Myth-busting Supply chain traceability & product data: separating hype from reality

Seventy percent of a typical company's carbon footprint originates from suppliers, yet 80% of businesses surveyed believe sustainability is important or extremely important to long-term success (McKinsey, 2024; MIT Sloan Management Review, 2025). This disconnect between acknowledging importance and achieving visibility defines the central challenge of supply chain traceability. For sustainability leads navigating North American operations, understanding what actually works—versus what vendors promise—determines whether traceability investments deliver compliance readiness and competitive advantage or become expensive data infrastructure projects with limited impact.

Why It Matters

The regulatory environment has fundamentally shifted. Over 50,000 companies will eventually face CSRD requirements for fiscal year 2024 and beyond, with Scope 3 emissions reporting mandatory when material—which for most companies means always (European Commission, 2024). Singapore and Malaysia made climate disclosure mandatory in 2024 and 2025 respectively. The SEC's 2024 ruling requires US public companies to make specific climate-related disclosures. The EU Deforestation Regulation (EUDR), effective December 31, 2024, mandates due diligence for deforestation-linked commodities with non-compliance penalties reaching 4% of annual revenue.

These regulations transform supply chain traceability from operational optimization to compliance requirement. Companies without credible Scope 3 measurement capabilities face audit findings, investor scrutiny, and potential exclusion from sustainable finance products. More immediately, major buyers increasingly incorporate carbon data into procurement decisions: 64% of companies now include sustainability metrics in supplier scorecards, up from 38% just two years ago (CDP Supply Chain Report, 2024).

The technology landscape has matured correspondingly. AI-powered carbon accounting platforms like Climatiq—which raised €10 million in Series A funding in September 2025—now process over 1 billion carbon calculations annually, matching fragmented supply chain data to appropriate emissions factors in minutes rather than weeks. However, technology alone cannot solve what remains fundamentally a data collection and supplier engagement challenge.

Key Concepts

Scope 3 Categories and Materiality

The GHG Protocol defines 15 categories of Scope 3 emissions, from purchased goods and services (Category 1) through end-of-life treatment of sold products (Category 12) and investments (Category 15). For most manufacturers and retailers, Categories 1 (purchased goods), 4 (upstream transportation), and 11 (use of sold products) represent the majority of value chain emissions. Sustainability leads must prioritise based on materiality rather than attempting comprehensive coverage immediately.

Primary vs. Secondary Data

The distinction between supplier-specific primary data and industry-average secondary data fundamentally affects Scope 3 accuracy and credibility. Spend-based methods using secondary data remain common but suffer from a critical flaw: they are primarily sensitive to product cost rather than actual emissions. Research shows that if a product's embedded emissions decrease by 25%, spend-based methods would show only a 3% decrease (Supply Chain Management Review, 2025). Transitioning to primary data from key suppliers represents the single highest-impact improvement most companies can make.

Digital Product Passports and Chain of Custody

The EU Digital Product Passport initiative requires product-level sustainability data for categories including batteries, textiles, and electronics. This regulation mandates unique identifiers and machine-readable data that travels with products through their lifecycle. Companies building traceability infrastructure should anticipate these requirements, designing systems that can accommodate product-level granularity even if current reporting operates at aggregate levels.

Auditability and Assurance Requirements

Sustainability reports increasingly require third-party assurance comparable to financial audits. The shift from "limited assurance" to "reasonable assurance" standards raises the bar for data quality, internal controls, and evidence trails. Traceability systems must generate auditable records—not just dashboards—documenting data sources, transformation logic, and uncertainty bounds.

Sector-Specific KPI Table

KPI	Current Benchmark	Best Practice Target	Implementation Blocker
Supplier data coverage (by emissions)	20-40% primary data	>70% from top suppliers	Supplier capability gaps
Scope 3 category coverage	3-8 categories	All 15 material categories	Cross-functional coordination
Data refresh frequency	Annual	Quarterly for major suppliers	System integration complexity
Emissions factor currency	Industry averages	Product-specific factors	LCA investment requirements
Traceability system integration	Standalone	ERP/SCM embedded	IT architecture constraints
Supplier response rate	30-50%	>80% for tier 1	Engagement resource limits
Audit-ready documentation	Partial	Complete evidence trails	Process maturity gaps

What's Working and What Isn't

What's Working

CDP Supply Chain programme is creating standardised disclosure infrastructure. Over 280 major companies use CDP to request sustainability data from suppliers, creating common disclosure formats that reduce supplier burden while improving data comparability. Suppliers responding to one CDP request can reuse responses for multiple customers, incentivising participation. The programme has achieved measurable impact: suppliers report 35% higher emissions reduction rates when responding to CDP requests compared to non-respondents.

