Avoid greenwashing and build trust in your sustainability disclosures

According to PwC’s 2023 Global Investor Survey, published in November, 94% of investors believe corporate reporting contains at least some level of greenwashing, with sustainability disclosures among the least trusted information sources published by companies.

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According to PwC’s 2023 Global Investor Survey, published in November, 94% of investors believe corporate reporting contains at least some level of greenwashing, with sustainability disclosures among the least trusted information sources published by companies.

Regulators are now ensuring that companies add more substance to green claims via measures like the EU’s Green Claims Directive and Corporate Sustainability Reporting Directive. New guidance is also expected soon from the FCA. These measures should ultimately help to bring sustainability reporting up to the standard of financial reporting in terms of rigour.

With greenwashing a high-profile issue, UK reporters need to ensure sustainability disclosures are credible.

What you can do:

  • Back up claims with data. Don’t include aspirations that can’t be substantiated. 
  • Don’t fall into the ‘greenhushing’ trap – where negative impacts are just not reported. Be upfront about sustainability-related challenges.
  • Use plain English, avoiding acronyms and jargon so that your ambitions and progress can be understood by all.
  • If you claim to be on a journey to net zero, explain in detail how you will get there. Friend’s 2023 research of FTSE 100 annual reports shows that while 92% have so far committed to net zero, only 71% outline the steps they will take to achieve this and very few of these offer truly insightful content, particularly on near-term plans.

The FRC recommend the following approaches when disclosing climate-related metrics and targets:

  • Only include climate-related opportunities that are truly material and avoid giving  too much emphasis to less important areas of the business that may be considered more ‘green’.
  • Explain any dependencies that could impact your ability to meet sustainability targets.
  • Avoid using misleading language, or vague terms such as ‘more sustainable’ or ‘carbon positive’ without explaining what it means and how it is measured.
  • Ensure that the tone of your messaging matches the accompanying data.

 

If you’re looking to avoid greenwashing in your next report, please do get in touch with the team at Friend.

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