Meaningful reductions require more than external commitment — they depend on strong internal momentum. Leadership buy-in and cross-functional alignment are essential to turning ambition into action, and tools like carbon key performance indicators (KPIs), internal incentive programs, and carbon pricing mechanisms can help enable the needed momentum.
Accelerating Supply Chain Decarbonization
A Corporate Guide for Smarter Actions
Internal Momentum
How you can help your company take the first step to change by shaping a more effective governance structure and sustaining momentum.
This section will provide you with the tactics necessary to help your company establish and/or sustain internal momentum:
- You will understand that the critical elements for building strong internal momentum are senior leadership buy-in and an effective governance structure, as well as having actionable insights on how to drive them.
- You will have clear and actionable steps to sustain momentum, from embedding climate KPIs across business functions, to creating internal incentives for deeper engagement, and lastly monetarizing carbon for business decision-making.
2.1 Set your company up for internal momentum
Critical element #1: Senior leadership buy-in.
This is fundamentally core for a company’s internal momentum. According to CDP’s Scope 3 upstream report, corporations with a climate-responsible board are 4.8 times more likely to set upstream Scope 3 targets. Climate-competent senior leaders set the tone for climate ambitions, signaling that decarbonization is not just a compliance exercise but also a strategic imperative. Their commitment cultivates a corporate culture where climate is embedded in strategic goals, thereby ensuring sufficient funding for climate initiatives, enabling shared accountability across departments, and encouraging bottom-up innovations.
There is no “silver bullet” for securing senior leadership buy-in — it requires both top-down leadership (boards and management actively driving the agenda) and bottom-up engagement from business units that can clearly articulate the opportunities and risks tied to climate actions.
Immediate priorities your company can take:
At the corporate level:
- Incorporate high-level KPIs such as having at least one climate competent board member, set up a board climate committee.
At the business unit level (e.g., climate team):
- Upskill senior executives and management by providing climate-informed decision-making tools and sharing real-world cases studies from competitors and sector leaders.
- Strengthen internal storytelling by translating Scope 3 management into business language, highlighting cost impacts, risk exposure, and long-term resilience opportunities.
For example, “If carbon prices rise 20% by 2030, our current supply chain footprint could increase annual operating costs by $X million;” or “Major buyers are requiring lower-carbon materials – failing to act now risks losing market access.”
Critical element #2: Effective governance structure
An effective internal governance structure is the backbone of meaningful corporate climate actions. It integrates decarbonization efforts across business functions and helps define responsibility. Since each company is unique, many develop their own governance structure organically along climate journeys. Decentralized and distributed structures are found to be particularly valuable for building internal momentum, as they unlock the power of collaboration and innovation, which enables ideas to flow, actions to move faster, and climate solutions to scale.
Each common governance approach offers distinct advantages and challenges, and the best fit depends on a company’s nature of business, level of climate ambition, and leadership style (Exhibit 2):
- A centralized approach is ideal for specialized businesses with simpler emissions inventories. It allows application of consistent KPIs across all units, as well as fast corporate-level decisions like public targets or purchasing commitments (e.g., buying X amount of near-zero-emissions materials by 2030).
- A decentralized approach is suited to companies with complex operations spanning multiple product types, markets, or supply chains. It grants individual units the autonomy and flexibility to respond swiftly to specific climate demands and opportunities from local markets.
- A distributed approach is increasingly popular among mission-driven organizations with ambitious climate goals. By weaving climate responsibilities into every role, it enables quick pivots to the evolving regulations and stakeholder expectations. Companies with a distributed structure are also more likely to leverage innovative market mechanisms in advancing their climate goals due to encouraged innovation and a learning environment.
In practice, corporations may end up with hybrid structures such as setting overarching climate targets centrally while empowering decentralized or distributed networks to innovate and adapt locally.
