Turning Tide?

The Environment Agency is the latest to condemn companies who compromise efforts to combat climate change.  

The tide on ESG is turning as investors and other stakeholders delve deeper to find new ways to quantify, track and evaluate ESG claims. Stakeholders are aware of the challenges in identifying greenwashing, The Financial Conduct Authority published Primary Market Bulletin 41 only a week ago. The Bulletin reiterates the importance of the sustainability linked bonds following the IMCA’s Sustainability Linked Bond Principles to strengthen ESG disclosure and transparency, which states: 

“Issuers should seek independent and external verification of their performance level against each sustainability performance target (SPT) for each key performance indicator (KPI) by a qualified external reviewer with relevant expertise, such as an auditor or an environmental consultant, at least once a year...” 

Whilst no metric is currently available to detect greenwashing, authorities and activists are targeting and analysing companies’ sustainability claims to interrogate the reliability of sustainability indices. 

UK Equity Fund Manager Laura Foll rightly revealed how difficult it is to differentiate between companies who aim to meet Net Zero via offsetting schemes versus those who prioritise cultural shift and internal change. And our ability to detect and assess greenwashing will impact the sustainability of investments. 

Scrutiny increases. More companies are exposed each week for misleading consumers on sustainable claims.  Coca-Cola and Unilever are two of the latest to be criticised in a report by the Changing Market foundation who suggest companies are using ocean bound plastic and recyclable plastics to mislead consumers.  

Recognising our flaws and addressing them is a positive step towards transparency. Often, we can only do this with external perspective and supportive rigour. Engaging a variety of different stakeholders can help us see things differently. It challenges us and supports change.  

Ultimately, it is our responsibility to perform due diligence on the products and tools we use to aid sustainable consumer choices. Take H&M, this week they have been recognised as one of an alliance of fashion brands to retract the Sustainability Index Tool after the Norwegian Consumer Authority suggested a review of the Higg Index to support environmentally sustainable clothing purchases. Criticism suggests the index only looks at a small part of the life cycle of a piece of clothing.  

Your commitment to sustainability is reflected in your actions and your reputation depends on it. Review and re-review your sustainability strategy. Examine your core concepts just as an academic would peer review research before publication.

Trust your team and stakeholders to acknowledge and forgive possible flaws. This transparency will undoubtedly strengthen your business.