What Is a Carbon Hotspot and Why Identifying It Is the First Step in Any Credible Decarbonisation Plan

Most manufacturers have a decarbonisation target. Far fewer have identified where the carbon actually is.

That gap — between committing to a reduction goal and knowing which processes, materials, or suppliers actually drive the number — is where most net-zero plans quietly fail. Reduction targets get set against a baseline that was never properly disaggregated. Investment goes into optimising manufacturing energy or replacing company vehicles, because those are the emissions that are easy to see and easy to control. Meanwhile, the lifecycle stage or supply chain activity that contributes 60%, 70%, or 80% of total emissions goes unaddressed, because it was never mapped.

A carbon hotspot analysis changes that. It answers the question that every decarbonisation plan depends on but most organisations have not formally asked: where is the carbon?

This blog explains what a carbon hotspot is, how it is identified, what the evidence shows about where hotspots sit in manufacturing value chains, why they are almost always upstream, and what a decarbonisation plan looks like when it is built on hotspot data versus when it is not.

A carbon hotspot is a lifecycle stage, material input, process, or supply chain activity that contributes a disproportionately large share of a product's or organisation's total greenhouse gas emissions.

Once you have measured your supply chain emissions, you can identify hotspots — the largest areas of carbon emissions where focus will lead to the most meaningful reductions. Making a one percent improvement in a hotspot could be more valuable than a fifty percent improvement in a non-hotspot, even if the non-hotspot improvement is easier to achieve.

The logic is straightforward but routinely ignored in practice. Emissions reduction effort, like any resource, should be allocated where it produces the largest return. A manufacturer who reduces energy consumption at a manufacturing facility by twenty percent has achieved something real — but if that facility's direct energy use represents four percent of the product's total cradle-to-gate carbon footprint, the net impact on the product's PCF is less than one percentage point. If raw material production represents sixty percent of total footprint, a two percent improvement in that stage delivers more carbon reduction than a complete elimination of facility energy use.

A transparent carbon footprint analysis enables a team to identify emissions hotspots and take targeted action — without needing to be a sustainability expert. The hotspot is the entry point. Everything else in a decarbonisation plan is either working from it or working around it.

The most consistent finding in product carbon footprinting across manufacturing industries is that the largest emission contributors are not on the factory floor. They are in the supply chain — in the raw materials purchased, the energy used to produce those materials, and the processes that happened long before the product arrived at the manufacturer's gate.

For many steel products, the largest contributor to production emissions does not come from forming components, transportation, or installation — it comes from the initial production of crude steel from iron ore. Approximately 70% of global steel is produced via the blast furnace and basic oxygen furnace (BF-BOF) route, with emissions of approximately 2.33 tonnes of CO2 per tonne of steel produced. The global weighted average across all production routes — including the less carbon-intensive electric arc furnace (EAF) route — is approximately 1.85 to 1.92 tonnes of CO2 per tonne of crude steel, according to the World Steel Association and Statista data citing WorldSteel (2022–2023). By comparison, steel transport, shaping, cutting, forming, and installation combined may only add a fraction of that, even when the product travels long distances.

The aluminium industry makes the same point in even sharper terms. For a manufacturer of aluminium products, making its rolling mill more energy efficient is important and necessary — but not as impactful on overall emissions reductions as addressing the hotspots in upstream activities, specifically the emissions generated in the production of the primary aluminium the manufacturer purchases.

For stainless steel produced via electric arc furnace, a cradle-to-gate analysis found a total carbon footprint of 4.57 tonnes of CO2e per tonne of stainless steel, with Scope 3 emissions as the dominant contribution at approximately 70%. Upstream raw material production — primarily ferroalloys for chromium and nickel — drives approximately 80% of those Scope 3 emissions, and accounts for around 39% of the total product footprint.

This pattern repeats across sectors. Scania conducted lifecycle analyses on its European production-related supply chain and identified four emission hotspots — batteries, steel, aluminium, and cast iron — which together constitute approximately 80% of carbon emissions arising from production materials. In electric vehicles, batteries can account for half of sourcing emissions, while in combustion engine vehicles, steel carries the greatest carbon footprint.

The implication for any manufacturer is this: if your decarbonisation plan begins with what you directly control — your own energy, your own fleet, your own facilities — you are starting at the wrong end of the emissions map. The hotspot is almost certainly in what you buy, not in what you do.

A hotspot analysis and a full Product Carbon Footprint study are related but not the same. Understanding the difference matters because the two serve different purposes and require different levels of data investment.

