How Indian SMEs Can Prepare for Supply-Chain Disclosure

Scope 3 emissions reporting has quietly moved from a boardroom concern for large corporates to a live commercial question for thousands of Indian SMEs. If you supply components, materials, packaging, or logistics to a listed company or an export buyer, your carbon numbers are now part of someone else's disclosure. Getting ahead of Scope 3 emissions reporting is fast becoming the difference between keeping a contract and losing it.

What Scope 3 emissions actually are

Greenhouse gas emissions are grouped into three scopes under the GHG Protocol, the global standard for corporate carbon accounting. Scope 1 covers direct emissions from sources you own or control, such as fuel burnt in your boilers or vehicles. Scope 2 covers indirect emissions from the electricity you purchase. Scope 3 is everything else in your value chain — the emissions embedded in the goods you buy, the transport you rely on, the use of your products, and their eventual disposal.

For most businesses, Scope 3 is by far the largest share of the total footprint, often 70% or more. Crucially, one company's Scope 3 is another company's Scope 1 and 2. That is exactly why your buyers are now asking you for data: your factory's direct emissions are a line item in their supply-chain footprint.

The 15 categories in brief

The GHG Protocol divides Scope 3 into 15 categories. Eight are upstream (categories 1 to 8), covering purchased goods and services, capital goods, fuel and energy activities, upstream transport, waste, business travel, employee commuting, and leased assets. Seven are downstream (categories 9 to 15), covering distribution, processing and use of sold products, end-of-life treatment, leased assets, franchises, and investments. As a supplier, you will most often be asked about Category 1 (purchased goods and services) and Category 4 (upstream transportation), because that is where your business appears in your customer's books.

Why Indian SMEs are suddenly in scope

Three forces are converging at once, and none of them wait for you to be ready.First, domestic regulation. SEBI's Business Responsibility and Sustainability Reporting (BRSR) framework requires large listed entities to disclose ESG performance across their value chain — meaning their suppliers and distributors. If a listed customer must report on you, they will pass the request straight down.

Second, export pressure. The EU's Carbon Border Adjustment Mechanism (CBAM) entered its definitive, charging phase at the start of 2026, imposing a carbon cost on imports of steel, aluminium, cement, fertilisers, hydrogen, and electricity. Buyers in the EU, US, and Japan are increasingly making Scope 3 data a condition of purchase, well beyond CBAM's named sectors.

Third, finance. Banks, private equity, and green-lending institutions now factor emissions and ESG readiness into credit and investment decisions. A supplier that can produce clean carbon data is simply easier to fund and easier to keep.

The BRSR Core and value-chain disclosure timeline

SEBI's BRSR Core is a subset of key ESG attributes — including greenhouse gas emissions, water, waste, energy, and workforce metrics — that require independent assessment or assurance. The obligation is being phased in along a glide path across the top listed entities by market capitalisation, widening year on year toward the top 1,000. (These thresholds and dates are periodically revised by SEBI circular — verify the current position before you rely on a specific year.)

Value-chain ESG disclosure reaches upstream and downstream partners that individually contribute 2% or more of a listed entity's purchases or sales, with disclosure permitted to be capped at 75% of value. In a relaxation issued in March 2025, SEBI made these value-chain disclosures voluntary from FY 2025-26, with assessment or assurance voluntary from FY 2026-27. There is no confirmed mandatory date yet, but the direction of travel is clear: value-chain reporting is widely expected to become mandatory within two to three years.

Read the signal, not just the letter

The voluntary window is a preparation window, not a reprieve. Listed companies chasing assessment-ready numbers will still ask their material suppliers for data now, because they cannot build a defensible value-chain figure at the last minute. SMEs who wait for the mandate will be scrambling when it lands.

Spend-based vs activity-based: where to startThere are two broad ways to calculate Scope 3 emissions. The spend-based method multiplies the money you spend on a category by an emission factor per rupee. It is quick, uses data you already have in your accounts, and is the realistic starting point for most SMEs. The activity-based method uses physical data — kilograms of steel, litres of diesel, tonne-kilometres of freight — multiplied by specific emission factors. It is far more accurate but more data-hungry.

The sensible path is to begin spend-based to get a complete, if rough, picture, then move your most material categories to activity-based data over time. Buyers understand this progression; what they will not accept is no number at all.

A practical Scope 3 readiness roadmap for SMEs

Map your value chain. List your top suppliers and customers by spend and revenue, and identify which categories are likely material for you.

Nail Scope 1 and 2 first. You cannot credibly report Scope 3 to a customer while your own direct and electricity emissions are unmeasured. Collect twelve months of fuel and power bills.

Start spend-based for Scope 3. Use your purchase ledger and recognised emission factors to build a first estimate across the relevant categories.

Assign ownership. Give one person accountability for carbon data, even part-time, so requests do not fall through the cracks.

Standardise your response. Prepare a simple, repeatable data pack you can send to any buyer, rather than reinventing it for each questionnaire.

Plan for assurance-grade data. Keep source documents, methodologies, and assumptions on file so numbers can survive a third-party check when your buyer needs assessment or limited assurance.

Common mistakes to avoid

Treating Scope 3 as optional because you are unlisted — your listed and exporting customers make it mandatory in practice.

Chasing perfect activity data on day one and producing nothing, instead of a defensible spend-based estimate.

Ignoring documentation, so numbers cannot be assured later.Reporting only Scope 1 and 2 and assuming that satisfies a value-chain request.

What this means for your business

Scope 3 disclosure is no longer a distant obligation for the largest few — it is a supply-chain reality reaching Indian SMEs through their biggest customers and export buyers. The businesses that start now, with an honest spend-based baseline and good record-keeping, will turn a compliance ask into a competitive edge. Testa & Tegmen helps SMEs build value-chain-ready carbon inventories, respond confidently to BRSR and buyer questionnaires, and prepare for assurance without over-engineering the first step. If your customers have started asking about emissions, talk to us before the request becomes a deadline.