Unraveling green assertions: Key insights for corporate reporters

In today's world, companies are under increasing scrutiny to be transparent about their environmental, social, and governance (ESG) impact. This is particularly true in the realm of supply chain management, where environmental impacts often occur.

The practice of greenwashing, where companies make their products or operations seem more environmentally friendly than they genuinely are, has become a significant concern. Greenwashing can take various forms, from vague marketing claims to selective disclosures, misleading PR communications, or exaggerated product benefits.

To combat this, central tools like the EU Green Claims Directive and the US FTC Green Guides require clear, accurate, and evidence-based claims. These regulations aim to ensure that companies provide substantiated ESG marketing claims and establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals.

Sustainability is no longer a nice-to-have but a necessity for companies. Investors, customers, and employees expect companies to manage climate risks, be transparent about their ESG impact, and meet increasingly stringent regulatory standards.

A successful sustainability leader must gain strong management support, cultivate a network of internal champions, and deeply embed sustainability into the company culture. The role of a dedicated sustainability lead or Chief Sustainability Officer (CSO) is crucial in integrating sustainability across all business functions.

Reporting frameworks and standards like GRI, SASB, and ESRS help companies establish robust, science-based sustainability goals for their disclosures, corporate communications, and marketing materials.

NGOs like Greenpeace and the Environmental Defense Fund play a crucial role in exposing misleading practices through investigations and lawsuits. They collaborate with companies to enhance their sustainability, promoting transparency and accountability.

Governments are also tightening rules around green corporate communication to hold companies accountable for their sustainability claims. For example, the EU Green Claims Directive, effective September 2022, bans vague or unverifiable claims and mandates third-party validation.

One notable example of the importance of effective sourcing practices in avoiding greenwashing is the case of Procter & Gamble (P&G). P&G has come under scrutiny for promoting its Charmin toilet paper as environmentally responsible while sourcing wood pulp from Canada's boreal forest, a critical ecosystem.

Greenwashing can have serious consequences for a company's reputation. It may compel a company to promise greater transparency in its auditing and supply chain management. Claims such as "eco-friendly," "green," or "natural" demand verification to avoid misleading consumers. The EU's Green Claims Directive requires consistent, verified data for green claims to ensure transparency and accountability.

On the other hand, greenhushing, the opposite of greenwashing, is when a company hides or avoids sharing information about its sustainability efforts. This undermines transparency and trust, potentially hiding insufficient or non-existent progress in sustainability.

In conclusion, sustainability is a priority for all stakeholders, and companies must strive for transparency and accuracy in their sustainability disclosures. The fight against greenwashing is a collective effort involving regulators, NGOs, and companies themselves. As consumers become more conscious of their environmental impact, companies that prioritise sustainability are likely to gain a competitive advantage.