21st July 2022
Chris Bowden, MD, Squeaky
5 minute read
Five ways to make your business watertight against climate scrutiny
Claims against companies who greenwash by misleading or lying to customers about their environmental credentials are on the rise.
In fact, a collective of environmentalist groups recently filed the first lawsuit against the airline industry for greenwashing. And in June, a report exposed “a litany of misleading claims” by household names, including Coca-Cola and Unilever.
These are just two of hundreds of examples.
So far, voluntary action seems to have led only to a corporate world littered with false claims. The pressure is now on regulators to impart heavy sanctions on those who fall foul of greenwashing.
Now’s the time for you to get ahead and mitigate the risks you could face from tighter regulations on corporate greenwashing.
Big targets on paper do not equate to impact delivered in reality
Reaching net zero by 2050 is essential if we are to limit global warming to 1.5C and ward off climate breakdown. To get there, we need to see an unprecedented commitment of net zero targets from the world’s largest companies.
The good news here is that big targets have been set. In fact, net zero targets now cover 91% of global GDP and 65% of greenhouse gas emissions. All-in-all, this equates to around six times more than two to three years ago.
This is progress indeed.
However, major global analysis of more than 4,000 pledges by countries and companies around the world has recently uncovered something of significant concern:
Corporate climate targets which - compared to country-level targets - lack robustness, fail to meet minimum standards and, for two-thirds of corporations globally, are “alarmingly weak”.
This adds to the growing evidence which suggests corporations around the world are concealing their lack of action with grand net zero targets.
Sanctions for greenwashing are incoming
It wasn’t long ago corporations could make vague promises and baseless claims on their climate commitments without facing scrutiny.
However, the table stakes around sustainability have significantly changed.
Although greenwashing is nothing new, the consequences of corporate greenwashing have become significantly more grim. For those at the helm, covering up an environmental scandal could soon spell more disaster than the scandal itself.
What we are witnessing now is a long-overdue push by regulators across industries to tame the wild west of greenwashing:
In June 2022, the EU set out its plan to hold firms accountable for environmental violations:
The European Parliament and the Governments of EU member states have struck a provisional agreement on new reporting requirements. These have been designed due to increasing concern from regulators that greenwashing has become commonplace.
Businesses will be required to disclose the impact of their activities and supply chains on the environment and on people each year. Standardised reporting will be introduced so stakeholders can compare the performance of different companies.
The mandate will be brought in in phases and will apply to some large businesses from early 2024, and expand to listed SMEs from 2026. In the same month, the UK’s Financial Conduct Authority (FCA) said it is ready to regulate ESG ratings firms to stop greenwashing.
Unrealistic expectations is putting corporate reputations at risk
It’s clear there has been a shift in urgency on matters of greenwashing. And it’s a shift that’s pressuring companies to face up to their sustainability journey in new and more serious ways.
However, many businesses feel unprepared to meet changing ESG reporting mandates. Especially those that are the most challenging to report against, such as Scope 3 emissions.
And there are other concerns to grapple with, too:
Our own comprehensive survey revealed sustainability and energy managers at FTSE 250 companies, believe their C-Suite has set unrealistic expectations regarding sustainability targets.
And 73% of those people admitted they are concerned about the reputational risk for the business of failing to meet these targets
Five ways to prepare your company for tighter regulations on greenwashing
We’ve listed out five actions you can take to ensure you can keep your climate promises and avoid being accused of greenwashing.
And the great thing is - you can put all of these in motion, today.
1. Ensure your communications team is the gatekeeper of your sustainability message
Companies are being criticised more than ever on how they market their sustainability impact. Those who claim to be, but are not genuinely on the sustainability journey, will come unstuck.
And this is where PR and marketing teams play a critical role. They have the skills and ability to articulate what ESG matters really mean in light of a given company’s overall environmental impact.
Give PR and marketing the autonomy to lead on your company’s communications around the environment , backed by the wisdom and knowledge of your sustainability experts. These professions will help leaders to resist stretching the truth about green-achievements the company is making.
2. Check your energy supplier is not falling foul of greenwashing themselves
74% of the UK’s top companies say they are now committed to powering their business with clean energy. It’s a smart move and an essential part of a businesses’ net zero journey.
However, there is growing concern that energy suppliers are, themselves, falling foul of greenwashing. We have uncovered plenty of examples of suppliers who promote their renewable tariffs under eco-friendly banners when in reality, they are sourcing their fuel from ‘dirty’ sources.
And the risk to your company could be huge. You may have publicly claimed that you only pump clean or green energy into your business. When in reality, it is energy from polluting fossil fuel sources.
Make it a priority to investigate the true makeup on your fuel mix. You can start by looking at your supplier’s fuel mix disclosure (FMD), which will give you a breakdown of the supplier’s energy sources.
But the FMD may only tell you half the story. A loophole in the system means energy supplier’s can mislead you about the makeup of their energy, even in the FMD. So you’ll need to dig deeper and look at how many renewable energy certificates your supplier has redeemed.
3. Be transparent and report externally on ESG initiatives
Long gone are the days when ESG was just a branding exercise. It is now the core requirement of any business strategy and it’s essential you prove that you are doing what you say you are.
Be proactive and take-charge by reporting externally on ESG initiatives. And not just reporting on what you are doing, but reporting the impact you are having. This will demonstrate to key stakeholders - shareholders, consumers, employees - that ESG is genuinely a strategic priority for you.
4. Prioritise Scope 3 emissions and plan ahead to avoid pitfalls
Arguably, Scope 3 emissions - emissions produced in the supply chain - are the most important emissions to address. That’s because they account for a whopping 80 to 90 per cent of the emissions connected with a great deal of end products.
However, Scope 3 emissions are notoriously complex to tackle. As a result, many companies sweep them under the carpet and opt to focus on the ‘easier’ tasks at hand.
It’s a risky move. Not least because the fragility of global supply networks has created a volatile environment to navigate.
Here’s an example: Low emission materials, like green steel, are now in short supply, which means that the cost for these materials has skyrocketed.
Companies that planned ahead and locked in their supply of greener materials will be safe in the knowledge they can meet the emissions targets they set out.
On the other hand, companies that have not secured their supply will be forced to either pay a steep premium for low emissions materials so they can meet their targets. Or, break the climate promises they’ve made to stakeholders and source cheaper, polluting materials.
5. Investigate your own company, now.
The truth is: regulatory and legal action is on the way. The quicker you accept this as truth, the better.
Engage with compliance executives now, and it could help you prevent potentially catastrophic blows in the years to come.
Plus, it’s proof to the board that you’re taking your company’s environmental responsibility seriously.
Do not delay taking action
The reality is:
Companies that fail to get their stall-in-order on climate matters will be held accountable.
Act now, or risk facing potentially catastrophic penalties.
I know which path I’d take.