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The Financial Times held a seminar on the 12th of December to review the uncertain backdrop of new ESG reporting mandates that are coming into force. These mandates will provide challenges for organisations; going forward they must insure cross-departmental collaboration to consolidate disparate financial and non-financial data.
Greenwashing accusations can have detrimental effects on a brand’s image, and by extension, its profit margins. Greenwashing is defined by the Cambridge dictionary as “the process of conveying a false impression or misleading information about how a company’s products are environmentally sound”. Greenwashing is an attempt to capitalise on the growing demand for environmentally friendly products. Similarly, accusations of greenwashing within ESG reporting have gained traction, with companies seeking to attract investors, but in fact, failing to accurately report their outputs (most commonly with carbon).
Although there is currently little research on the corporate effects of greenwashing, one study found that greenwashing accusations resulted in a negative consumer reputation, and thus a direct correlation to decreased sales. Moreover, the report found that only ‘true green behaviour‘ will have any desired positive effects on reputation. Similarly, according to PwC, more than three-quarters of consumers would “discontinue relations with companies that treat employees, communities, and the environment poorly.” Growing numbers of consumers expect green credentials and ESG efforts from their favourite brands. Companies have begun to transition to meet these ‘green needs’, recognising that the ESG data they provide to their stakeholders must be trusted and must meet the requirements of various directives being implemented around the world.
Panellist John Ostergren, Chief Sustainability Officer at Smiths Group, suggested that we are likely to see a third-party standardisation of ESG reporting across the board. Many investors are unable to pinpoint the effectiveness of a company’s ESG performance due to a wealth of different methodologies, metrics and weights, resulting in somewhat ambiguous data and uninformed decision-making.
Mandi McReynolds, Head of Global ESG at Workiva argued that these regulations must be top-down and empirically refuted to avoid greenwashing accusations. Greater support from governments through enhanced policy and guidance directed at companies to improve EGS reporting across the board was also highlighted as a necessity.
Likewise, there is a growing consensus that ESG and finance teams need to work together if ESG reports are to face the same scrutiny as financial reports. Going forward, it would make sense for the ESG reporting cycle to mimic the financial reporting cycle. This would embed ESG reporting into the heart of the organisation and create an environment in which ESG teams can work closely with risk management, internal audit, investor relations and technology officers to produce accurate, consistent and timely data.
The panel agreed that this would create greater transparency and accessibility, for investors and stakeholders but also internally. Additionally, it was apparent that more business leaders believe that a failure to comply with new ESG requirements could pose significant risks to their entire operations.
This is particularly relevant to the next generation. The panellists highlighted the importance of driving change through the entire company and employees to ensure that the next generation is engaged with the discussion as wealth and spending power move.
There will be a huge democratic shift within the workforce, with Millennials and Gen Z making up 72% of the workforce by 2029. By placing a greater emphasis on engaging the entire company on ESG agendas, we can future-proof business and practices to increase “efficiency, purpose and opportunity for the next generation”.
To summarise, the event concluded by advocating how proactive ESG activities can provide positive business value by improving customer retention, cutting costs and reducing risk, investing in technology to support the reporting process and standardise it across the board to meet new and emerging mandates.
Georgina Murrin is a ESG Analyst in Itriom’s London Office.
Itriom is the global impact platform helping leading families shape a better world. Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter. Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in Leadership, Geostrategy, and Sustainability benefit clients by developing strategies to engage and support the Next Generation in building a lasting legacy of which families can be proud.
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