Corporate Climate Data Has a Trust Problem

A shorter version of this piece was originally posted on LinkedIn — this is the fuller version, with more detail on the study’s findings and the global regulatory picture.

More than half of major U.S. corporations quietly revise their reported emissions after the fact — and when they do, the errors overwhelmingly go in one direction: down. That’s the central finding of a new study in Nature Climate Change by Cohen, Rouen and Sachdeva, and it raises uncomfortable questions for anyone relying on corporate climate data — regulators, investors, and the companies themselves.

What the study found

The researchers examined a decade of Corporate Social Responsibility (CSR) reports from major U.S. firms, tracking how self-reported Scope 1 emissions changed between initial disclosure and later restatement. The pattern was remarkably consistent:

  • 58–60% of firms’ self-reported Scope 1 emissions were later revised — a rate that has not meaningfully changed over ten years, despite growing regulatory and investor attention to climate disclosure.
  • Understatements outweigh overstatements by roughly 2:1. In a related analysis of S&P 500 companies, underreported emissions totalled approximately 135 million tons of CO2e, compared to about 57 million tons overreported — a net gap larger than the annual emissions of many mid-sized countries.
  • Neither third-party assurance nor documented methodology changes fully explain the pattern. Companies that pay for external verification of their emissions data are not meaningfully less likely to revise it later.
  • Data providers and ESG databases don’t consistently update when companies restate their numbers. This means outdated, incorrect figures can continue circulating in ESG scores, sustainability rankings, and investor models long after a company has quietly corrected them in a footnote.
Bar chart comparing underreported (135 million tons) vs. overreported (57 million tons) corporate emissions

Why this is happening

A few explanations emerge from the research and the broader literature on corporate disclosure:

There’s no audit function for emissions data the way there is for financial data. Financial restatements are rare and trigger real scrutiny — from auditors, regulators, and sometimes the SEC. Emissions restatements, by contrast, are common, largely unexplained, and often buried in a footnote or an updated appendix rather than flagged as a correction.

The measurement infrastructure is still maturing. Financial accounting has had roughly a century of standardisation, enforcement, and case law to work out consistent rules. Greenhouse gas accounting is comparatively young. Methodology changes, mergers and acquisitions, and shifting emissions-factor databases can all move historical numbers retroactively, and it’s not always clear from the outside whether a revision reflects better data or something else.

Incentive design may play a role. The study finds a suggestive—not conclusive—correlation between executive compensation tied to emissions targets and the direction of subsequent revisions: numbers move in a less favourable direction before a compensation link kicks in, and in a more favourable direction afterwards. This doesn’t prove manipulation, but it raises legitimate questions about how targets are set, measured, and audited when real money is riding on the outcome.

Why measurement accuracy matters beyond the numbers themselves

It’s tempting to treat this as a data-quality footnote. It isn’t. Emissions data is a foundational input into decisions with real consequences:

For policy design, carbon budgets, sector-specific regulations, and national climate commitments are all calibrated against baseline emissions figures. If those baselines are systematically off — especially if they’re skewed toward understatement, as this research suggests — governments risk setting targets that are too lax relative to the actual scale of the problem, or building compliance frameworks around numbers that don’t hold up to scrutiny.

For capital allocation, green financing, net-zero-aligned investment portfolios, and ESG-linked financial products all depend on emissions data to direct capital toward genuine climate performers. When the underlying numbers are unreliable, capital risks flowing to companies that look better on paper than in practice, while genuine leaders — who may report more conservatively or face more scrutiny — go underrecognized and undercapitalised. Bad data doesn’t just distort rankings; it can misdirect real money.

For corporate strategy itself, a company managing toward a flawed baseline can end up optimising for the wrong target — declaring victory on a reduction that was never real, or missing a risk that was hiding in the numbers all along.

The regulatory backdrop — and a global patchwork

This research lands at a pointed moment for U.S. climate policy. With the SEC’s climate disclosure rule shelved, the regulatory vacuum in the U.S. is increasingly being filled by other frameworks: California’s climate disclosure laws, the EU’s Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board’s (ISSB) global baseline standards. Multinational companies will need to navigate this patchwork regardless of what happens federally in the U.S.

The picture outside the U.S. is similarly mixed. In India, the Business Responsibility and Sustainability Reporting (BRSR) framework has driven a sharp increase in the volume of corporate emissions filings in recent years. But reviews from the Council on Energy, Environment and Water (CEEW) and CFA Institute (in partnership with CFA Society India and the National Stock Exchange) have flagged ongoing inconsistencies in data quality and comparability across companies, even as overall disclosure volume improves. No study equivalent to this one — tracking restatements over time — has yet been done for the Indian market, so it’s an open question how the same underlying dynamics play out there. Given the direction the U.S. data points, it would be surprising if similar issues weren’t present.

The bottom line

We are not measuring corporate emissions with anything close to the rigour we apply to corporate earnings — and the data suggests the errors aren’t randomly distributed. Until emissions accounting has the audit infrastructure, standardisation, and accountability that financial accounting has built up over decades, self-reported climate data should be treated as directionally useful rather than decision-grade, particularly for high-stakes uses like net-zero commitments, green financing, and regulatory compliance.

Sources: Cohen, Rouen & Sachdeva, “Widespread Revisions of Self-Reported Emissions by Major US Corporations,” Nature Climate Change (2025); CEEW issue briefs on BRSR and emissions disclosure; CFA Institute, “The Current State of BRSR at Corporate India” (2024).

