1. The uncomfortable truth
Scope 3 emissions have moved from being a disclosure exercise to something far more consequential.
Banks and financial institutions are increasingly expected to use Scope 3 data in climate risk assessments, financed emissions calculations, and decisions that now sit with risk committees and boards.
The uncomfortable truth is that much of this data was never designed to be relied upon at that level.
2. Why this was not a problem before and why it is now
For years, the use of estimates and industry averages in Scope 3 reporting was largely accepted. Disclosures were directional, intended to demonstrate awareness and progress rather than precision.
That context has changed. Sustainability disclosure is now near universal across global capital markets, and expectations around credibility have strengthened. Climate data is increasingly being drawn into credit assessment, capital allocation, and portfolio level risk decisions.
What once worked for narrative reporting begins to break down when the same data is expected to withstand regulatory scrutiny and internal governance review.
3. The issue is not calculation. It is trust.
The challenge with Scope 3 emissions data is often framed as a technical one. Better models, more granular factors, improved methodologies.
In practice, the issue is more fundamental. It is not primarily a question of calculation, but of trust.
Data built largely on estimates, proxies, and self reported inputs becomes difficult to rely on when it is used to inform risk decisions, capital allocation, or board level oversight, regardless of how sophisticated the methodology may be.
The question is no longer how emissions are calculated, but what institutions are prepared to stand behind.
Regulators and decision makers are increasingly asking board level questions. Can this data be trusted. Has it been manipulated, intentionally or otherwise. Can funding, risk decisions, and capital allocation be made on the basis of it.
Ultimately, the issue is whether Scope 3 data is fit for institutional reliance.
4. When Scope 3 becomes a governance issue
As Scope 3 data is increasingly embedded into risk frameworks, credit assessments, and transition planning, it inevitably becomes a matter of governance rather than disclosure.
Boards are not only responsible for setting strategy, but for overseeing the information on which material decisions are made. When climate data informs lending decisions, capital allocation, or public commitments, the question of reliance becomes unavoidable.
In this context, the use of unvalidated estimates introduces a different category of risk. One that is less about carbon accounting methodology and more about fiduciary responsibility, regulatory exposure, and reputational resilience.
The challenge for boards is not whether to engage with Scope 3 emissions, but how to exercise oversight when the underlying data varies widely in quality, provenance, and verifiability.
5. Rethinking the problem. From estimation to validation
Addressing the governance challenge posed by Scope 3 emissions does not necessarily require more sophisticated models or increasingly complex assumptions.
It requires a shift in how the problem itself is framed. From estimation to validation, from aggregated averages to underlying evidence, and from best effort disclosure to defensible data.
Rather than asking how accurately a number can be calculated, the more relevant question becomes what can be independently substantiated. This distinction matters when climate data is used not just to report progress, but to support financial, regulatory, and governance decisions.
A focus on validation recognises that confidence is built not through precision alone, but through transparency, traceability, and the ability to explain what sits behind the numbers.
6. What institutions will ultimately be judged on
As sustainability reporting continues to mature, the challenge facing institutions is no longer whether to disclose Scope 3 emissions, but how those disclosures are governed, relied upon, and defended.
The next phase of climate accountability will be shaped less by the completeness of reported data and more by the confidence institutions have in the information they use to make decisions. For boards and regulators alike, this shifts the focus from volume of disclosure to quality of reliance.
In that sense, the transition challenge ahead is not only about measuring more emissions, but about deciding what data organisations are prepared to stand behind, in risk decisions, in governance, and ultimately, in public accountability.
