Businesses will drive the transformation
As the world decarbonises, we are likely to see tremendous developments in new technologies, systems and processes which will change the way we live, what we consume, and how we manage our limited physical and natural resources. While government must play a significant role in the transformation to a decarbonised world by establishing the right policy settings and incentives, the heavy lifting will be borne by ambitious, profit-making businesses with the support and trust of their customers, employees and investors.
A successful transformation will require capital and customers to flow to those firms who drive the transition, and those whose business models are genuinely sustainable in the new commercial environment.
To attract the necessary capital through investment and revenue, businesses must be able to differentiate themselves in the market from their competitors through the promotion of their genuine environmental, social and ethical credentials, performance and commitments.
Greenwashing is an increasing focus
Recently, regulators across the globe have announced measures to increase surveillance and enforcement action in respect of ‘greenwashing’. Greenwashing is a term used to describe a form of misleading and deceptive conduct involving social, environmental or ethical claims to entice the market to purchase products or services, or to attract investment. It may occur in a number of forms, including through the use of unclear or inconsistent language, making unsubstantiated statements of intent or commitments, or selectively disclosing positive social or environmental initiatives without appropriate balance.
In addition to potential detrimental impacts on a business’ reputation and social licence to operate, significant penalties can be levied on businesses who engage in misleading or deceptive conduct, or who make false or misleading claims about their social, environmental or ethical performance or commitments.
The increased regulatory focus on greenwashing is a positive development which promotes the transformation to a fairer, decarbonised future by supporting market integrity and transparency, allowing those who offer genuine solutions and business models aligned with a transformed world to differentiate themselves in the market and attract additional capital.
Integrity is critical to achieve positive change
It is in everyone’s interests that firms are truthful and transparent about the social, environmental and ethical credentials of their products, services and operations, so that consumers and investors can make informed decisions about how they spend and invest. When firms make claims in the market (for example, through formal reports, regulatory disclosures, product labelling or promotions), the community expects those claims to be clear and unambiguous, genuine and substantiated. In addition, the community’s expectation is that those claims are subject to appropriate governance arrangements including due diligence processes, robust planning, clear accountability and ongoing monitoring.
False or misleading social, environmental and ethical claims by businesses erode consumer and investor trust across the market, hindering the flow of capital needed to genuinely drive positive change.
Genuine ambition, backed by capital and trusting customers, will deliver solutions
Profit-making businesses must continue to be ambitious to meet the challenges of the transformation and benefit from the opportunities. Ambition, however, needs to be matched with legitimate change and evidence via verifiable data. To promote informed decision-making on the allocation of capital and maintain the social licence to operate, businesses need to carefully manage the risk of greenwashing and be clear and transparent with their communications on social, environmental and ethical aspiration and performance, backed by legitimate actions and realistic expectations. Such integrity is critical to ensure the effective flow of capital and trusting consumers to those businesses which are bringing genuine solutions to market.
Nicholas Debney - Director, Climate & Sustainability