If You Can’t Measure Emissions, You May Pay More

What happens when weak carbon data stops being a reporting problem and starts raising your cost of capital?
Because that’s no longer hypothetical. It’s starting to hit financing, insurance, and risk in the real world.

In this episode, I’m joined by Cynthia Lai, former banker, executive coach, and board advisor, with nearly 20 years’ experience in tier-one banking, including HSBC and Bank of China. We dig into why this matters now for supply chain resilience, sustainability, risk, data, and visibility. The big shift? Banks and insurers are increasingly treating emissions data as a risk signal, not a box-ticking exercise.

You’ll hear how weak or missing carbon data can push companies into a higher-risk bucket, raising borrowing costs and insurance premiums. We break down why Scope 3 is no longer just an ESG reporting issue, but a commercial one with real consequences for supply chain leaders. And you might be surprised to learn that if you don’t provide the data, the market may fill in the blanks for you using proxy figures you probably won’t like.

We also get practical. Cynthia lays out an 80/20 approach to getting started: focus on the 20% of suppliers driving 80% of the impact, build a workable heat map, and start the conversation before perfect data arrives. Because in this environment, having a credible plan may matter almost as much as having the final numbers.

🎙️ Listen now to hear how Cynthia Lai connects sustainability data, financing, insurance, and supply chain resilience in a way every senior leader should understand.

Transcript

Cynthia Lai: 0:03

if you cannot provide the figures for like your carbon emissions, et cetera, what the banks and insurers will do is that they will try to use the proxy data or industry reference They will not rank you as a, a low risk customer. They will definitely put you as a high risk customers. So the implication is if you really want to get financing, your interest rate will be higher than the others who have lower risk. And the same for your premium as well for your insurance policy.

Tom Raftery: 0:39

Good morning, good afternoon, or good evening, wherever you are in the world. Welcome to episode 117 of the Resilient Supply Chain Podcast. I'm your host, Tom Raftery. What happens when weak carbon data stops being a reporting problem and starts raising your cost of capital, because that's what's starting to happen. In this episode of the Resilience Supply Chain podcast, I'm joined by Cynthia Lai, a former banker turned executive coach and board advisor with nearly 20 years in tier one banking, including HSBC and Bank of China. And her perspective matters because she sees something that many supply chain leaders still underestimate. Banks and insurers are increasingly treating emissions data as a risk signal, not a box ticking exercise. So if you're a senior leader in supply chain, sustainability, or operations, this episode will help you understand why better carbon data is no longer just about compliance. It can shape your access to finance, your insurance premiums, and ultimately your resilience. Interestingly, one of the sharpest insights in this episode is that if you don't provide the data, the market may fill in the blanks for you using proxy figures you probably won't like. And a quick note before we begin the second bonus episode of Resilient Supply Chain+ went live last Friday, the 10th of April, and it looks at what the war on Iran means for supply chain resilience, sustainability, risk, data, and visibility over the next six to 12 months. It's available exclusively to subscribers. So sign up to hear that episode and the bonus ones coming in the next few weeks. Now let's get into it. Cynthia, welcome to the podcast. Would you like to introduce yourself?

Cynthia Lai: 2:39

Hi everyone. I'm Cynthia and happy to be here. And thank you for inviting me to join the podcast. I'm a banker turned executive coach and board advisor. I spent Nearly 20 years in tier one bank, including HSBC, Bank of China, working across different approaches involving digital and business transformation. So I'm really happy today here to share my thoughts around, what's happening around Scope 3

Tom Raftery: 3:08

And Cynthia, you're the first banker I've had on the podcast. So take it easy on us.'cause at least in my case, I know very little about finance, but for people hearing you for the first time, how would you describe what you do day to day?

Cynthia Lai: 3:23

Okay, so I just left banking. Previously, my key role was to drive different business and digital transformation projects. Just take a simpler example. I drove a business transformation for insurance. So what I did back then was to apart from looking after the business target, like the KPI, the revenue, et cetera, we also need to look at like the operations, the fund and sales management, different kind of things just to make sure that the business run properly. And at the same time, we need to optimise on the ongoing basis, just to make sure that we can keep abreast of what's happening in the market and the customer preferences.

Tom Raftery: 4:06

And what problem are you trying to solve now for organisations?

