Governance Institute unveils its essential guide to navigating greenwashing challenges
As sustainability moves from the periphery to become part of core business strategy, organisations are faced with increased public scrutiny to substantiate their eco-friendly claims.
There’s been a focus by regulators to investigate and crackdown on misleading claims. While some organisations have been identified as taking part in deliberate wrongdoing, others have been caught out, unaware of where they have gone wrong.
Inadvertent greenwashing is driven by a lack of understanding of what is needed to produce high quality disclosure including the measurement and performance of sustainability claims made.
Holistic governance frameworks that consider these issues in detail have been demonstrated to be an important tool to combat the potential for greenwashing,
The Governance Institute’s newest publication, Greenwashing: a governance perspective, is an essential guide for governance professionals to better equip organisations and their boards with the tools and skills needed to understand and comply with regulations.
Governance professionals play an increasingly important role in informing senior management and their boards with the appropriate frameworks to inform clear strategic direction and decision making on sustainability related issues.
Governance Institute’s CEO, Megan Motto FGIA FCG said the guide is a roadmap to helping governance professionals understand and avoid greenwashing.
“Our new greenwashing guide aims to empower directors and board members to wade through the regulation and compliance requirements, ensuring that their commitment to sustainability is not only authentic but also legally sound.”
Examples of greenwashing can include selective disclosure, meaningless targets, virtue signalling, baseless claims, hidden trade-offs and the ‘green-halo’ effect.
“We know from our recent Ethics Index that accountability, transparency and misleading and deceptive advertising are the top three concerns for Australians when it comes to unethical behaviour,” Ms Motto said.
Globally a European Commission review of corporate websites found that 42 per cent of environment-related claims were exaggerated, false or deceptive.
The Guide explores processes to prevent greenwashing such as producing high-quality, transparent disclosures. The Australian Government is currently consulting stakeholders on introducing climate-related reporting requirements that aim to align with IFRS S1 and S2. Once the Australian equivalent of S2 is in force it will be mandatory for those companies to which it applies to report against that standard.
Other methods of disclosures suggested by the guide include a materiality assessment to fully understand an organisation’s risk level, its resilience and the key impacts that it has on the environment. Metrics are targets mentioned as KPIs, as is the need for transparency.
Increasing board capacity and robust oversight is also crucial, which suggests governance professionals should equip board members with the tools to navigate the complexities of climate reporting and other sustainability requirements. Governance professionals should ensure that they provide board members with timely updates about developments in anti-greenwashing regulation, at both a local and international level, as needed.
“The focus for boards is increasingly on how their duty is discharged. Disclosure alone is no longer sufficient,” Ms Motto said.
Implementing change and creating accountability is key. To avoid greenwashing long-term and to comply with regulatory, investor and stakeholder demands, boards must implement the strategic and operational change necessary for an organisation to make progress on climate action.
Avoiding accusations of greenwashing comes down to accountability, and taking responsibility for what progress has or has not been made towards the ambitions an organisation has laid out.
You can read Greenwashing: a governance perspective on our website.