How Corporate Climate Targets Reshape Emissions Across Global Supply Chains

When a global corporation signs up to a science-based climate target, the promise doesn't stop at its own factories or offices. It extends deep into its supply chain, to the companies that manufacture parts, process materials, and assemble products. A new World Bank study, Deep and Shallow Decarbonization in Supply Chains.

Authored by Anne Beck and Alvaro Pedraza from the World Bank's Development Research Group, the research looks at how suppliers react when major customers receive formal approval of their emissions-reduction targets under the Science Based Targets initiative (SBTi). The central question: do suppliers genuinely cut emissions, or do they rely on easier, more symbolic strategies?

The answer is both.

A Rapid Rise in Corporate Climate Commitments

Over the past decade, thousands of large companies have committed to reducing emissions in line with climate science. Under SBTi rules, these firms must also account for emissions across their supply chains, known as Scope 3 emissions. That means customers increasingly expect suppliers to measure, disclose, and lower their carbon footprints.

The study shows how fast this pressure has grown. Before 2014, almost none of the firms in the dataset had approved science-based targets. By 2023, more than 1,600 had received validation. Because each of these companies works with many suppliers, the impact spreads quickly. More than 11,000 suppliers were linked to at least one customer with an approved climate target. This created a powerful ripple effect across global production networks.

Real Emission Cuts, But Not for Everyone

The researchers combined global supply-chain data with firm-level emissions records and carbon offset transactions to track how suppliers reacted once a customer's target was officially validated.

On average, suppliers did respond. They became much more likely to adopt climate targets of their own. Many even sought SBTi approval. More importantly, their emission intensity, emissions relative to revenue, fell by nearly nine percent after their customer's target was validated. These reductions continued over time, suggesting real operational improvements rather than temporary slowdowns.

But the response was not uniform.

Suppliers that started with high emission levels made the biggest changes. After being exposed to customer pressure, these firms reduced total emissions by about 15 percent and cut emission intensity by nearly 19 percent. For these high emitters, real decarbonization appeared to be the main strategy.

Suppliers that were already relatively low emitters reacted very differently. They showed no meaningful reduction in emissions or emission intensity after their customers received validation.

The Carbon Offset Shortcut

Instead of cutting emissions further, many low-emission suppliers turned to carbon offsets.

Carbon offsets allow companies to compensate for their emissions by financing climate projects elsewhere, such as forest protection or renewable energy installations. After customer targets were validated, the use of offsets rose sharply. Suppliers were more likely to purchase offsets, and the volume they retired increased substantially.

For low-emission suppliers, offset intensity jumped by more than 250 percent compared to previous levels. In simple terms, they relied heavily on buying carbon credits instead of reducing emissions directly.

High-emission suppliers also increased offset use, but much more modestly. Their main adjustment came through operational changes.

This suggests a clear pattern. High emitters decarbonized deeply. Lower emitters often chose the easier route.

Not All Offsets Are Equal

The study also looked at the quality of the carbon credits being used. By matching offset projects to independent MSCI ratings, the researchers found that suppliers facing customer pressure tended to purchase lower-rated credits on average.

However, firms that actually reduced their emissions were more likely to choose higher-quality offsets.

This matters because not all carbon credits deliver the same environmental benefits. Lower-quality credits may be cheaper but less reliable in delivering real emission reductions. The findings raise concerns that some of the increase in offset use may represent symbolic compliance rather than meaningful climate action.

Why Validation Matters

Interestingly, the study found that simple announcements of climate commitments did not trigger major changes in suppliers. Real responses came only after targets were formally validated by SBTi.

This suggests that credibility matters. Third-party approval sends a stronger signal than a public pledge alone.

Overall, the research paints a balanced picture. Supply-chain climate pressure can drive real emission reductions, especially among the largest polluters. But it can also encourage reliance on carbon offsets, particularly among firms that already have relatively low emissions.

For policymakers and corporate leaders, the lesson is clear: climate commitments can influence entire supply chains, but ensuring those changes are deep, credible, and high-quality requires careful oversight.