How can ESG Standards Stop Being a Tool for Corporate Greenwashing?
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ESG stands for Environmental, Social, and Governance, three critical factors used to evaluate a company’s sustainability and impact on society and the environment. These three elements assess a company’s ethical and responsible behaviour and ability to deliver long-term value to stakeholders. While on the face of it, ESG commitments sound like an excellent way for corporates to support sustainability and help mitigate climate change, the sad reality is that far too often, corporates use ESG for “greenwashing”. The phrase “greenwashing” describes how businesses, whether mistakenly or as part of a purposeful marketing campaign, make inaccurate or deceptive representations about their environmental credentials.
Greenwashing Galore
One of the latest examples of greenwashing has been reported from the voluntary carbon offsets sector, a growing $2 billion market. A UK Guardian newspaper report found that 90% of rainforest offset credits offered by Verra (the world’s leading carbon standard) are likely to be “phantom credits” and do not represent genuine carbon reductions. The Washington, DC-based Verra runs several industry-leading environmental standards for tackling climate change and promoting sustainable development, including the verified carbon standard (VCS), which has generated over 1 billion carbon credits. It accepts 75% of all voluntary offsets. Its rainforest preservation programme, which accounts for 40% of the credits it authorises, was started before the Paris Agreement to raise money for ecosystem protection. Major corporations, including Gucci and Disney, have purchased these carbon offsets.
Apart from companies that, by accident or design, misled their consumers into believing their products are carbon neutral when they are not, this latest incident of greenwashing raises concerns about the future of the voluntary offset market in general. The recently concluded UN Biodiversity Conference (COP 15) has important implications for the biodiversity offset market. It is expected…
