As multinational buyers demand increasingly detailed emissions data from suppliers, small and medium-sized manufacturers face growing pressure to measure and document their carbon footprints. Limited expertise, fragmented reporting requirements and the cost of verification are creating a compliance gap that AI-powered carbon accounting platforms are attempting to address.
Carbon reporting is increasingly extending beyond the large corporations traditionally associated with sustainability disclosures. Across global supply chains, manufacturers are asking suppliers to provide information about the emissions associated with their products, production processes and raw materials. For smaller businesses, meeting these expectations can be difficult without dedicated sustainability teams, specialised software or the budget to engage external consultants.
The challenge is particularly relevant in South Korea, where small and medium-sized enterprises (SMEs) account for approximately 14.3% of greenhouse gas emissions from the industrial sectors of manufacturing and mining. Yet an OECD assessment published in June 2026 found that only 15% of Korean SMEs had measured their emissions or developed a reduction plan, highlighting the gap between the country’s decarbonisation ambitions and the capabilities of smaller businesses.
As environmental information becomes part of supplier assessments and procurement decisions, carbon accounting is evolving from a sustainability exercise into a question of commercial competitiveness.
Supply-Chain Requirements Are Extending the Reporting Burden
Many SMEs are not directly covered by mandatory corporate sustainability reporting requirements. However, this does not mean they are insulated from the growing demand for emissions data.
Large companies increasingly need information about the environmental impact of their supply chains, including emissions generated by suppliers. Consequently, smaller manufacturers may be asked to provide carbon inventories, product-level emissions calculations and supporting documentation as part of their commercial relationships.
South Korea illustrates how these expectations are developing. According to the OECD, 87% of the country’s 30 largest companies conduct ESG evaluations of their SME suppliers, while 69% incorporate evaluation results into procurement decisions. Around half collect or plan to collect environmental data from suppliers.
For smaller manufacturers, the implications can extend beyond reporting administration. Their ability to provide credible environmental information can influence supplier evaluations and access to business opportunities.
Michael Ma, founder and CEO of Climate Seal, an AI-powered carbon management platform, said SMEs, particularly manufacturers involved in international supply chains, experience the greatest pressure.
“Large companies face complex reporting requirements, but they usually have dedicated sustainability teams and budgets. Smaller suppliers often face the same demands from international buyers without having the resources or expertise to meet them. For them, carbon compliance can determine whether they win or lose business.”
Scope 3 Emissions Make Carbon Accounting More Complicated
One of the biggest difficulties for manufacturers is measuring emissions beyond their immediate operations. Carbon accounting generally categorises emissions into three scopes. Scope 1 covers direct emissions from sources controlled by a company, while Scope 2 accounts for emissions associated with purchased electricity and energy. Scope 3 covers other indirect emissions across the value chain, including raw materials, transportation and supplier activities.
Scope 3 is particularly difficult for smaller manufacturers because the required information often depends on data collected from other businesses. A company may have records of its electricity consumption but lack reliable information about the emissions embedded in purchased materials or components.
The OECD’s assessment of South Korea’s SME decarbonisation policies identifies limited technical expertise and the cost of measurement and verification as significant barriers. Approximately 30% of SMEs cited a lack of internal expertise and technical capacity, while around 25% identified measurement and verification costs as obstacles.
These limitations make it difficult for smaller suppliers to respond consistently to different customer questionnaires and reporting methodologies. Without reliable data systems, even routine requests can require substantial manual work and external support.
Global Carbon Rules Are Raising the Stakes
International regulations are adding another layer of complexity. The European Union’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on January 1, 2026, covering imports of selected carbon-intensive goods, including iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.
The mechanism places obligations on covered EU importers to declare embedded emissions and surrender corresponding carbon certificates. Although the direct obligations primarily concern importers, manufacturers outside the EU can face requests from customers for detailed emissions information about their products and production processes.
South Korea’s government has introduced support measures to help exporters understand emissions calculations, verification requirements and CBAM-related procedures. These efforts reflect the importance of preparing smaller manufacturers for changing international trade requirements.
At the same time, the European Union’s 2026 sustainability reporting simplification narrowed the scope of companies directly subject to certain disclosure obligations. However, regulatory reporting and commercial supply-chain requirements are not identical. Smaller suppliers may continue to receive emissions-data requests from customers even when they are not directly covered by mandatory disclosure rules.
Can AI Make Carbon Accounting More Accessible?
The cost and complexity of carbon accounting have created opportunities for technology providers developing automated emissions-management systems. AI-powered platforms are designed to reduce manual work involved in collecting business information, identifying relevant emission factors, calculating product footprints and preparing supporting documentation.
Climate Seal is developing a platform that automates product-level carbon footprint calculations and carbon reporting workflows. The company says its system aligns with standards including ISO 14067 and the GHG Protocol, and is designed to support manufacturers, SMEs and sustainability consultants.
Ma sees consultants as an important part of making these services accessible to smaller businesses.
“That’s also why we see consultants as an important part of our strategy. By helping them serve clients more efficiently, we can make professional carbon accounting accessible to many more smaller businesses.”
This approach could allow consultants to manage more projects while reducing repetitive data-processing tasks. It also offers SMEs a way to access specialist support without having to establish an internal sustainability function.
However, automation alone cannot guarantee credible carbon data. The reliability of calculations depends on the quality of source information, appropriate emission factors, consistent methodologies and adequate review. AI-generated reports should not be confused with independent verification or certification.
Making Carbon Compliance Work for Smaller Businesses
The growing demand for emissions information is exposing a structural gap in global supply chains. Large corporations may have the resources to establish comprehensive carbon-management systems, but smaller suppliers often lack the expertise and financial capacity to meet similar expectations.
Closing this gap will require more than new reporting software. SMEs need accessible measurement tools, standardised methodologies, affordable verification and practical support from governments, industry associations and sustainability professionals.
For South Korea, where manufacturing SMEs play an important role in industrial supply chains, improving access to credible carbon accounting will be essential to ensuring that smaller businesses can participate in the low-carbon transition.
AI could reduce the administrative burden and make emissions calculations more accessible. But its long-term value will depend on whether it can deliver reliable, traceable data that buyers, auditors and regulators can trust. As carbon transparency becomes increasingly connected to procurement and international trade, the ability to demonstrate environmental performance may become an important condition for remaining competitive.
