What Investors and Companies Need to Know About Greenwashing

Green washing has been growing since the Paris Agreement was signed in 2015, and regulators, investors, and consumers are looking at company claims that may mislead their sustainability work.

In this Q&A, Alexandra Mihailescu Cichon, the chief commercial officer at RepRisk, intervenes in companies and investors should know about this trend. RepRisk, a Swiss-based data science, Social, and Governance (ESG) company, works with some of the world’s largest banks, investment managers, and corporations to identifying and assessing ESG and greenwashing risks.

Cichon discusses how to return the onion to know that companies “walk their talk.” He advises on how to spot the red flags of green washing in all supply chains. You explain why you don’t want to reveal yourself. And lights up businesses with high-end green cleaning events.

Garbage360: Tell us about RepRisk’s work on ESG risks and why companies should consider those risks

Cichon: We combine Artificial Intelligence (AI) and human intelligence to identify and assess ESG risks. In doing so, we enable clients to mitigate risks that could have a negative impact on the reputation and finances of the company and its shareholders, or a negative impact on people and/or the planet.

Basically, our data is the antidote to greenwashing. We examine how companies conduct their business – do they walk the talk when it comes to human rights, labor standards, corruption, and environmental issues?

Garbage360: Who are some of your customers and what brought them to you?

Cichon: We work with over 550+ clients, including 80+ of the world’s leading banks, 17 of the 25 largest investment managers, two of the world’s largest hedge funds, the world’s largest corporations, and the world’s leading logistics providers. due diligence and risk management in all their investments and activities.

Garbage360: Where are the common greenwashing messages, and how do you spot them?

Cichon: Greenwashing can be found in all types of corporate messages, including sustainability reports, marketing, and internal communications. A company can use messages as a vehicle to justify its behavior; by hiding the truth, they can be perceived in a positive light. Ultimately, the message of greenwashing and actual business ethics are incompatible.

Garbage360: How do companies often risk being identified as “greenwashers”?

Cichon: In any case where a company claims to be ‘net-zero,’ ‘green,’ or ‘ethically sourced,’ they are at risk of being overstated and potentially diluted because those terms are not well defined. Regulators in Europe and the United States have implemented some guidelines, but we continue to see the need for better definitions and a better understanding of green to address the causes and drivers.

Garbage360: How can investors identify greenwashing in their portfolios? And or when they are evaluating potential new investments?

Cichon: First and foremost, investors and companies need clear and reliable data to make decisions, presented in a transparent manner.

RepRisk helps clients navigate risk by shining a light on them when they might otherwise be obscured by greenwashing. We do this by deliberately excluding company exposure, instead analyzing 100,00 sources in 23 languages ​​daily – including media, online media, social media, blogs, government bodies, regulators, think tanks, newsletters, and and others online. sources. These sources range from international to local, national, and regional levels. This external view allows investors to see where their portfolio or future investments may face greenwashing risks – or any other ESG and corporate conduct risk – early on.

Garbage360: What are your thoughts on the information you reported?

Cichon: Self-reported information is unreliable, especially when it comes to risks. Corporate disclosures are also often out of date and do not meet investors’ needs for ongoing, timely monitoring to review their portfolios and perform due diligence on new investments.

Garbage360: What is most important companies know about greenwashing as it applies to their businesses?

Cichon: Greenwashing is no small crime. Misinformation and poor job descriptions pose a threat not only to trust, but also to our collective ability to transition to a sustainable future. Companies need to know that greenwashing is short-sighted. It poses reputational and financial risks to them, as well as risks that can have potentially negative impacts on people and the planet.

Data focused on risk and based on sources outside the company can shed light on business behavior, helping companies to identify and assess risks in their supply chains – where it is often difficult to find reliable information on countries and entities, including small and independent companies or infrastructure projects.

Garbage360: What is most important investors Understanding about green washing?

Cichon: Investors should be aware that greenwashing can be difficult to identify. For an investor evaluating the risk in their portfolio, they must consider the industry or sector and the regional nature of their investment. Sometimes, greenwashing is a mismatch of actions and words (such as lobbying for one issue and publicly supporting the opposite) or setting a close community goal that cannot be achieved and revealing it requires a lot of information that is not always easily accessible.

Garbage360: Do some businesses appear to be doing more greenwashing than others?

Cichon: RepRisk’s research shows that the extractive sectors (such as mining, oil, and gas), financial services, and food and beverage have the highest incidence of greening.

Garbage360: How can you tell the “good guys” in these businesses have a bad rap?

Cichon: By accurate data – meaning company-specific, granular, and timely data obtained externally. Investors and companies need to establish clear, measurable sustainable business practices in the sector they work in or invest in – and then get the right data to base their decisions on. From our lens, we look danger – for example, high risk or low risk (or somewhere in between), when it comes to ESG risk in general or specific issues such as human rights.

Garbage360: How should investors use data to identify greenwashing?

Cichon: My best advice is to never stop chasing the full picture of a company’s business behavior and rely on robust, transparent, and source-based data sets that don’t intend to hide the truth – in other words, look beyond the company’s disclosures!

Without a clear, universal definition, identifying greenwashing requires a complex approach depending on the company, sector, location, and other factors. The RepRisk team of analysts in collaboration with sophisticated AI generates the necessary data for care and makes this process easier, as greenwashing can take different forms depending on the company and the context.

Garbage360: Why is the risk of greenwashing increasing in European and US-based companies?

Cichon: There is more pressure than ever for companies to reduce their negative impact on the world, and some companies have exaggerated their sustainability progress. In our data, we see a dramatic increase over the past several years in greenwashing incidents. Recent regulations have given companies new compliance standards to follow, and increased stakeholder pressure is leading some companies to make bold promises about future goals and targets such as net zero.

Interestingly, we see that greenwashing is often associated with social washing – and we are happy to start our new research on this topic at the beginning of October. We hope that understanding ESG integration helps investors and companies better identify and prevent both issues in the future.

#Investors #Companies #Greenwashing

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