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The drum beat around greenwash is getting louder

By Andrew Adie
05 July 2022
Green & Good (ESG and Impact)

By Andrew Adie

Corporate greenwashing is under the microscope again this week, with Environment Agency chair, Emma Howard Boyd, saying that greenwashing is ‘creating a false sense of security about the climate crisis’ – and warning that corporates overstating their sustainability pledges and the impact they are having is creating a false impression of progress in tackling the climate emergency.

This is a real challenge for corporates. In an era where geopolitical tension and economic challenges are distracting political agendas from delivering net zero, the onus for driving change and impact will start to fall more heavily on corporates. If they are failing to deliver against that and instead putting a green tint on ‘business as usual’ then they are storing up major reputational trouble for themselves in the future.

This sense of corporates drifting in the wind when it comes to sustainability was highlighted by a piece of research published this morning from the BSI, which highlighted that the majority of businesses in the UK do not know what the UN Sustainable Development Goals are. Given that aligning with UNSDGs is widely regarded a foundational to delivering net zero and sustainable growth, this should be a concern.

None of this criticism in isolation will change the way corporates operate but added together, it presents a picture that should worry the corporate community. Why? Because in delivering net zero, corporates rely on the support of a wide range of stakeholders that surround them: from investors to their staff, to customers, regulators, governments, and the general public. Net zero requires significant change in corporate behaviour, in some cases it requires a total change in business model, in most cases it requires investment in new ways of working and operating that may not immediately translate into higher revenues and business growth.

Getting your stakeholders to back that change requires them to take a leap of faith and buy into the strategy you set. Trust is a vital component in that calculation.

Which is why the nagging doubts and increasingly urgent questions around levels of greenwash is important. It saps the energy and the permission that corporates have to lead change.

That view was born out by focus groups that we ran recently among retail investors and informed members of the general public. Part of an ongoing series of focus groups and research studies that we are running globally to chart how views on corporate sustainability and trust in business is evolving, it showed a clear line of continuity through all the studies.

The message that comes back from the public is loud and clear: people want corporates to act responsibly and to do the right thing to make the world around them a better place.

The consistent finding that we get is that the public don’t buy into net zero pledges, they don’t believe many of the claims being made and they want to see corporates focusing on impact and transparently reporting progress around a plan to deliver positive environmental and social impact.

How that translates in the minds of the public is that they want companies to do what they say and act like responsible citizens. They want corporates to treat their people well, be decent customers to their supply chains and reduce the environmental impact they have on the world around them. Those that don’t do this will gain censure and attract activist behaviour directed against them.

What is so striking is that the tone of the conversations you have with the public is markedly different to the conversation you often have with corporates. Corporates are obsessed with ESG, while the general public usually don’t know what it is. We often have to explain what it means and then they ‘get it’ and set out what they expect to see in terms of behaviour from business. They particularly expect sustainability to be a key objective.

It is easy to knock the corporate world for greenwashing. In reality, many companies that we speak to want to do the right thing, they are just struggling to work out what ‘good’ looks like.

In a world of multiple ESG measurements, of multiple routes that may or may not get you to net zero in varying time scales, it is not surprising that corporates sometimes struggle to set out how they will make a real impact.

Part of the issue is ESG reporting, which is inherently backward facing. While it sets targets, it doesn’t necessarily incentivise bold and visionary behaviour that delivers actual impact on the ground. Part of it is also down to some corporates hedging their bets, doing enough to stay out of trouble, but not enough to drive real change.

While greenwashing is not new, while criticism of it has been around for some time, the reality is that the drum beat of concern is getting louder and more urgent, and the scrutiny around corporate behaviour is becoming more acute.  Corporates would do well to listen and act.