What is Greenwashing?
Greenwashing is when misleading or unsubstantiated claims about environmental performance are made by businesses or investment funds about their products or activities. This can lead to the wrong products being bought – undermining trust in the market – and leading to misallocation of capital intended for sustainable investments.
Greenwashing is a deliberate act by companies to mislead customers, investors and partners by selective use of information, exaggeration and/or omission, or otherwise “washing” the company’s ESG impacts to appear more positive than they actually are. It can be executed at a product-level, company-level or industry-level (Gillespie, 2008).
Targeted by new regulations
Greenwashing is in the sights of the regulators in the UK, EU and US.
The Roadmap to the UKs Sustainable Disclosure Requirements (SDR) published in October 2021 states, “Better information will not only improve decision-making, but also help to build trust and combat potential greenwashing”.
One of the EU’s Sustainable Financial Disclosure Regulation’s (SFDR) stated aims is also, “to counter greenwashing”. And in the US the Securities and Exchange Commission (SEC) is consulting on “ESG risks (including greenwashing) and opportunities”.
Each regulator is seeking consistent standards for measuring and communicating ESG performance in a manner that’s consistent with the widely accepted standards of financial reporting.
ESG Audits – the antidote to greenwashing
ESG accounting is the practice of measuring, analysing and auditing a company’s environmental, social and governance (ESG) impacts and the financial value created, or at risk, in line with International Auditing Standards (ISAE 3000).
Certified Public Accountants or Chartered Accountants (also certified in ESG) are the only professionals licenced to independently audit ESG data and results with the same professional standards of security, confidentiality and accuracy as financial accounting.
ESGgen clients can be confident that their ESG accounting complies with professional standards, applicable laws and regulations, and the Code of Ethics of the Institute of Chartered Accountants of England and Wales.