Tier 1 supplier engagement is yielding primary data at scale. Companies focusing resources on suppliers representing 70-80% of spend or emissions are achieving high response rates and data quality. Nestlé's commitment to engage suppliers covering 70% of their emissions by 2024 demonstrates how concentrated effort on major partners yields disproportionate coverage improvement. The key insight: rather than pursuing comprehensive tier 1 coverage, prioritise depth with high-impact partners before breadth.

AI is accelerating emissions factor matching and gap filling. Platforms like Climatiq and Persefoni apply machine learning to match fragmented supplier data (purchase orders, invoices, product specifications) to appropriate emissions factors from databases of 200,000+ verified factors. This automation reduces the bottleneck from data collection to calculation, enabling companies to focus limited analyst time on supplier engagement rather than spreadsheet manipulation.

Blockchain pilots are proving feasibility for high-value chains. While wholesale blockchain adoption remains premature, specific applications demonstrate value. Textile supply chains using blockchain-based chain of custody can prove organic or recycled content claims with cryptographic certainty. The technology works best where transaction volume is manageable, verification costs justify investment, and multiple parties benefit from shared truth. Fashion brands including H&M and Kering have implemented pilot programmes demonstrating practical applicability.

What Isn't Working

Spend-based methods are systematically misleading decision-making. The most common Scope 3 calculation approach—multiplying spend in categories by industry-average emissions factors—produces numbers that satisfy reporting requirements but fail to guide action. When a company switches to a lower-carbon supplier at higher cost, spend-based methods may show emissions increasing because higher spend multiplies by the same factor. This perverse outcome discourages the procurement decisions that actually reduce emissions.

IoT sensor deployments often generate data without insight. Many companies have invested in IoT sensors for logistics tracking, cold chain monitoring, or manufacturing process visibility. However, sensor data rarely connects to emissions calculations or sustainability reporting workflows. The gap between operational technology generating terabytes of data and sustainability teams manually populating spreadsheets represents massive unrealised potential—and significant integration investment to bridge.

Supplier tiering creates blind spots. Most companies have reasonable visibility into tier 1 suppliers but limited insight into tier 2+ partners who may contribute substantial emissions. Tier 2 blind spots become particularly problematic for commodities like palm oil, soy, or metals where upstream production drives environmental impact. Extending traceability beyond tier 1 requires industry collaboration, as individual companies cannot compel disclosure from suppliers of suppliers.

Scenario modelling capabilities remain immature. While companies invest in measuring current emissions, few have developed capabilities to model how procurement decisions affect future trajectories. Without scenario modelling, sustainability leads cannot answer basic strategic questions: What if we shift 20% of spend to low-carbon suppliers? How would supply base consolidation affect our carbon footprint? What's the emissions impact of nearshoring? This analytical gap limits sustainability integration into business strategy.

Key Players

Established Leaders

SAP embeds carbon tracking into its ERP and supply chain management platforms, enabling transaction-level emissions calculation without standalone sustainability software. Their Product Footprint Management module calculates emissions at product level, supporting Digital Product Passport requirements.

CDP (formerly Carbon Disclosure Project) operates the dominant platform for corporate environmental disclosure, including supply chain modules that enable buyers to request standardised data from suppliers. Over 23,000 companies disclosed through CDP in 2024.

EcoVadis provides supplier sustainability ratings combining environmental, social, and ethical dimensions. Their scorecards enable procurement teams to incorporate sustainability into supplier qualification and performance management without deep domain expertise.

IBM offers supply chain traceability solutions through IBM Food Trust and broader Sterling Supply Chain Suite, with particular strength in blockchain-enabled chain of custody applications.

Emerging Startups

Climatiq raised €10 million in September 2025 to scale its API-first carbon calculation platform. Their emissions factor database and matching algorithms address the data standardisation challenge that frustrates many Scope 3 efforts.

Sweep provides collaborative carbon accounting software designed for distributed organisations, with strong supplier engagement workflows enabling data collection at scale.

Pulsora offers audit-ready dashboards covering all 15 Scope 3 categories, with PulsoraAI capabilities for decarbonisation pathway modelling. Their platform addresses the scenario modelling gap identified in many carbon accounting implementations.

Sourcemap specialises in multi-tier supply chain mapping, using AI to identify likely tier 2+ suppliers even when direct data is unavailable. Their approach addresses the visibility gap that limits most traceability efforts to tier 1.

Key Investors and Funders

Breakthrough Energy Ventures invests in climate technology including supply chain decarbonisation solutions, providing growth capital and credibility signalling for emerging platforms.

Salesforce Ventures has invested in multiple sustainability software companies, reflecting enterprise software's integration with climate data requirements.

Amazon Climate Pledge Fund invests in technologies enabling supply chain decarbonisation, aligning investment with Amazon's own Scope 3 reduction commitments.