Cynthia Lai: 4:11

I spend most of my time solving the people issues. Because every time you run transformation, you need to take care of the technical plan. Can it be digital? Can it be AI, et cetera. But the most challenging part is always people. If you cannot convince the people who need to be changed or those who need to support your transformation, you cannot make it.

Tom Raftery: 4:35

And from where you sit now, where do you think are organisations getting their ESG initiatives, projects, programs, whatever, where are they messing up? Where are they going fundamentally wrong?

Cynthia Lai: 4:49

Recently because of the economic downturns, a number of companies actually, they decrease their expenses on ESG related items. Maybe they just keep the budget to fulfill the regulatory requirement, like writing the ESG report And a number of company also find that it's quite difficult to fulfill the requirement because they do not have the data. And we have lots of say rumors around how to measure the ESG impact. So if you are like a SME companies, that will be something that kind of an headache to you.

Tom Raftery: 5:27

Of course. Yeah. And in more complex supply chains, where do you think leaders underestimate most of the risk?

Cynthia Lai: 5:37

I think maybe because for now scope 3 to banks and insurers are not just like, fancy things for PR. They are part of the regulation requirements, no matter is in Hong Kong, China, Singapore, and also in Europe. So if you are a leader in supply chain, you need to look at it, not just because you would like to have fancy ESG report, because you would like to get financing, and you also want to get insurance for your operations.

Tom Raftery: 6:08

Okay, this is a key topic or a key point I think. Many people are, unaware, I suspect in supply chain, the importance of this. So can you explain to people listening the concept of financed emissions and insurance enabled emissions, what are those and why are they important to people in supply chain?

Cynthia Lai: 6:32

because for now it is part of the regulatory requirements. Okay? So for the bank the finance emissions, that mean that the bank, they cannot just look at their own emissions, okay? They need to look at their loan portfolios. That mean they need to checkout their customers. From the existing portfolio they have, to new customers, they need to add those parameters and criteria into their credit scoring mechanism. That's for the banks. And for the insurers, it is kind of the same. They need to look at their own portfolio and they need to assess rather, the insured operations they have today can support them to fulfill the requirement. So that actually a number of insurer, they already say no to high risk industry like the coal industry. They do not want to insure them because those customer will kind of ruin their portfolio and they cannot go through the stress test by the regulators.

Tom Raftery: 7:33

Okay, so just to kind of put this in plain English, if you want, if I'm a manufacturing company or I'm any company with a supply chain, my Scope one and my Scope two emissions are part of the scope 3 emissions of my bank and my insurance company. And my bank and my insurance company have to report as part of their Scope 3 reporting, my Scope one and two. And so if I have a very high scope one and two, the bank that I deal with, and the insurance company that I deal with will not look favorably on me. Is that a fair summation of what you're saying?

Cynthia Lai: 8:20

Yeah, because banks and insurers, they also need to go through like the climate risk pressure test. Okay? So they need to answer questions around, okay, what if the temperature increase by three degrees, and so will some of your customer go bankrupt? Then will you get default of those loans? Okay. If that's the case, then that should mean financial instability to the bank and even for the wider financial system of the country. So that's kind of something quite significant nowadays.

Tom Raftery: 8:55

And these regulations that require the banks and the insurance companies to report their scope three, it's part of the CSRD in Europe came into effect, if I remember correctly, in 2024. It's also part of the Californian Emissions Regulations, which comes into effect, if I remember correctly, start of 2027. And it's in other regions as well. So it's in Europe, it is now, today an issue, in the US for people dealing with California, it's about to be an issue. And in Asia where you're based, it's also an issue today, correct?

Cynthia Lai: 9:42

Yes. In Asia, like Singapore and Hong Kong, we already have the regulations in place.

Tom Raftery: 9:48

Okay. Where else are we talking about? I mean, that's most of the world covered right there, but where, where else is this an issue?

Cynthia Lai: 9:56

I think the key challenge is because the banks and the insurers, they are looking at their portfolio so that as a customer or as a lender, okay, or as someone who would like to get your insurance, you need to try to think from the perspective of your bank or your insurer or else you cannot get the finance you want. Put it very simple, if you cannot get your operation insured, actually you cannot get financing because bank are really prudent and they love protection.

Tom Raftery: 10:31

Yeah, of course, of course. And it's not just lack of insurance potentially, but it's also, I suspect because it's part of the bank's loan book, banks will try and make the loans less attractive by increasing the interest rates for high emissions projects. Would that be fair?

