Seven steps to steer clear of greenwashing

Seven steps to steer clear of greenwashing

Australian regulators have long been at the forefront of the fight against greenwashing, introducing a number of measures to identify and reduce a tendency for organisations to use misleading environmental messaging. So, what can organisations do to avoid getting themselves in hot water?

What is greenwashing, and why should you avoid it?

Greenwashing is the practice of portraying a company, product or service to appear more environmentally and socially friendly than it really is.

Stakeholder demands for an increasing focus on sustainability are rising. While often well-intentioned, making broad or ambiguous claims that can’t be substantiated can be seen as misleading. Examples can include stating that something is ‘environmentally friendly’ while lacking adequate data to verify the claim, or using terms like ‘green’ to suggest a product is ‘good’ for the environment. Using iconography that might infer or suggest third-party certification can also be seen as misleading.

As stakeholders use the available information provided to inform their buying or investing decisions for products, services, and even the organisations to align with, claims that are false, or even unintentionally misleading, could lead to decisions that may not otherwise have been made. This can have financial, environmental, reputational, and - ultimately – trust implications for the organisations.

Seven steps to avoid greenwashing

Along with following the guidance of Australia’s regulators to help you avoid greenwashing, here are seven steps to consider putting in place at your organisation to ensure your environmental messaging meets all stakeholder requirements.

  1. Establish strong governance to record, address and support the sustainability risks (and opportunities) identified for your organisation.
  2. Clarify the oversight responsibilities held by the Board and/or a committee of the Board. For many organisations, the Audit & Risk Committee is responsible for overseeing sustainability risks and opportunities, which is largely driven by the imminent mandatory sustainability reporting requirements being added to the annual report in Australia.
  3. Establish and define management’s role in assessing and managing sustainability-related risks and opportunities. This is often the Chief Executive Office and/or Chief Financial Officer (CFO). It’s worth noting that the role of the CFO has been evolving for some time now - it is no longer purely focused on financial reporting but also on adding value throughout the organisation’s operations by way of its sustainability and broader strategy.
  4. Determine and implement the necessary internal controls required, including the systems, policies and processes that ensure the reliability of data and reporting for the relevant, required disclosures.
  5. Bolster the integrity of relevant disclosures by engaging various internal stakeholders to perform cross-functional reviews. Reviewers could, for example, include legal, executive management, investor relations, the Board or Board sub-committee overseeing sustainability, CFO, and so on. This process can help to add greater layers of scrutiny to ensure a robust, thorough review.
  6. Benchmark against competitors' disclosures to shine a light on any gaps or requirements in your organisation’s reporting. Alternately, it can help to align with commonly used sustainability standards and disclosure requirements, including those that are industry-specific.
  7. Lastly, but possibly most importantly, aligning the responsibility of the sustainability report with that of the financial report ensures the organisation can meet the required level of skill and understanding of the mandatory disclosures. For many organisations, this responsibility currently sits with the CFO and/or a Board sub-committee, like the Audit & Risk Committee. The people in these roles are already well versed in the scrutiny required to successfully deliver these types of reports, the credibility required, the internal controls that need to be established (including the systems, policies and processes), management of underlying data to ensure completeness and accuracy, and engaging with auditors to obtain assurance (whether reasonable or limited is required).

Here to help

Our national sustainability team works with organisations on:

  • Carbon accounting and measuring carbon footprints
  • Sustainability reporting, whether mandatory or voluntary
  • Decarbonisation and sustainability strategies
  • Assurance over sustainability reports.

Contact us to see how we can help you.