Greenwashing - Engaging constructively with the risk

We have previously written about the importance of truthfulness and transparency in our society’s transition to a sustainable and decarbonised future. We have also explored some of the complexities that sit behind the risk of greenwashing, noting that good intentions are often not enough for companies to avoid accusations of greenwashing.

One potential response could be for a company to reduce ESG ambitions or limit public disclosure of sustainability credentials, performance or commitments in order to minimise the risk of greenwashing (or the perception of greenwashing). Such ‘Green Bleaching’ of disclosures and communications would be harmful, leading to missed opportunity and further distorting the market away from those companies who are making a difference with their ESG initiatives.

So if the prevention of greenwashing is essential to achieving a sustainable future for our society, and withdrawing disclosure on ESG performance and commitments is not a desirable outcome, the question that arises next is ‘what should companies do about it’?

Keeping focus on the bigger picture

A company’s first priority is to establish a robust and credible ESG strategy, including a detailed analysis of its material ESG issues and considerations. There must be a core of substance to a company’s plans and actions, and as mentioned in a prior blog Deloitte’s own trust model offers a starting point. It is from this core that corporate disclosures and broader market communications should then flow.

But that flow of communication still has its own role to play. Companies should welcome an open dialogue with the market and broader society - clearly communicating plans, actions and performance on ESG, and listening to stakeholders in return.

So how can companies engage in open dialogue with confidence?

Getting proactive

A clear and current view of all sustainability-related market disclosures and statements must be accessible to a regular governance and review regime. This should extend beyond the standard annual sustainability report to other market communications including announcements and briefings, online communications, marketing and promotions, and product information and sponsorship activities. Such a view would enable both upfront and periodic re-review of all relevant statements to confirm their accuracy, relevance and alignment to the company’s strategy, industry standards and public expectations.

Reviews and re-reviews would also need to focus on more than just technical accuracy, considering clarity and perception risk, as well as asking the question “what is not being said?”. Selective disclosure (focusing on one aspect of sustainability performance without appropriate acknowledgement of another, possibly more important issue) is a common pitfall.

Beyond internal critical challenge of disclosures and statements, external market testing may also be warranted. This can shine further light on how others might reasonably interpret your statements or even challenge them.

Finally, understanding the role which third parties play in promises and commitments is crucial, as is monitoring their performance in respect of that role. Third party actions and associations, whether associated with investments, suppliers or sponsorships, can be some of the most difficult risks to manage.

What does technology have to do with it?

Much is often promised of new technology, but the pragmatic application of it can be hard to get right. There is no suggestion that technology can replace the role of people, who bring human professional judgement and real-life experience. But it does provide a means of dealing with the scale challenge that companies might face in keeping track of, and evaluating, all relevant sustainability statements and performance elements, and in mapping and monitoring networks of third parties. The art will lie in striking the right balance between a) setting machines to use technology, data and Artificial Intelligence to measure and make decisions and b) picking the right points to inject human review and judgement. There is no magic box, but there can be sensible use of technology to broaden the reach and effectiveness of people to review and mitigate the risks of greenwashing.

Those organisations who are serious about achieving sustainable change should be on the front foot, ready and willing to communicate with the market and wider society on their plans, actions and performance. While there may be concern about taking on greenwashing risk, it can also be well-managed through proactive steps and technology. There is more to be gained in opportunity and trust by building an active dialogue with the market and wider society on sustainability matters.

Co-author:

Nicholas Debney, Director Climate & Sustainability