Exhibit 2. Finding the right governance structure for your company
| Centralized | Decentralized | Distributed | |
|---|---|---|---|
| Overview | Place climate responsibility within a single leadership team at the corporate level (e.g., CSO, climate team) which sets strategy, makes key decisions, and drives implementation across all business units. | Each key business unit (climate, procurement, finance) has its own climate governance mechanism and autonomy, with general oversight/goal from corporate senior leadership. | Cross-functional staff spread across multiple teams have collaborative platforms for innovative decision-making, allowing climate decisions to flow dynamically among departments and roles. |
| Prototype |
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| Advantage |
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| Challenge |
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To help shape your company’s governance structure:
Here is how different governance frameworks may be brought down to the individual department level (e.g., procurement) at your company and how it can hinder/support decision-making:
| Centralized | Decentralized | Distributed |
|---|---|---|
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Procurement team receives a specific green procurement criterion (e.g., recycled content goal) as a mandate. It executes this mandate consistently with the climate team and with laser focus on products meeting the pre-determined purchasing criterion.
However, it’s less responsive to innovative product offerings or opportunities meeting the similar emissions reduction goal but not through recycled content. |
Procurement team receives the corporate-level climate goal and can set their own strategy within the broader framework. It acts quickly to explore available product offerings at local markets and supply chains and has flexibility to adopt emerging near-zero products.
Procurement teams in different markets may have inconsistent preference (or duplicate efforts) on qualifying lower-carbon products. |
Procurement team co-develops climate goal and green purchasing criterion with relevant teams. It is flexible to adopt emerging near-zero products and has ability to scale it faster across the company.
It requires strong coordination mechanisms and open communication channels, otherwise it may risk slower alignment especially when scaling a successful pilot purchase. |
2.2 Take steps to sustain momentum
Beyond leadership and governance, companies may consider these enabling approaches to sustain the momentum as they advance in the climate journey:
Step 1: Embed specific climate KPIs across business functions
At the initial stage, setting the right climate KPIs is critical to translate corporate climate ambition into actionable outcomes for different departments and ensure that decarbonization is a shared objective. This involves breaking down aggregate reduction targets to specific metrics, such as a material-level reduction target, recycled content goal, or purchase volume of low-carbon materials, and assigning these metrics to corresponding teams and individuals (e.g., climate, procurement, etc.).
Step 2: Create internal incentives to drive deeper engagement
Once accountability structures are in place, introducing internal incentives can effectively accelerate momentum and deepen both internal and supplier engagement, enhancing efficiency and impact. These incentives can be financial (e.g., bonuses linked to meeting specific climate KPIs based on the company’s core business, additional budget allocations for climate initiatives) and non-financial (e.g., public recognition, career development opportunities).
Step 3: Price carbon to integrate climate into business decision-making
At a more mature stage, pricing carbon becomes a valuable method for companies to make meaningful reduction actions as it monetizes the future costs of climate regulation or corporate climate ambitions in business decision-making. The EU CBAM has already made carbon a cost factor in global trade, reinforcing the rationale and urgency for companies to turn emissions into a financial cost to inform sourcing decisions and avoid unexpected financial impacts. Companies interpret carbon pricing differently based on their needs, and there are different ways for setting a carbon pricing system. Examples from companies include an internal shadow price system with a hypothetical price to raise awareness across business functions, or in more advanced cases, setting target-based prices to evaluate co-investment opportunities with suppliers, etc.
Corporate Insights
Senior leadership support was instrumental in establishing the foundation for Ball's collaborative efforts in carbon reduction. A key driver is the internal Sustainability Accelerator working group, which brings together senior leaders from engineering, procurement, finance, strategy, innovation, public affairs, and sustainability. Held quarterly, this group focuses on driving action and sharing strategies to reduce the carbon footprint, ensuring clear accountability for achieving climate-related goals.
Effective cross-organizational coordination is key to aligning business targets with Scope 3 emissions reductions. Setting KPIs that integrate sustainability and business goals is a critical enabling approach. At Schneider, there are three interconnected mechanisms that drive Scope 3 upstream reductions: SBTi absolute reduction targets, internal long-term incentives tied to upstream emissions, and an external sustainability KPI.
At Bayer, we integrate carbon pricing into our sourcing events as a fundamental component of our procurement strategy. In addition to traditional sourcing criteria, we evaluate suppliers based on their decarbonization maturity and the carbon footprint of their products, translating these factors into carbon pricing. This approach ensures that sustainability considerations are not only prioritized but also quantifiably assessed, reinforcing our commitment to environmentally responsible sourcing practices.
