Are you at risk of Greenwashing?

A number of converging issues have potential to increase Environmental, Social and Governance (ESG) risks for companies including global supply-chain pressures and climate change.

We tend to think about ESG obligations as only being relevant for publicly listed companies, however that’s no longer the case.

Any organisation that makes claims about the environment and sustainability in relation to their products and services needs to take heed of the potential for legal liability, brand damage and financial losses if they get this wrong.

A key issue is Greenwashing.

Greenwashing is defined by Cambridge University as "behaviour or activities that make people believe that a company is doing more to protect the environment than it really is." Given how conscious consumers have become about environmental issues, promoting a company's environmental and sustainability credentials can provide a competitive advantage.  

Given the explosion of claims by companies about their environmental and sustainability credentials and mounting concern about the extent of greenwashing, it is now on the radar of both the Australian Consumer and Competition Commission (ACCC) and Australian Securities and Investments Commission (ASIC).

According to the ACCC these claims can be made in three ways:

• Product specific claims.
• Company-wide claims.
• Claims using logos and symbols (including certification trademarks).

In October 2022, the ACCC conducted a sweep of the internet for examples of greenwashing. They examined 247 different businesses and/or brands across multiple sectors and identified a number of key themes that are exposing organisations to claims of greenwashing.

In March 2023, ASIC also launched it's first civil litigation case against Mercer Superannuation for greenwashing. There are concerns that other superannuation funds may have also been making misleading claims. These issues promoted the World Economic Forum to create the term 'greenhushing'. This is the practice of removing reports and other communications about a companies environmental and sustainability credentials.

Whilst there are broader ESG issues emerging in relation to supply-chain and operational resilience that have potential to cause harm to companies, greenwashing is a key issue today. Yet there are some actions you can take now to avoid falling into this trap.  The starting point here is conduct an assessment of any environmental or substantiality claims you are making in relation to your products, services or the company itself.

In Sention-iQ, we have been monitoring ESG trends for some time and provided guidance and mitigations on how you can avoid accusations of greenwashing. Go to our website at www.sention.co/solutions to find out more.