Insetting or Offsetting: What’s the choice?

While we frequently read about carbon offsets, carbon insets are less commonly known. Carbon offsets, as we understand, are tradable “rights” or certificates linked to activities that reduce the amount of carbon dioxide (CO2) in the atmosphere. By purchasing these certificates, an individual or organisation can support projects that address climate change instead of decreasing their own carbon emissions.

Carbon insets are pretty similar to carbon offsets, with one significant difference – here, a company reduces or removes carbon emissions within its own value chain, rather than offsetting them through unrelated external projects.

Some examples of carbon insetting are:
L’Oréal collaborates with shea butter suppliers in Burkina Faso to restore local ecosystems and enhance agricultural practices — directly lowering emissions in its sourcing regions.

Ben & Jerry’s collaborates with dairy farmers in its supply chain to implement regenerative farming practices that reduce methane emissions from cows and sequester carbon in soil.

Insetting is often seen in industries such as coffee, cocoa, dairy, fashion, and cosmetics, where natural resources and farming play a central role.

While carbon offsetting is often associated with the risk of greenwashing, carbon insetting offers a good opportunity to reduce scope 3 emissions. Insetting, being part of a company’s value chain linked to producing countries, makes it easier to align with a country’s NDCs (Nationally Determined Contributions). Insetting encourages companies to focus on areas such as regenerative agriculture, renewable energy, and ecosystem restoration.

There is a need to shift from offsetting to insetting to promote a more integrated climate action. Carbon offsets will still be relevant for residual emissions.

The Case for Urban Forests

Once upon a time, we lived an agrarian life and were surrounded by nature. Gradually, our lives turned urban, and now we are surrounded by concrete. Plants and trees that are critical lungs for human well-being have almost disappeared. This has brought forward the need to bring nature to the cities to make urban living sustainable.

Photo by Arno Senoner on Unsplash

Urban forests are a cost-efficient, scalable, nature-based solution that can make urban living sustainable. They also help in climate change adaptation and mitigation. What are urban forests? According to Wikipedia, “An urban forest is a forest, or a collection of trees, that grow within a city, town or a suburb. In a wider sense, it may include any kind of woody plant vegetation growing in and around human settlements.”

Some of the key benefits of urban forests are:

a. Trees act as a breath of fresh air in the urban landscape. Strategically planted trees can create pockets of oxygen-rich haven in the midst of concrete. Trees are nature’s air purifiers, filtering pollution and releasing clean oxygen.

b. Urban forests also act as a means of carbon sequestration. Trees are the most natural mechanism for carbon sequestration and help reduce GHG emissions in cities.

c. Trees can help improve cities’ biodiversity and act as wildlife habitats. They attract many kinds of birds and animals and can help protect many species.

d. By reducing temperature within cities, they act as a natural mechanism for energy-efficient cooling.

e. A visit to urban forests can help improve its citizens’ physical and mental well-being.

While many cities worldwide boast urban forests, every city should have one. With the increasing population of cities, a greater area of urban forest is needed to provide fresh and clean air.

Why decarbonising so tough?

Everyone agrees that decarbonisation is essential. The IMF estimates that global decarbonisation would have a net value of $85 trillion. The IPCC reports have consistently pointed to the pernicious effects of greenhouse gases (or carbon, in common parlance) and that we have probably missed the bus in achieving the goals that we set out in Paris. Despite the criticality of decarbonisation, the results are not particularly encouraging. So, why is decarbonising so tough?

Photo by Laura Penwell: https://www.pexels.com/photo/photo-of-windmills-during-dawn-3608056/

Incentives for decarbonisation: Companies bear the cost of decarbonisation – improving energy efficiency, new equipment, and payment of carbon price/tax. The benefits accrue to the local communities and often to whole regions and may often be cross-country. So, why should businesses pay when they do not benefit?  Companies do it for several reasons – the belief that they can earn higher profits due to distinctiveness, moral reasons, due to peer pressure, or simply because they want to “look good.” Except for the first reason (higher profitability), there is a conflict between private profit and social profit, with private profit winning in most situations. The high cost involved acts as a barrier. A recent Morgan Stanley report suggests that the biggest barrier to establishing a sustainability strategy is the high levels of investment required. This is the same reason developing countries find implementing net-zero strategies difficult. Similarly, MSME companies also face difficulties.

Renewable energy adoption is complex. Renewables are the best substitutes for fossil fuels, which currently have a well-developed infrastructure and network. There exists a vast network of powerlines that connect to power stations. Or, there is a petrol/diesel station network where one can refill fuel conveniently. In the case of renewables, this network has to be established. Establishing the network requires time and effort. It is also costly.

Technological changes: Another issue is that no one knows which technology will survive in the long run. Whether electric vehicles will survive or hydrogen cars will rule the roost. This makes capital investment difficult. Unlike in the past, technologies are changing dramatically and rapidly. An investment today may become a burden tomorrow. Capital investments may be laid to waste in no time. In such an environment, the risk-averse will avoid or delay investment.

These challenges are difficult and will not go away easily. The fossil fuel industry has developed since the 1800s, and the renewable energy industry is rather nascent. While we don’t have too much time, we will still need to wait for the industry to develop. At the same time, global leaders will need to find a way to ensure that the developing and developed nations agree on the way forward. Similarly, large and small businesses must negotiate how decarbonisation efforts can progress. A constant sustained effort is the key to success.