With the ESG spotlight upon us all, company’s need to meticulously craft their future communications strategies, making sure they truly understand the sustainable profile of their products, services, or activities.
In the last few decades, environmental awareness has increased significantly with most of us now fully aware of the enormity of environmental problems. Society’s demands for all things eco has driven organisations to want to be seen as eco-friendly or at least not to be considered eco-ignorant. As a result, our supermarkets, shopping centres and social media feeds are filled with fashionable green statements. Phrases such as: “sustainable”, “eco”, “recycled”, and “close to nature” are commonly used in both packaging and advertising campaigns, but how truthful are organisations really being about their products?
The act of making an unsubstantiated claim to deceive consumers into believing a company’s products are more environmentally friendly than they are, has become so commonplace that greenwashing has become an everyday business term. Whilst some companies are starting to implement risk strategies to combat it, to many it would seem greenwashing is inconsequential despite the practice greatly increasing a brand’s reputational risks. What is more with the rise in scrutiny of a company’s sustainability through mandatory ESG reporting, it’s not just an organisation’s reputation that’s at risk. ESG reporting places a duty of care to the company firmly on the executive bodies’ shoulders to ensure there is full disclosure about just how sustainable a company is. There will be no place to hide for those deceiving the public, and litigation risks could be looming large for many.
Getting a grasp of the situation
Is this all just scaremongering?How commonplace is greenwashing really? Greenwashing incidents in banks and financial service companies alone were up a whopping 70% globally in 2023. In the face of such eyewatering statistics for just one industry sector how ready are organisations across all industries for the impact of ESG on their green marketing campaigns and product claims? How are businesses approaching greenwashing in the light of ESG and sustainability reporting? Together with Advatera surveyed communications professionals from different sectors in Europe to get a snapshot:
Greenwashing is prevalent but corporate awareness of the practice is rising
In response to the question about how prevalent greenwashing is in their industry, 60% of our respondents agreed or strongly agreed that greenwashing is a common practice in their industry. 35% of recipients disagreed with the statement, while the rest had no view. We went on to ask how many companies were doing something about greenwashing, and what’s interesting is that over half (55%) of our respondents indicated their company already has a clear strategy to fight against this unethical practice. Furthermore, only one out of 20 respondents disagreed with a statement that their organisation has a designated team or individual focused on sustainability. This shows us the scale of awareness is increasing.
How will ESG help combat greenwashing?
In the not-too-distant future, based on the CRSD directive, it will be mandatory to report on ESG criteria meaning ESG compliance can become a strategic business goal to many companies. We asked our survey participants if they think that the upcoming ESG reporting obligation will make it more important in their organisation’s overall communication strategy. The results were almost unanimous: 15 out of 20 respondents agreed with the statement, and only two respondents completely disagreed.
When talking about communication strategies we also asked about the ways and actions that will be taken by companies to avoid actual greenwashing or being accused of it, many of our respondents emphasised the importance of genuine, truthful communication and full transparency. After all, honesty, not only in sustainability and green issues, but in business in general, is always the best policy.
How great is the awareness of the risks associated with greenwashing?
We also wanted to find out what corporate risks our respondents associated with greenwashing disclosure through ESG reporting. The most frequently indicated risks sited were damages to a company’s brand and reputation; the possibility of suppliers and business partners being more reluctant towards further cooperation; and the possibility of losing both customers and employees. All of which can result in immense damage to the company followed by finance losses.
In addition to the above cited risks, liability risks are also something organisations need protect themselves against because ESG places the responsibility for all things sustainability at the executive board’s door. Non-compliant responses to ESG standards are now one of the most important risk trends in the field of directors’ and officers’ liability insurance (D&O insurance). In principle, this offers protection through the payment of defence costs and, in the event of liability, reimbursement of any claims payment, although any exclusions must be checked on a case-by-case basis.
With the ESG spotlight upon us all, company’s need to meticulously craft their future communications strategies, making sure they truly understand the sustainable profile of their products, services, or activities. What is more, this needs to be coherently communicated to communications, marketing, and sales teams so they are fully aware of the claims they can and can’t make. In so doing, a company’s best protection against the raft of risks posed by greenwashing is maintaining good practice and high standards in corporate governance, always providing full disclosure, and ensuring unfailing due diligence.
Anna Borowska
Account Executive
GrECo Poland
T +48 517 044 605
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