S.E.R.G. WP Series #01-2026: Equity-based additional downstream allocation methods for Scope 3 emissions

Amid growing pressure to reduce greenhouse gas emissions, corporations increasingly commit to cutting emissions across their supply chains, including those generated by their upstream suppliers. Because these emissions lie beyond firms’ operational control, companies resort to using coercive supplier management strategies that can shift mitigation burdens to less powerful upstream firms. In response, we present alternative principles for allocating upstream emission reduction responsibility using an axiomatic framework. In particular, we characterize methods that distributes mitigation burdens downstream according to an exogenous fairness metric. We apply our alternative allocation methods to reconstructed multi-tier supply chains derived from the Structural Path input–output database analysis method paired with the Competitiveness Research Network firm-level characteristics database. We find that while downstream logic dominates global cost-sharing outcomes, allocation principles influence their magnitude and distribution across industries and countries. This work o!ers a foundation for advancing equity considerations in supply-chain-level emission mitigation.