires companies to disclose Scope 1, 2, and 3 emissions | Companies operating in California with annual revenue of $1 billion or more | Fines of up to $500k per year for non-compliance | 2026 |
The increasing convergence of voluntary and regulatory requirements signals a clear shift toward greater transparency, sector-specific granularity, and a stronger emphasis on measurable reduction outcomes, often reflected in carbon costs or other key metrics. Disclosure alone is no longer enough — companies need to go beyond reporting and demonstrate tangible progress in reducing supply chain emissions.
Achieving these reductions will require companies to build strong internal momentum for change, but the challenge often lies in identifying the most effective tools and procedures to align internal stakeholders. To move from disclosure to tangible emissions reduction, companies should:
The value of supply chain transparency extends beyond compliance. Gaining a deeper understanding of supply chain impacts can unlock significant strategic benefits. Enhanced, data-driven decision-making empowers companies to position themselves more competitively in expanding markets. By taking reduction actions, such as purchasing lower-carbon products, companies can lead in developing and scaling these products, accessing net-zero technologies, and gaining first-mover benefits as regulatory and voluntary demands for net-zero aligned solutions grow. Especially as demand for essential materials like steel and aluminum continue to rise, those who not only meet regulatory benchmarks but surpass them will solidify their status as industry leaders.
Building long-term resilience against future policy uncertainties and supply chain risks is another key value for proactively reducing supply chain emissions. With the ever-changing policy landscape, companies can stay ahead of regulatory changes and reduce exposure to new carbon taxes and tariffs. Additionally, by creatively mitigating or hedging risks through lower-carbon purchasing, companies can safeguard their business from price volatility (e.g., rising energy cost) and resource scarcity (e.g., insufficient availability).
Data challenges are often cited by companies as the most prominent barrier in managing Scope 3 emissions, but waiting for perfect data is an unrealistic expectation. To meet climate imperatives, companies need to find a way to act with the available but imperfect data.
Successful companies recognize that managing supply chain emissions calls for different, but aligned, strategies for near-term outcomes and long-term near-zero ambition. Acting in tandem on both fronts allows companies to pursue quick wins while laying the groundwork for systemic change. Recognizing that companies can work toward meeting targets with imperfect data while simultaneously striving to collect better data will support quicker decarbonization.
Here you will find the list of actions your company can take to advance both goals, and more detailed steps and actions are available in following chapters.
To meet near-term goal:
• Continue improving data quality but don't let spend-based data limit your immediate actions.
• Use spend-based data to derive insights on high-impact materials and key emissions hotspots.
• For companies that grasp their GHG footprints but face practical barriers to collecting full activity-based data (e.g., in fragmented and complex supply chains), start exploring flexible green procurement options, including book-and-claim solutions, once you have a credible view of your supply chain emissions.
• Prioritize credibility when considering book-and-claim mechanism to ensure the attributes purchased are tied to real climate impact.
To drive near-zero goal:
• Begin engaging tier 1 suppliers for direct offtake of lower-carbon materials and products.
• Focus on establishing purchasing standards that support physical offtake of near-zero materials.
To meet near-term goal:
• Streamline methodology selection process and quickly prioritize suppliers for targeted engagement and rapid action.
• Focus on efficiency and execution to accelerate reductions across known hotspots.
• Assess available low-carbon product options and make selections balancing cost and reductions.
To drive near-zero goals:
• Systematically evaluate advanced green procurement options for near-zero products with your suppliers.
• Start developing plans for off-taking advanced low-carbon or deep decarbonized products from climate-leading suppliers.
• Balance opportunity and risk by embedding near-zero climate considerations into procurement decisions at scale.
“Ball’s focus on moving from disclosing emissions to actively managing them has become a strong driver of our competitive advantage. By combining reporting with actionable strategies, we’ve attracted customers, investors, and partners aligned with our decarbonization goals.”
At Bayer, we firmly believe in the transformative potential of supplier engagement and the synergy derived from industrial collaboration. By harnessing established guidelines and leveraging well-defined industrial practices, we can significantly enhance the efficiency of data exchange while simultaneously facilitating seamless communication and cooperation among stakeholders. This strategic approach not only fosters a more integrated supply chain but also cultivates an environment of mutual growth and innovation, ultimately driving sustainable progress within our industry.
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