Greenwashing: Promising the earth

The green promise

Our previous article on the risks of greenwashing highlighted the perils of overstating claims of achievement in the ESG areas. The exuberance of leadership teams to communicate their progress in ESG improvements can leave organisations unable – either partially or wholly – to live up to their promised outcomes and substantiate their assertions. With more focus on fact-checking and keeping a keen eye on the emerging standards for ESG reporting, organisations can get the balance just right between declarations they make and the substance of their progress.

But annual reporting isn’t the only way that organisations make sustainability promises. Every day, they’re adding to the sum total of all promises made as they communicate across many and diverse channels on their goals and ambitions. So, whether it’s to:

• ratings agencies in responding to their questionnaires;
• banks and financiers by linking funding to ambitious sustainability-led outcomes;
• customers by claiming products and services as green/sustainable/healthier, and more;
• customers in tender processes by suggesting full green delivery of the product or service;
• their staff and suppliers of being a green, net-zero company by a certain year; or
• the wider world through social media posts, media interviews and analyst presentations, that green promise is growing and growing.

 We’ve seen examples in annual shareholder meetings where the Board promised actions that could not be met by the organisation – and the issue is that these are challenged the following year and, if no progress can be shown, this becomes a credibility problem where a small promise can have a big impact on the organisation’s reputation.

Even more, stakeholders are increasingly taking action based on promises made. One of the most prominent examples is the legal action of Milieudefensie (Friends of the Earth) against Shell, based on Shell’s own climate-related promises, which Milieudefensie won. Other legal actions relating to misrepresentation on green credentials include the H&M case involving claims that were not simply inaccurate, but deliberately misleading, and the pending action against KLM by leading environmental groups asserting that KLM’s sustainability messaging can’t be supported by facts. It is therefore increasingly important that communication promises are well managed and monitored.

Living up to expectations

To what extent do organisations carefully track this overall portfolio promise? Do they connect the different messages, understand the full extent of the assertions made, and regularly assess the degree to which promise management must happen? In our experience, not to the extent they should. Having an organisational procedure for verifying ESG communications that’s comparable to procedures for financial or market-sensitive information is increasingly what’s required.

The challenge for leaders of businesses in the Netherlands is broadly the same as those in other jurisdictions. Having greater competence in ‘promise management’ will separate those leadership teams that live up to promises versus those that attract legal action or adverse media attention. This ultimately boils down to having a determined green communications strategy championed by the leadership team and encompassing every output, from annual reports to advertising. That strategy needs to be backed up by appropriate KPIs, effective governance structures, and clear implementation plans built on the promises made, not to mention robust monitoring practices, close relationships across the organisation, and reliable sensing technology (see below) to both collect and record the extent of the promise – and support subsequent detective requirements. Organisations must also actively manage risk through engagement across other stakeholder groups – particularly those with a strong sector interest – to ensure that the conforming pressure from investors and lenders to rise to the reporting challenge is met with a healthy, considered and evidence-based response, rather than one based on aspirations alone.

Assurance from sensing technology

The whole mechanism of steering the green agenda, establishing KPIs and promises, agreeing critical decision-making approaches, setting policy and external communication guidelines, and implementing the processes needed to ensure integrity, transparency and verification benefits from a data system underpinned by sensing technology to track progress across the full ambit of the promises made. This includes actively scanning social media and other channels to track official and unofficial statements that may have an effect on the overall position the business is taking or promoting on matters of sustainability. Such activity is also a valuable trawl for risks and legal exposure. Leadership teams can track what’s happening versus consolidated promise made, and adjust either the communications or working practices accordingly, to ensure there are minimal mismatches and therefore a low risk of misreporting and negative outcomes.

The way ahead

Organisations must ensure they have an unambiguous green strategy that gives rise to communications that can be tracked and measured relative to achievements. Having a dedicated team to manage promises made across all reporting platforms – and to actively compare those promises to outcomes in a way that’s supported by robust data – is key to ensuring that there are no gaps in the promise equation. Taking this seriously requires the support of those leading and governing the organisation, to impress upon everyone how important promise expectation management is.