The Danger of Greenwashing in ESG Sustainability Reporting
The idea of ESG sustainability reporting is perhaps the most important thing in the history of the globe. This is not because it is introducing a lot of new considerations, but the widespread acceptability and potential to address global issues.
However, greenwashing has become a serious issue, with some stakeholders indicating reports generated by some companies are not sufficient to help them make the right decisions. This post looks at the dangers of greenwashing and demonstrates why you should always provide accurate information.
What is Greenwashing?
Greenwashing is the presentation of a company with the aim of showcasing it to be sustainable when it is not. It is aimed at making stakeholders believe that your company is operating sustainably by misrepresenting facts.
One good example of greenwashing is presenting an assertion in a sustainability report without facts.
If the ESG report indicates that the company has cut emissions by 50%, the information should be factual and verifiable. If it is not, that will be considered greenwashing.
Dangers of Greenwashing in Sustainability Reporting
The main problem with greenwashing is that companies presenting false information about their focus on sustainability are likely to get an undue advantage on the market (see Adrian Cheng comments).
This implies that they are able to keep the cost of production lower compared to companies with additional budgets for ESG sustainability reporting. This could ultimately water down the allure of sustainability.
- Greenwashing is Easy to Note
Although a company might find it easy to simply throw some numbers in the report to falsely indicate it is sustainable, they will be pretty easy to note. For example, it will be difficult to convince stakeholders that you were able to cut costs, but there was no plan for it.
The effect will be rejection by stakeholders. Customers might also reject your products, while investors will opt for alternative companies.
- It Gives a False Start for the Company
Greenwashing gives the company a false start because there is no focus on identifying the right reporting topics. This means that your company will remain at the same level in the subsequent years.
If you adopted ESG reporting following the right process, the principle of continuity would result in progressive growth.
- Disconnect with Stakeholders
The process of ESG sustainability reporting starts with stakeholder engagement and company review. Companies that focus on greenwashing are likely to miss the opportunity of engaging stakeholders to understand what they want to be addressed. This disconnect might ultimately work against their companies when the stakeholders opt for your competitor.
- Non Compliance
Because of its diverse benefits, more regulatory authorities are installing systems to drive compliance. If your company is targeting listing in top exchanges, such as the London Stock Exchange (LSE) or Hong Kong Stock Exchange (HKEX), their systems and experts will quickly note greenwashing. If your company is already listed, it risks getting delisted for greenwashing.
How to Avoid Greenwashing
One thing you need to know about greenwashing is that it is pretty broad and you should be extra careful with the reporting process. To avoid your efforts being seen as greenwashing, you need to identify and follow a good ESG reporting framework, such as the Global Reporting Initiative (GRI).
Then, identify good sustainability management software to help with gathering the right data and report generation.
Visit Diginex.com for the best programs and assistance with sustainability in your company.
To make your company successful, it is paramount to adopt ESG sustainability reporting. Particularly, you need to follow the right procedure so that the data is accurate and presentation professional. In the entire process of ESG sustainability reporting, you should avoid greenwashing at all costs.