As the global push for net-zero accelerates, manufacturers are under growing pressure to reduce their carbon footprint, not just from direct operations, but also from hidden emissions embedded in raw materials, production, and supply chains.
For mid-sized manufacturers and exporters, tackling these embedded emissions is no longer optional. It’s a strategic business move that can improve competitiveness, ensure regulatory compliance, and manage future risks. This article explores the challenges, key steps, and technologies that can help manufacturers take control of their embedded emissions.
Understanding Embedded Emissions and Their Impact
Embedded emissions (also called embodied carbon) account for roughly 70% of a product’s total emissions. These are generated during the extraction of raw materials, manufacturing, transportation, and other activities that happen before the product reaches the customer.
Understanding and managing embedded emissions is crucial for several reasons:
- Competitive Advantage: A recent survey shows that 88% of consumers prefer low-carbon products, and buyers now prioritise suppliers with transparent embedded emissions
- Regulatory Compliance: Governments worldwide are introducing carbon pricing mechanisms, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which imposes tariffs on imported goods with high embedded emissions
- Cost Mitigation: Reducing embedded emissions can lower operational costs through improved material efficiency, reduced waste, and optimised logistics
- Risk Management: Businesses that fail to act face a projected 20% increase in costs from regulatory penalties and carbon pricing by 2030
Reducing embedded emissions - typical process and the big challenge
Reducing embedded emissions, those tied to materials, production, and supply chains requires a structured, multi-step approach. It begins with identifying high-emission areas using Lifecycle Assessment (LCA) to pinpoint carbon-intensive materials and processes. Next, businesses must engage their value chain, working with suppliers to source low-carbon materials, improve energy efficiency, and shift to renewables. Sustainable product design is also key, including using alternative materials, extending product life, and adopting circular practices like recycling and remanufacturing. Monitoring progress through Environmental Product Declarations (EPDs) and carbon labelling ensures transparency and drives continuous improvement.
However, the biggest hurdle is building a clear, detailed picture of emissions across the full product lifecycle. Without accurate, science-based data, it’s difficult to set goals, comply with regulations, or reduce emissions effectively. A solid data foundation is essential for tracking progress and making impactful decisions.
Best practices to get the right baseline data needed to embark on the embedded emissions reduction journey
- Use Direct Measurements for Greater Accuracy:
- Use real-time monitoring tools like IoT sensors, process analysers, to obtain actual fuel combustion, energy use where feasible.
- Engage suppliers for Environmental Product Declarations (EPDs) and Life Cycle Inventory (LCI) datasets to capture product-specific emissions
- Where direct measurement is not feasible, use reliable data sources and only estimate or allocate as a last resort
- Capture All Relevant Emissions: Direct, Indirect, and Supply Chain Impacts:
- Track all Scope 1, 2, and 3 emissions using established reporting approaches
- Engage suppliers to capture upstream Scope 3 data, aligning with regulations like EU CBAM and SEC disclosure rules
- Use a centralised system to standardise and manage emissions data across suppliers and production sites
- Standardise Units, Apply Recognised Emission Factors, and Cross-Check Data Sources:
- Convert data to CO₂e using IPCC’s GWP factors and standardise units across suppliers
- Cross-check supplier data with third-party sources such as Ecoinvent, GaBi, and Sphera to enhance credibility and compliance
- Prefer Primary Data from Suppliers, Use Standardised Secondary Databases When Necessary
- Obtain supplier-specific data through carbon footprint reports, EPDs, and ISO 14044-compliant LCAs
- If unavailable, use standardised databases like Ecoinvent, GaBi, and Sphera. Exporters should align with CBAM benchmarks to meet EU reporting requirements
- Validate Results Through Internal Reviews, Third-Party Audits, and Transparent Documentation:
- Regularly verify data through internal reviews and third-party audits (ISO 14064, CDP, SBTi)
- Maintain a central repository with methodologies, emission factors, and supplier validation
- Exporters should align with EU CBAM, TCFD, and carbon pricing schemes to ensure compliance and reduce risks
Role of Technology in enabling embedded emissions calculation and management
Though the best practices may seem clear, many companies struggle due to limited expertise and a lack of the right tools. Tracking emissions across complex supply chains and meeting evolving regulations is challenging, especially when done manually – it may be slow, error-prone, and hard to scale.
Technology doesn’t replace emissions management; it enhances and streamlines it. Digital tools and AI-driven platforms improve speed, accuracy, and transparency, helping manufacturers stay compliant, meet sustainability goals, and cut embedded emissions effectively.
KarbonWise offers a technology-driven solution for seamless embedded emissions management.
- By leveraging advanced digital tools, we help manufacturers accurately measure, track, and reduce their carbon footprint across the value chain.
- Our platform integrates with existing operations to ensure data accuracy, regulatory compliance, and actionable insights for emissions reduction.
- KarbonWise supports scenario modeling and lifecycle assessments, enabling businesses to explore material substitutions, process optimisations, and circular economy strategies.
We transform emissions management from a compliance challenge into a competitive advantage, enhancing transparency, reducing risks, and positioning companies as leaders in the low-carbon economy.
Conclusion
For mid-market manufacturers, reducing embedded emissions is no longer an option - it is a business imperative. With increasing regulatory pressures, shifting consumer preferences, and growing demand for supply chain transparency, companies that act now will gain a competitive advantage. Proactively managing embedded emissions not only ensures compliance and cost efficiency but also strengthens market positioning by attracting sustainability-conscious customers and investors. Waiting is no longer viable; those who take action today will be the ones shaping the low-carbon economy of tomorrow.
➔ To know more about KarbonWise and support services available through IGCC, write to sustainmarkets(at)indo-german.com
➔ To learn more about the impact of embedded emissions on businesses, click here to register for our upcoming webinar on 8th April 2025.