Examples

Walmart Project Gigaton: Walmart launched Project Gigaton in 2017 with the goal of reducing or avoiding one billion metric tonnes (a gigaton) of greenhouse gases from its value chain by 2030. By 2024, participating suppliers reported over 750 million metric tonnes of cumulative reductions. The programme demonstrates that voluntary supplier engagement, supported by measurement tools and recognition, can achieve scale without mandating participation. Suppliers access Walmart's sustainability hub containing calculation tools and best practice guidance, reducing the capability barrier that often limits supplier response. For sustainability leads, Project Gigaton offers a template for supplier engagement that balances ambition with practicality.
Unilever Sustainable Living Plan and Scope 3 Tracking: Unilever pioneered Scope 3 measurement in consumer goods, disclosing that over 60% of their greenhouse gas footprint occurred in consumer use (water heating for showers, laundry, etc.) rather than manufacturing or supply chain. This insight reshaped product development priorities, driving investment in concentrated formulas and cold-water effective detergents. The example illustrates how traceability investments must extend beyond supply chain to product use patterns—and how insights from comprehensive measurement can redirect innovation resources.
Apple Supplier Clean Energy Program: Apple has committed that its entire manufacturing supply chain will use 100% renewable electricity by 2030. By 2024, over 320 suppliers representing 95% of direct manufacturing spend had committed to this target. Apple's approach combines clear requirements (suppliers must meet renewable energy targets), capability building (Apple helps suppliers access renewable energy procurement), and accountability (progress tracking through CDP Supply Chain). The programme demonstrates how buyer power can accelerate supplier decarbonisation when combined with support resources. For sustainability leads at smaller companies, Apple's model suggests that prioritising emissions-heavy suppliers with clear requirements yields results even without Apple's market power.

Action Checklist

Map Scope 3 categories by materiality, identifying which categories represent >5% of value chain emissions
Assess current supplier data coverage by emissions contribution, calculating what percentage of footprint is measured with primary vs. secondary data
Evaluate carbon accounting platforms against integration requirements—standalone tools may create data silos
Establish supplier engagement programme for top 50 partners by emissions, including data request templates and capability-building resources
Develop internal data infrastructure roadmap connecting procurement systems to sustainability reporting workflows
Build scenario modelling capability enabling "what if" analysis for procurement and supply base decisions
Implement audit-ready documentation practices from day one, anticipating assurance requirements

FAQ

Q: How should sustainability leads prioritise between Scope 3 categories given limited resources? A: Start with a screening exercise using industry-average data to estimate emissions by category, then focus engagement resources on categories representing 80%+ of estimated footprint. For most manufacturers, this means purchased goods and services (Category 1) and upstream transportation (Category 4). For retailers, it typically adds end-of-life treatment. Avoid the temptation to achieve comprehensive coverage before achieving accuracy in material categories.

Q: What's the realistic timeline for transitioning from spend-based to primary data methods? A: Companies typically require 2-3 years to achieve meaningful primary data coverage from major suppliers. Year one focuses on platform selection and data infrastructure. Year two emphasises supplier engagement and capability building. Year three achieves operational integration and expanded coverage. Companies attempting faster timelines often sacrifice data quality for coverage metrics.

Q: How should we handle suppliers who refuse to provide emissions data? A: Three-pronged approach: First, use CDP Supply Chain to leverage collective buyer pressure—suppliers receiving requests from multiple customers respond at higher rates. Second, offer capability-building resources (calculation tools, training, funding support) addressing genuine capability barriers. Third, incorporate sustainability data provision into supplier qualification criteria, creating commercial consequences for non-participation. Leading companies report 80%+ response rates using these combined approaches.

Q: What IoT sensor investments make sense for sustainability leads to advocate? A: Prioritise sensors that generate data directly usable in emissions calculations: fuel flow meters for transportation, energy sub-metering for facilities, cold chain monitors for temperature-sensitive products. Avoid sensors generating operational data without clear sustainability application. The key question: does this sensor output connect to a line item in our GHG inventory? If not, it may generate data without sustainability value.

Q: How should we prepare for EU Digital Product Passport requirements even if operating primarily in North America? A: Companies selling products into EU markets will face Digital Product Passport requirements regardless of headquarter location. Begin building product-level data infrastructure now, even if current reporting aggregates to company or category level. Design traceability systems with unique product identifiers, modular data architectures, and API-based data sharing capabilities. The investment prepares for regulatory requirements while building capabilities valuable for customer demands and competitive differentiation.

Sources

McKinsey & Company. "Sustainability in the supply chain: How to drive decarbonisation." 2024.
MIT Sloan Management Review. "The State of Sustainable Business 2025." February 2025.
CDP. "Global Supply Chain Report 2024." December 2024.
European Commission. "EU Deforestation Regulation Implementation Guidance." 2024.
Supply Chain Management Review. "Toward more accurate Scope 3 emissions accounting." January 2025.
GHG Protocol. "Technical Guidance for Calculating Scope 3 Emissions." Updated 2024.
Climatiq. "Press Release: Series A Funding Announcement." September 2025.