GreenCo Calls for Higher Standards in ESG Disclosure - Evaluating the Quality of Scope 3 Disclosure Like a Professional
HONG KONG, Oct. 24, 2025 /PRNewswire/ -- Many companies and investors rely on greenhouse gas (GHG) disclosure of a company to assess its climate performance, but how can one tell whether those numbers are truly credible?
GreenCo, an ESG consulting firm specializing in sustainability advisory since 2016, is calling on stakeholders, analysts, and professionals to look beyond simple compliance claims, and apply critical thinking and professional judgment to evaluate what's inside the disclosure: scope, boundaries, justifications, and year-over-year improvement.
According to GreenCo, the growing use of "AI-based" or "automated" carbon calculators has made it easier to generate emission numbers, but not necessarily more reliable.
"Today, we see more companies relying on AI-based tools to generate carbon figures and presenting them as highly accurate," said Max Tsang, the Director of GreenCo. "But carbon accounting is not a one-click process. Behind every credible number is a professional who understands context, boundaries, and data integrity."
Encouraging Credible and Responsible Disclosure
Through its advisory work, GreenCo has observed a trend of "formulaic" GHG reporting and is reminding the market that ESG disclosure should be grounded in accountability and transparency, not automation.
"ESG disclosure should reflect responsibility, not convenience," said Charlie Yang, the Director of GreenCo. "We encourage companies to treat Scope 3 reporting as part of their long-term climate strategy, not just a data exercise."
GreenCo's Key Recommendations
1. Understand the Limitations of Technology, Apply Human Judgment Wisely
Automated or AI-driven calculators can improve efficiency, but they often include disclaimers stating that AI "may make errors" and should be "used with caution." Such disclaimers remind users that automation does not equal accuracy — professional review and contextual understanding remain essential.
2. "Prepared in Accordance with the GHG Protocol" — What It Really Means
It is common for companies, whether performing internal calculations or hiring external consultants, to state that their GHG inventory was "prepared with reference to" or "in accordance with the GHG Protocol." However, , this claim alone does not automatically guarantee reliability or completeness. The real quality depends on how comprehensively the methodology has been applied, how transparent the assumptions are, and how robust the underlying data is.
3. Evaluating Completeness and Relevance: How Many Scope 3 Categories Are Covered?
There are 15 categories of Scope 3 emissions — 8 upstream and 7 downstream. A credible disclosure should explain which categories are included or excluded, along with the rationale for those decisions.
Companies should assess the relevance of each category using multiple criteria as in the GHG Protocol, such as the potential magnitude of emissions, the company's influence over the source, exposure to related risks, and the level of stakeholder interest.
If significant categories appear to be missing without clear justification, this should raise a red flag, and professionals should question whether the inventory truly reflects the company's value chain impact.
In other words, completeness is not about covering all 15 categories, but about demonstrating a well-reasoned and transparent boundary-setting process.
4. Assessing the Validity of Exclusions
When companies justify exclusions, reviewers should consider whether those decisions are supported by a screening analysis. If categories are excluded due to limited operational resources, assess whether this is truly a capacity issue or a management choice.
Exclusions based purely on convenience or resource limitation may indicate a lack of prioritization rather than a legitimate constraint. If a company has strong financial capacity but continues to cite "limited resources" as a reason for partial coverage, it may signal a lack of sustainability commitment or insufficient integration of sustainability into core operations.
5. Recognize the Challenges — but Expect Progress
For companies with complex supply chains and multiple business operations across regions, calculating a full GHG inventory is undoubtedly challenging. Yet, responsible reporters acknowledge data limitations and outline plans for continuous improvement.
"Scope 3 disclosure should be viewed as a journey of refinement," said Stephanie Chan, Co-owner and Principal Consultant of GreenCo. "The real value lies not in producing a perfect dataset overnight, but in showing genuine effort to improve data coverage and accuracy year after year. Companies may decide to account for selected sites or limited shares of suppliers first, but this should be viewed as a starting point, not the end goal."
Driving Professional Standards in ESG Practice
"Responsible ESG disclosure starts with asking the right questions, not accepting the easiest answers," said Max, "Our mission is to help companies move from convenience to credibility."
GreenCo continues to advance ESG professionalism through consulting, training, and tools that help organizations strengthen internal sustainability management.
Co-authors:
Max Tsang, Director of GreenCo in Hong Kong
Charlie Yang, Director of GreenCo in Singapore
Stephanie Chan, Co-owner and Principal Consultant of GreenCo
To view the full article, download our iOS or Android application - GreenCo ESG Action Toolkit+ AI:
You can also explore our ESG toolkits and checklists designed to share practical knowledge on ESG and sustainability management.
SOURCE GreenCo ESG Advisory Limited
Share this article