India is actively weighing whether to introduce Scope 3 emissions reporting for exporters, as officials discuss how to track indirect emissions across supply chains without overwhelming smaller firms. The discussions, reported by ET Supply Chain Dispatch on 21 October 2026, involve Niti Aayog's push for a phased approach that would begin with large firms in high-impact sectors, allowing MSMEs time to adapt before compliance obligations extend to them.
The context for this debate is the European Union's Carbon Border Adjustment Mechanism, which has already begun requiring exporters in carbon-intensive sectors to report embedded emissions in their products destined for the EU market. Sectors explicitly identified as facing CBAM rules include steel, aluminium, cement, fertiliser, electricity, and hydrogen. These are precisely the sectors where India's export exposure to Europe is significant, and where the cost of non-compliance could translate into lost market access or reduced margins.
Scope 3 emissions are the indirect emissions that occur in a company's value chain, both upstream and downstream. For exporters, this includes emissions from purchased materials, transport, and the use of sold products. Tracking these emissions is substantially more complex than measuring direct operational emissions, because it requires data from suppliers and logistics providers across multiple tiers of the supply chain. The complexity is precisely why Niti Aayog has argued for starting with large firms rather than imposing the burden uniformly.
The MSME dimension is central to the policy debate. India's export sector includes a large number of small and medium enterprises that supply components, materials, and services to larger exporters. If Scope 3 reporting were imposed broadly, these smaller firms would face documentation and verification costs that many could not absorb. The phased approach proposed would allow the compliance architecture to be built around large firms first, with MSMEs brought in gradually as systems and capacity develop.
For Indian exporters already facing CBAM, the stakes are immediate. European buyers are increasingly demanding emissions data as a condition of purchase, and the EU's mechanism will eventually impose a carbon cost on imports based on embedded emissions. Exporters who cannot provide verified data risk being displaced by competitors from countries with clearer carbon accounting systems, or facing a price disadvantage as importers pass through CBAM costs.
The timing of the discussions reflects a broader recognition that carbon reporting is becoming a trade issue, not merely an environmental one. India has opposed unilateral carbon border measures at international forums, arguing that they impose unfair costs on developing countries. But opposition at the WTO or in bilateral negotiations does not relieve exporters of the practical requirement to meet buyer demands and regulatory requirements in destination markets.
The policy design challenge is to create a reporting framework that is credible enough to satisfy European regulators and buyers, while being feasible for Indian firms at different levels of capacity. This means not only technical standards for measurement and verification, but also institutional infrastructure: accredited verifiers, digital reporting platforms, and support for firms that lack the internal resources to comply.
Looking ahead, the outcome of India's deliberations will shape how the country's export sector adapts to the global shift toward carbon accounting. If a phased Scope 3 framework is adopted, it could provide a structured pathway for exporters to build compliance capacity before obligations become binding. If the process stalls or produces a framework that is not recognised by major trading partners, Indian exporters may find themselves navigating multiple, incompatible reporting requirements. The decision is ultimately about whether India shapes its own carbon accounting architecture or has one imposed on it by its trading relationships.