For companies with agricultural supply chains, the challenge of decarbonisation extends far beyond their own operations. The emissions associated with farming, land use and purchased raw materials often account for the vast majority of their carbon footprint, yet the people and places where those emissions originate, including smallholder farms, can be among the hardest to reach with investment, technical support and effective measurement.
The challenge is no longer simply whether companies are measuring their Scope 3 emissions or setting reduction targets. It is how those commitments translate into practical changes across complex supply chains – and whether the incentives, financing and policy frameworks needed to deliver them are in place. This was the focus of a closed-door workshop hosted by Innovation Forum and Solidaridad, bringing together senior stakeholders from business, finance, policy and civil society.
The event took place to mark the launch of the first edition of the Carbon Barometer, Far From the Factory Gate, developed by Solidaridad Network and Observer Research Foundation. The report assesses how far agribusinesses are from required emission reduction and identifies the gap in investment and implementation. It also provides companies with a practical decision tool to benchmark performance and strengthen the management and reduction of Scope 3 emissions in their supply chain.
For farmers, this gap in investment and implementation by agribusinesses, translates to real challenges in the upstream supply chain. Addressing the room, Hilarius Gimawan from CUKK, an oil palm farmer credit cooperative in West Kalimantan, Indonesia, described how climate impacts are affecting farm productivity and livelihoods, increasing financial risks for both farmers and the communities that support them.
“For farmers, with each season, the risk to farming is increasing. We need support to farm in a way that climate shocks don’t lead to loss of livelihoods for us. We need support to build resilient farming systems and farming communities that can continue to put food on just our tables but yours too.” Hilarius Gimawan, CUKK, Indonesia
Financing the transition: moving capital to where it can make a difference
The workshop explored three connected questions in facilitated working groups: how to finance the transition, how to make policy and reporting more effective, and how corporate procurement can incentivise decarbonisation among smallholder farmers.
Scope 3 progress requires more than better data or stronger targets. Moving finance towards smallholder production systems, to support transition to low-emission and resilient agriculture, continues to be a challenge. There may not be a lack of finance, but it remains inaccessible to farmers because projects are fragmented, transaction costs are high, repayment terms are unsuitable, or companies lack the internal incentives and delivery systems needed to invest upstream.
A key point emerged from the discussion: Scope 3 finance is not just about raising capital. It is about aligning incentives, building a clear business case and ensuring investment reaches the farms, farmers and supply chains where it can make a difference.
Making the business case
Investment in agricultural decarbonisation competes with other priorities. Better data can help companies identify emissions hotspots, understand intervention costs and demonstrate the value of investment. It is, therefore, important to look beyond carbon to soil health, climate resilience and security of supply.
Embedding incentives in business decisions
Scope 3 targets need to influence operational and financial decisions. Internal carbon pricing, management KPIs and supplier scorecards as ways to make emissions performance more relevant to investment and procurement. Sustainability-linked payments and premiums can also reward suppliers for progress.
Getting finance to farmers
Blended finance, concessional loans and government incentives could help mobilise investment and reduce risks. However, banks often work with traders and processors rather than farmers directly, meaning finance does not always reach the places where emissions originate. Preferential payment terms, sustainability-linked premiums and farmer cooperatives could bridge this gap. Corporate finance should be linked to credible targets and demonstrable progress, supported by practical transition plans. Conditions must not simply transfer responsibility to smallholders without giving them the resources to change.
Policy, compliance and reporting: creating clarity without adding complexity
There is a gap between collecting Scope 3 data and using it to drive reductions. Companies face a patchwork of reporting frameworks, customer requirements, regulations and voluntary standards, creating duplication without always providing a clear picture of progress.
An important point that emerged from the discussion was: Reporting and regulation should make progress more comparable, support better decisions and provide clarity on what action is needed – rather than adding complexity or becoming ends in themselves.
From reporting to action
Better data remains essential for identifying emissions hotspots, assessing risk and directing investment. However, compliance does not necessarily demonstrate performance. There is a need for a clearer “North Star”: consistent expectations that help companies understand what to prioritise and how to demonstrate progress.
Reporting should connect to credible transition plans, setting out actions, responsibilities and how progress will be assessed. Plans also need to account for competing priorities, such as water scarcity and supply-chain resilience, and help companies sequence investments.
The role of regulation and collaboration
Regulation can create a level playing field and encourage action beyond voluntary commitments, but requirements need to be coherent and proportionate. Challenges exist around traceability, measurement and complex, multi-tier supply chains. New reporting obligations should not impose additional costs on farmers and suppliers without adequate resources or support. Existing multi-stakeholder initiatives could help companies develop practical, shared approaches.
Supply-chain practices: making decarbonisation work for smallholders
Procurement, insetting (investing in emissions reductions and removals within a company’s own supply chain) and supplier partnerships can incentivise lower-emissions farming. Farmers, however, must help shape these approaches, rather than simply being expected to meet corporate sustainability requirements.
Another key point that emerged was: Procurement can support decarbonisation when incentives are credible, farmers are involved in programme design, and long-term relationships are backed by finance and technical support. The goal is to make change economically viable for farmers as well as beneficial for companies.
Start with farmers’ needs
Higher yields do not automatically mean higher incomes, and a single incentive will not work across every commodity or region. Companies need to understand farmers’ priorities and constraints, involving them from the outset and working with trusted local organisations and cooperatives.
Depending on the context, farmers may benefit from premiums, more predictable income, long-term contracts, insurance, land rights or technical support. Programmes also need regular review as labour costs, inflation and market conditions change.
Make procurement incentives meaningful
Long-term purchasing commitments, preferential payment terms, sustainability-linked premiums and funding for farm-level innovation can help make new practices financially viable. But farmers need to see tangible benefits, particularly when changes involve upfront costs or additional risk.
Companies must also be incentivised to reflect sustainability goals in their own purchasing decisions. Procurement practices should recognise the commercial realities of suppliers, rather than placing the cost of transition disproportionately on them.
Look beyond carbon and collaborate by commodity
To effect systemic change, relying on emissions metrics alone will not lead to desired change, especially on the farms. Reducing emissions intensity does not necessarily improve the resilience of an agricultural system, and poorly designed incentives can create unintended consequences. Soil health, biodiversity, productivity, livelihoods, income diversification and resilience to climate shocks should also be considered.
Technical support and fair, context-appropriate measurement are essential. While common principles can provide direction, solutions need to reflect the realities of individual commodities. Industry initiatives can help companies align around shared goals, learn from one another and avoid duplicating efforts.
A clear call to action
Now more than ever, there is a need to connect corporate accountability with practical support across agricultural supply chains. Better reporting can identify where action is needed, but reductions depend on investment reaching the right places, incentives shaping business decisions and procurement practices supporting suppliers. Regulation and collaboration can help create the conditions for progress, but approaches must reflect the realities faced by farmers.
Ultimately, companies cannot deliver meaningful Scope 3 emission reductions without working with the people who produce their raw materials. Targets need to translate into investment, reporting needs to inform decisions, and procurement needs to support both decarbonisation and resilient livelihoods.