A full PCF under ISO 14067 or the GHG Protocol Product Standard requires a rigorous, comprehensive inventory of all emissions across every lifecycle stage within the defined system boundary, using data that meets the standard's quality requirements. It produces a defensible, verifiable number expressed in kg CO2e per functional unit.

A hotspot analysis is a screening exercise. Its purpose is not to produce an auditable PCF number — it is to identify where the largest emission contributions sit, so that data collection effort and reduction investment can be prioritised accordingly.

If the aim is to understand the relative extent of different Scope 3 activities and identify emission hotspots, secondary data can often suffice. For a more in-depth assessment that goes beyond hotspot analysis, an approach combining primary and secondary data is recommended — prioritising primary data for the highest-contributing categories identified in the hotspot screening.

In practice, a hotspot analysis uses spend-based or industry-average emission factors to build a rough emissions profile across all material inputs, processes, and lifecycle stages. The resulting percentages are approximations — but they are precise enough to reveal which categories are large and which are small, which materials dominate the footprint and which are negligible, which suppliers need primary data engagement and which can be handled with secondary factors.

The hotspot analysis is the input to prioritisation. The full PCF follows from it, focusing data collection effort where the hotspot analysis showed it matters most. Running a detailed PCF without a preceding hotspot analysis is like conducting a detailed audit of every room in a building before checking which rooms have leaks. The order matters.

A hotspot analysis follows a defined sequence. The steps are not technically complex, but they require complete data inputs to produce reliable prioritisation.

A hotspot is only useful if it changes what you do next. The actions that follow from a hotspot finding depend on whether the hotspot is in your own operations or in your supply chain.

The consequence of building a decarbonisation plan without a hotspot analysis is not that the plan fails spectacularly. It is that the plan works correctly against the wrong problem.

Organisations that have not mapped their hotspots typically default to the emissions they can see: facility energy use, company fleet, business travel, waste. These are primarily Scope 1 and 2 categories — along with readily measurable Scope 3 categories such as business travel — because they are directly visible and controllable. They are measurable, directly controllable, and satisfying to reduce. They are also, for most manufacturers, a small fraction of total lifecycle emissions.

Understanding carbon hotspots across the production of goods is what enables reporting of a product's emissions to customers, banks, or regulators — and identifies how to reduce those emissions. Without this, decarbonisation plans address symptoms rather than causes.

There is a regulatory dimension to this that is becoming increasingly material. The Corporate Sustainability Reporting Directive (CSRD), SBTi's Corporate Net-Zero Standard, and the GHG Protocol Corporate Value Chain (Scope 3) Standard all require that companies demonstrate credible, science-based plans for reducing value chain emissions — not just operational emissions. A company that has set a Scope 3 Category 1 reduction target without identifying which purchased materials drive that category's emissions cannot demonstrate a credible path to meeting the target. The target exists on paper. The mechanism for achieving it does not.

Without data backing up climate targets and decarbonisation claims, companies risk being penalised for greenwashing under increasingly stringent regulations. Product carbon footprints reveal the highest and lowest emitting products and the biggest carbon hotspots within a product's supply chain, enabling companies to benchmark their performance against peers and set targets to reduce emissions toward net zero.

A credible decarbonisation plan does not start with a target. It starts with a hotspot map that makes the path from current emissions to the target legible — showing which interventions, in which parts of the value chain, deliver which reductions, in which order.

A hotspot analysis built on incomplete bill of materials data, missing lifecycle stages, or emission factors that do not reflect the actual production processes in your supply chain will identify the wrong hotspots and send reduction investment in the wrong direction. The quality of the output depends entirely on the completeness and accuracy of the input data.

Three things determine whether a hotspot analysis is reliable enough to base strategic decisions on.

A carbon hotspot is the part of your lifecycle that carries the most emissions and therefore holds the most reduction potential. Finding it is not the end of decarbonisation — it is the beginning.

Every reduction target, every supplier engagement programme, every material substitution decision, and every capital investment in low-carbon production should be traceable back to hotspot data that shows why that target, that supplier, that material, and that investment were chosen over alternatives. Without that traceability, decarbonisation plans rest on assumption rather than evidence.

The evidence from manufacturing industries is consistent: the hotspot is upstream, in the materials purchased, not in the processes that shape them. What is not measured cannot be managed. The first step to reduce emissions is to know what they are. High-quality data is key to accurately understanding the emissions along your supply chain — and the hotspot analysis is the tool that turns that data into a prioritised action map.