How Small Business will lead the Climate Transition

From supply chain emissions to corporate execution, SMBs are the backbone of Scope 3 and hold the key to accelerating climate goals.

For years, small businesses were treated as peripheral to the climate agenda. That view is outdated. From supply chains to demands from financial institutions, SMBs are emerging as a driving force in the climate transition.

Far from the sidelines, small and medium-sized businesses are at the center of the shift. Large corporations cannot meet climate commitments or comply with new rules without accurate data and concrete action from their suppliers.

This means SMBs are not on the margins. They are at the center of the climate transition.

Understanding Scope 3 in Business Terms

Scope 3 covers all indirect emissions across a company’s value chain. While Scopes 1 and 2 represent internal operations, Scope 3 is built on suppliers, logistics, and product use. Areas dominated by SMBs.

According to the EPA, supply chain emissions are on average 11.4 times higher than a company’s operational emissions, making up about 92% of the total footprint. A BCG/CDP study in 2023 found that supply chain emissions were 26 times greater than Scopes 1 and 2 combined. Across industries, Scope 3 typically accounts for 70–90% of the climate impact.

The implication here is straightforward: the pace of any corporate climate action depends on the performance and engagement of their small suppliers.

Why SMBs Matter for Corporate Climate Goals

SMBs are not just another stakeholder group, they are the engine that powers Scope 3. Without them, climate strategies collapse into spreadsheets with no execution. This reality plays out in four critical dimensions where SMB engagement directly shapes whether corporates succeed or fail in their climate goals:

• Compliance leverage: Global frameworks such as IFRS S2, CBAM in the EU, and Brazil’s upcoming SBCE require companies to disclose not only their direct emissions but also those of their entire supply chain. Since the bulk of Scope 3 sits with SMB suppliers, compliance is literally impossible without their participation. Corporates that fail to engage suppliers risk regulatory penalties, trade barriers, or losing access to international markets.

• Risk management: From carbon pricing to extreme weather, risks propagate through supply chains. Rising transport costs, unstable suppliers, or disruptions in commodity flows all show up in Scope 3. SMB practices determine whether corporations can shield themselves from volatility or remain exposed to systemic shocks.

• Efficiency at scale: Incremental improvements at the SMB level create ripple effects across entire industries. What looks small in isolation scales up to millions in savings and major emission reductions when multiplied across hundreds of suppliers.

• Investor trust: Investors are no longer satisfied with corporate-level disclosures. ESG ratings and climate funds are increasingly scrutinizing whether suppliers are aligned with net zero pathways. Weak supplier engagement translates into downgraded ESG scores, higher cost of capital, and shrinking access to green finance.

In short, without SMB engagement, there is no real climate progress. The future of corporate climate strategies depends less on internal operations and more on whether small businesses across the value chain are mobilized, supported, and integrated into the journey.

Step by step, but moving forward

A credible Scope 3 strategy only works when large enterprises and SMBs move together.

• For large corporations, the path starts by focusing on what matters most: map the suppliers and categories that represent the bulk of Scope 3, set clear data standards, and make climate part of procurement. More than demanding numbers, they need to enable their suppliers with tools, training, and simple templates.

• For SMBs, the task is to begin with a simple baseline, share progress with clients, and capture quick wins in efficiency and logistics. Over time, accuracy improves, trust is built, and competitiveness grows.

When both sides align, Scope 3 stops being a bottleneck and becomes a lever for scale. This process is challenging, but technology is changing the equation.

This is where Alga uses Vertical AI to cut complexity, automate data capture, and create a shared language between corporates and suppliers — enabling faster progress, lower costs, and greater clarity :)

Final word

SMBs are not bystanders in the climate transition. They are Scope 3. Their engagement is what decides whether corporations achieve their climate goals or fall short.

Climate action cannot remain a privilege for a few — it must be built into every contract and every supplier relationship. The companies that mobilize their SMBs will accelerate the transition; the SMBs that step up will gain resilience, growth, and a stronger place in global value chains.