Cynthia Lai: 10:49

Yeah. from the bank's perspective, they would like to have kind of a balanced portfolio. So if they find that for now they got quite lots of risky customer per se, they will try to accept more low risk customer in the future. I think this the implication we can see nowadays.

Tom Raftery: 11:08

And it's not just an issue if I have high emissions. It's also an issue if I am not able to properly report my carbon data because this whole issue of reporting of emissions is relatively immature still. But now it's starting to become more and more vital because banks and insurance companies require it for their own reporting.

Cynthia Lai: 11:39

Yeah, absolutely. Because as banks and insurers, they need to fulfill the regulation requirement doesn't say they need figures. Okay? So if you cannot provide the figures for like your carbon emissions, et cetera, what the banks and insurers will do is that they will try to use the proxy data or industry reference They will not rank you as a, a low risk customer. They will definitely put you as a high risk customers. So the implication is if you really want to get financing, your interest rate will be higher than the others who have lower risk. And the same for your premium as well for your insurance policy.

Tom Raftery: 12:21

And what do you think changes then when emissions data starts influencing access to capital or insurance?

Cynthia Lai: 12:29

In fact, even banks and insurers, they need to do business. So they also try to do something to help their customer apart from just driving all of them away. So banks actually offer different solutions for their customer. They got a full suite of product. For example, they got something called sustainability link loans. If you can link your operations to say a specific sustainability targets, the bank can offer you more favorable interest rate. And actually you can see the same from all over the world. For example, Lloyds Bank, they got around 400 million pound loans to financing them on their operation, but they need to link to sophisticated metrics like reducing embodied carbon in new construction. And this is also a type of loan that the bank I work for use a lot with the customer because this is some product that not only applicable to large company, but also applicable to like SMEs as well, provided that they can link their operations to specific sustainability targets for example, from legal waters or other service providers.

Tom Raftery: 13:49

Okay, so if I am embarking on a project to reduce my emissions, maybe I'm rolling out a fleet of electric vehicles. Maybe I'm installing solar panels, or something like that, I should have access to lower cost capital.

Cynthia Lai: 14:06

Yes and no. Okay. It really depends on what you do. apart from the SLL sustainability link loans I mentioned, banks actually offer other alternative as well like financing project that support a company to transit from like less environmental friendly company to one that is more sustainable. So the example you mentioned may be eligible for, say, different types of financing. So whenever you've got this kind of project the best option is to talk to your relationship managers because they know the bank products really well and they also know your industry and your offering as well. So definitely they can offer you the best solution and maybe they can tailor some solution for you to support your transition.

Tom Raftery: 14:55

And as a supply chain leader, if I'm in a company and I'm a supply chain leader, what kind of signals should I look out for from my bank and my insurance company?

Cynthia Lai: 15:07

If you sense that your approval rate okay, of your financing solutions or like your insurance policy got lowered, or your bank asked for increased interest rate, or your insurer asked for increased premium, I think it's kind of very clear signal that you need to look around rather it is because your own problem or because of like the macro economics. If, it is not about the macro economic, there should be something that you would like to do with your portfolio to ensure that you can get the interest rate you, you wish to have and also the insurance premium that is more affordable.

Tom Raftery: 15:50

Okay. let's make this practical for leaders who are already overwhelmed with lots of other things that are going on. For people who are, you know, for leaders who are drowning in regulation and data requests, what does a sensible 80 20 approach look like?

Cynthia Lai: 16:09

I think the 80 20 approach can be quite straightforward. I think the leaders can first just look at the data they have to identify the top 20% of supplier that gave out like 80% of the emissions. Okay. Just right on what they have. It's not possible to have like the perfect solutions. Maybe you can make use of your procurement spend, or you can call reference to the industry average emission data, et cetera, just to identify the hotspot suppliers. To formulate your own quick heat map. Once you have that, just start a dialogue with a shortlisted critical suppliers. Understand more around what they're doing and rather they have more data that can help you to estimate the impact. If you can, and if you have connections, you can try to connect them with people that you think can help them to transit. Maybe your bankers who can offer them transitionals so that they can improve their operation, their infrastructure, et cetera. Or maybe some other, your suppliers or customer who are the kind of the upstream or downstream in that industry that may help them to do their business in a more sustainable way. Once you identify the shortlisted suppliers, or once you have your initial idea around what to do, it'll be good to run some pilot. So that you can have some variable results because the key here is that if you would like to get some financing in the future, the bank will as usual, the banks love us for different kind of things, right? Long list of supporting. So maybe one of them can be this kind of improvement plan so that you can show to your banker and ensure that, okay, you are working on something and you've got a timeline around that, so that they can also help you to think around how they can help. And how they can help you to run your business more sustainably.

