Manufacturing leaders face a stark reality: while they focus on factory floor emissions, 70% of their environmental impact occurs upstream and downstream in supply chains. New research from Capgemini reveals that Scope 3 emissions—those indirect emissions from suppliers, logistics, and product lifecycle—represent the largest decarbonization challenge for industrial companies worldwide.
Key Takeaways
According to Capgemini's Building Sustainable Value Chains report, the industrial sector contributes over 35% of total greenhouse gas emissions globally, with supply chain activities generating the majority of this impact. Without aggressive emission controls, global temperatures could rise 4.1–4.8°C by 2100, far exceeding Paris Agreement targets of 1.5–2°C.
This data reveals why traditional carbon reduction strategies focused solely on direct operations fall short. Manufacturing executives must expand their sustainability lens beyond factory walls to encompass entire value networks, from raw material sourcing to end-of-life disposal.
Despite sustainability becoming a strategic priority, Capgemini's research shows approximately 50% of surveyed companies acknowledge falling behind on Scope 3 emission reduction efforts. More concerning, 67% doubt their ability to craft comprehensive decarbonization plans.
The complexity stems from several factors: difficulty tracking emissions across complex supplier networks, limited visibility into third-party operations, and challenges scaling low-carbon technologies across diverse supply chains. Companies implementing advanced supply chain visibility solutions like Trax's AI-powered audit systems are discovering that data normalization becomes essential for accurate emissions tracking across global logistics networks.
Different sectors face unique challenges. Cement, steel, and mining industries struggle more with direct Scope 1 emissions, while chemicals and electronics must tackle Scope 3 challenges requiring cooperation with suppliers and retailers throughout extended value chains.
"Digital transformation and AI are a formidable opportunity to get faster and improve decision-making throughout this transformation," explain Cyril Garcia and Charlotte Pierron-Perlès from Capgemini. These technologies enable predictive analytics, enhance decision-making processes, and ensure comprehensive traceability across supply chains.
Real-world applications demonstrate significant impact. One automated carbon footprint system enabled a manufacturer to evaluate emissions across 8,000 suppliers and 350,000 products, establishing the foundation for robust decarbonization planning. Similarly, digital twins and AI applications have delivered substantial energy consumption reductions in heavy industry projects.
Supply chain leaders using intelligent freight audit platforms like Trax's solutions find that comprehensive data collection and normalization across global operations becomes the foundation for accurate emissions measurement and reduction strategies.
Capgemini's research reveals compelling financial benefits from sustainable value chain transformation. Examples include packaging redesign reducing product carbon footprints from 10 kgCO₂e to 3 kgCO₂e while cutting costs, and automotive initiatives achieving 27% Scope 1 and 13% Scope 2 CO₂ reductions across multiple locations.
Circular business models deliver even greater impact, with adopters in water and automotive industries reporting material savings up to 50% and cost reductions reaching 70%. These results demonstrate that sustainability investments generate measurable returns rather than representing pure compliance costs.
Capgemini outlines essential transformation pillars:
Sustainable Product Design incorporating eco-friendly materials and circularity from initial design phases delivers cost reductions while extending product lifespans. Sustainable Manufacturing involves shifting to low-carbon energy usage and embracing circular production models to reduce emissions and operating costs. Sustainable Supply Chains require responsible sourcing, logistics optimization, and ESG transparency to lower resource dependency and increase market resilience.
"Building a sustainable value chain is an iterative process requiring balanced approach between short-term quick wins and long-term strategic action," note Capgemini executives Garcia and Pierron-Perlès.
The research emphasizes that sustainable value chains extend beyond regulatory compliance, catalyzing growth and positioning companies as leaders in resilient, future-focused industries. Manufacturing leaders who embrace comprehensive supply chain decarbonization strategies position themselves for long-term competitive advantage while contributing to global climate goals.
Ready to transform your supply chain sustainability strategy? Contact Trax to discover how AI-powered freight audit and supply chain visibility solutions can provide the data foundation essential for comprehensive Scope 3 emissions tracking and reduction.