Awasi Perdayaan Korporat "Acah Hijau" – Beware of Greenwashing

“Net Zero.”

“Carbon Neutral.”

“Low emissions.”

More and more companies are making the claims above in the name of being “green”. We have witnessed a lot of corporate greenwashing due to pressure from investors, customers, and regulators. Greenwashing occurs when a company makes incomplete, unsubstantiated, or outright false claims about the sustainability characteristics of a product, service, or a company's business operations. However, some greenwashing is unintentional, due to the lack of knowledge or understanding on the part of management.

Examples of corporate greenwashing in Southeast Asia include 1) Claim of being carbon neutral/low carbon without the numbers to prove, 2) claim reduction in carbon emissions when in reality the company just cherry-picked favorable numbers and excluded heavily polluting activities from emissions calculation, 3) setting net-zero targets without establishing appropriate baseline emissions or developing a credible climate transition roadmap

Companies engaging in greenwashing risk reputational damage and backlash amidst a stricter regulatory backdrop uncovering and persecuting greenwashing acts. For example, in May 2022, DWS Group, the asset management arm of Deutsche Bank, was raided by German police following a whistle-blower's greenwashing allegations. In June 2022, Goldman's mutual-funds business was under investigation by the U.S. Securities and Exchange Commission (SEC) over alleged greenwashing. SEC Commissioner Allison Herren Lee emphasized the need for transparency and accountability in ESG reporting. She summarised this by saying “In other words: say what you mean and mean what you say.”

Closer to home, we saw Malaysian healthcare giant Top Glove come under fire due to errors in their emission reporting. When investigated, the root cause of this was likely due to manual calculation which does not have the checks and balances to ensure standard-compliant reporting. While this can be argued to be an honest mistake, there were consequences. Recent research conducted by the National University of Singapore on corporate greenwashing, focusing on a sample of 566 companies listed on the SGX, found that all these companies reported favorable aspects of ESG achievements, but only 66% mentioned unfavorable aspects even if these are critical.

Companies that wish to avoid greenwashing allegations should leverage proper resources and expertise to accurately report their Greenhouse Gas (GHG) emissions. Manual processes to calculate emissions are prone to error and lead to a high cost of reporting, increasing the chance of greenwashing. Companies should consider disclosing and getting a climate disclosure score by CDP to establish their credibility. CDP is an international not-for-profit charity that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.

Climate disclosure is no longer a page in an annual financial or CSR report that eventually gets ignored by stakeholders. Greenwashing can occur if companies do not pay attention to carbon accounting standards. It has the potential to severely distort the outlook of a company in the eyes of all stakeholders. As the push for greater sustainability and climate-friendly practices gathers pace across society, we expect companies to be under intense scrutiny for potential greenwashing.

Here at Pantas, we assist companies to avoid greenwashing by helping our clients accurately calculate, manage and disclose their GHG emissions based on international standards. Our solutions provide companies with easy-to-use carbon management software and access to climate-themed investments (equity and climate transition finance).

Schedule a demo if you are interested in getting free diagnostics and analysis to determine the accuracy of your company's existing climate reporting. To learn more about Pantas Climate Solutions, visit our website.