Tom Raftery: 18:13

And is there any part where the governance adds clarity rather than friction?

Cynthia Lai: 18:19

I think because for now we got more regulatory requirement for banks and insurers on Scope 3 So as compared to previously, we just heard different kind of rumors. For now, you can definitely check out the regulatory requirement. We, we got AI now today, right? So you can simply ask AI to help you do different kind of summary. Maybe you can ask AI to help you summarise actions or requirement that are relevant to your business so that you will know as a leader in the supply chain, what exactly are the areas that you should look out to, or are the areas that you should talk to your relationship manager or your insurance broker around.

Tom Raftery: 19:04

A lot of AI initiatives though, seem to stall at the organisational level rather than the technical one. Why? Why do you reckon that might be?

Cynthia Lai: 19:13

It really depends on how we make use of the AI solutions to help. Okay. It really depends on what types of tools your company's using. You can first use it to help analyse your own portfolio, okay to save some of the works for you. And then you can assess your risk or you can understand more around your positioning by combining those together with the regulatory requirements or some of the guidelines that the banks and the insurance company, they need to compile nowadays. Then you'll have like a more data driven action plan to work on apart from just your gut feel or what you heard around from like your friends or other petitioners in the industries.

Tom Raftery: 19:58

Have you come across any examples of successful uses of AI in this field?

Cynthia Lai: 20:05

I think from what I heard from my, like friends in banks and also customers all of us are still, working on how to best use AI for this. For banks, they already use AI to help predict the risk level of their customer. And definitely ESG is one of the parameters they already fit in, in those kind of credit risk scoring model. But on the customer side, I guess maybe for now because a number of customer, they are still believe that ESG is something more related to their reporting than to their financing or insurance portfolio. So maybe they haven't add that into the AI solutions they have right now.

Tom Raftery: 20:52

And we've been talking about financed emissions and insurance enabled emissions. But there's another form of emissions called enabled emissions, which we haven't discussed yet. Is this a concept you're familiar with the concept of enabled emissions, and if so, do you see them becoming an issue for supply chains in the near future?

Cynthia Lai: 21:17

My focus is more around the finance and insured emission. So I, I'm not that familiar with the enabled emission.

Tom Raftery: 21:26

Okay, no worries. So just a quick 101 on enabled emissions. So, enabled emissions would be, say for technology companies, for example, or PR or advertising companies. Because they enable companies to create emissions. Maybe a technology company's AI solution, for example, helps a fossil fuel company to extract fossil fuels 20% more efficiently or 20% faster. Suddenly that enabling of that extra extraction has to be reported as part of enabled emissions. It's not, it, it's still in the concept phase. It's not a regulation yet, but the financed emissions and the insurance enabled emissions were concepts only a couple of years ago and weren't regulations, and now they are, so enabled emissions are likely to become reporting requirements in the next few years. So I was just, checking to see if, if this was something that was on your radar yet.

Cynthia Lai: 22:32

Not yet.

Tom Raftery: 22:34

Okay. Okay, what capabilities do you think resilient organisations need that are they are most under investing in today?

Cynthia Lai: 22:46

I think most of the organisations, they focus quite a lot on the short term achievement. Or the hot topic. Recently we have, for example lots of company spend lots of resources on AI. Gen AI especially in the past few months or in the recent one, two years, maybe next year as well, because it's kind of the hot topic. But I guess the very key questions they should ask, is that why they use the Gen AI or what exactly is a business challenge or the customer challenge Gen AI can help them to resolve. That actually relate back to what we discussed around the scope 3 for banks and insurance company. Okay, because, if you are a leader in supply chain, I guess the true reason why, should be you would like to have your business run in a more sustainable way, and the byproduct of that is that you can get cheaper financing and you can get your insurance policy easier.

Tom Raftery: 23:50

What would you say is one question every board or executive team should be asking themselves right now?

Cynthia Lai: 23:59

They should ask what is their competitive advantage against their key competitor? The reason why they should ask around that is that the answer of this question should be the drivers or the basis of all the actions. Okay? Because all company, they need to protect or further say, improve their competitive advantage so that they can continue to grow their customer base as well as their revenue, but for now, I observe that quite a lot of organisation, they forgot around their core capability, their competitive advantage, and they just try to do something the others are doing and trying to catch the market.

Tom Raftery: 24:48

A little bit of crystal ball gazing. Where do you see all these requirements going in the next five, 10 years? Do you think they're gonna get more relaxed or more strict, or, I suspect more strict, but you tell me what, what your outlook on the, the next five, 10 years for these reporting requirements are.

Cynthia Lai: 25:08

Yeah. I also think that the requirement will go even in stricter in the coming like three to five years, just like the ESG reporting. When we start to have the ESG reporting, actually there's no framework, no benchmark, nothing to reference around, but then we got different guidelines and benchmarking, et cetera. Okay. I guess that should be the same for the Scope 3 or the requirement we talk about just now, especially around this actually affect the stability of the banks and insurance company, which is kind of very important in the entire business cycle. So, the requirement will get more stringent because it actually help the banks and the insurance company to manage the potential impact that might be created by climate change and other risks caused by the natural disaster

Tom Raftery: 26:08

And do you foresee a time when this kind of reporting will be required to have the same amount of rigor as financial reporting has today?

Cynthia Lai: 26:19

I think maybe three to five years. Yeah, because for like all new regulation, they will take like two, three years to mature and net petitioner to understand what's happening and to do all the changes, and for most regulatory requirement, there's some kind of grace period Okay. For the petitioner to play around it so because we are getting the Scope 3 related requirements, like from last year. So I guess in like three years time, all the requirement will become mature and even maybe in US they will get more requirement around. So by then everyone need to understand what's happening and to fulfill all the requirements.

Tom Raftery: 27:05

Which means that the requirement for transparency in supply chains, particularly the access to real data as opposed to using industry averages will become more and more important.

Cynthia Lai: 27:22

Yeah. And at the same time as more countries implemented the regulatory requirement customer cannot like move around. Okay? For example, for now if you really want to escape from like Asia and Europe requirement, you can go for a US bank, okay? But in the future, when you cannot run around, you have to fulfill the requirement.

Tom Raftery: 27:46

Fair enough. If listeners remember one idea from this conversation, what should it be?

Cynthia Lai: 27:54

I think they should remember around that 80 20 principle. Just focus on your top 20 suppliers that generate 80% of the impact. Just start from there and talk to your banker, your insurance broker to explore options because you cannot transform your business overnight. Okay? It will take months and even years to do so, and same for your supplier. So if you do that today and you start the process, next time when your banker asks you, very likely you've got a plan, even if you haven't got the outcome yet. And that's already something quite helpful for your interest rate and for your banker to advise you further around what they can do for you.

Tom Raftery: 28:42

Cynthia, we're coming towards the end of the podcast now. Is there any question that I didn't ask that you wish I did, or any aspect of this we haven't touched on that you think it's important for people to be aware of?

Cynthia Lai: 28:53

Yeah, I think you have covered the key areas that the leaders in supply chain need to take a look around.

Tom Raftery: 29:02

Okay, great. if people would like to know more about yourself or any of the things we've mentioned in the podcast today, where would you have me direct them?

Cynthia Lai: 29:12

Yeah, sure. They can connect me via LinkedIn. I'm quite active on LinkedIn.

Tom Raftery: 29:17

Cynthia, that's been fascinating. Thanks a million for coming on the podcast today.

Cynthia Lai: 29:22

Thank you very much.

Tom Raftery: 29:24

Okay. Thanks everyone for listening to this episode of the Resilient Supply Chain Podcast with me, Tom Raftery. Every week, thousands of senior supply chain and sustainability leaders tune in to learn what's next in resilience, innovation, and transformation. If your organisation wants to reach this influential global audience, the people shaping the future of supply chains, consider partnering with the show. Sponsorship isn't just brand visibility, it's thought leadership, credibility, and direct engagement with the decision makers driving change. To explore how we can spotlight your story or your solutions, connect with me on LinkedIn or drop me an email at Tom at tom Raftery dot com. Let's collaborate to build smarter, more resilient, more sustainable supply chains together. Thanks for tuning in, and I'll catch you all in the next episode.