Why greenwashing and competence greenwashing are risks to ESG integration and corporate sustainability
Greenwashing
Why is ESG important? What is it?
ESG, or “environment, society, and governance,” is an abbreviation. ESG was first developed in the finance and management industries to delineate the various aspects that businesses and financial institutions should take into account when making investment and business decisions.
Basically, “E” refers to metrics related to climate change, biodiversity, ecosystems, and water; “S” refers to metrics related to human rights, gender issues, education, and health (which was crucial during the COVID pandemic); and “G” refers to metrics primarily related to corporate governance, such as executive pay, corruption, and board diversity. These non-financial measures are used to monitor or gauge an organization’s ESG performance, which also acts as a gauge for assessing its sustainability impact.
ESG is meant to be a fundamental component of what is important to a firm. It is crucial to remember that it differs from sustainability. ESG has a significantly narrower focus than the idea of sustainability, which is most frequently connected to the SGDs (Sustainable Development Goals). The latter is a management, financial, and business strategy rather than a scientific idea.
What distinguishes ESG from CSR?
ESG, CSR, and SGDs are frequently combined. The term “corporate social responsibility” is abbreviated as CSR. It was presented as a type of self-regulatory corporate governance that attempts to partially include societal and ethical factors into business management that were previously ignored, such as healthcare and employee wellbeing.
By questions like “how do we effect society as a whole?,” CSR progressively came into focus. How do our business methods affect society? How can the many societal stakeholders produce shared value? “How do our products affect the community?” It was the first attempt to consider the potential social effects of the company’s goods or services, both favourable and unfavourable.
ESG goes beyond CSR, which over time mostly devolved into a mere marketing and communications technique more concerned with enhancing the company’s image than making a sincere effort to evaluate the societal implications of its goods or services. This was demonstrated by numerous companies creating CSR-related positions, frequently housed under the HR or PR remits and entrusted with producing attractive reports with eye-catching graphics.
The term “sustainability” refers to the ability of a product to withstand the ravages of time, and the term “resilience” refers to the ability of a product to withstand the ravages of the environment. As a result, the SDGs and the Planetary Boundaries are now generally linked with the concept of sustainability.
You’ve had a fairly international education, earning degrees from France, the US, and Japan. How did it help you prepare for your career?
My profession has been shaped by my varied schooling. I began studying law after completing my high school education in Luxembourg. To be really honest, I didn’t really know what I wanted to study, so I went with law. I chose to study law in France because I believed it to be a subject with numerous potential applications. I had the luxury of studying all around Europe with the Erasmus programme. I had the opportunity to visit Germany and England. My perspective was subsequently expanded, and I had the incredible good fortune to be awarded a Fulbright scholarship to pursue an LL.M. at UC Berkeley.
I became interested in the scientific side of energy and environmental issues about that time after the devastating Fukushima tragedy. It was a logical extension of my previous Master’s degree in International Law from the University of Lille, where I had completed my thesis on the European Union’s carbon taxation policies.
She was the lecturer for one of my UC Berkeley classes, and her class’s multidisciplinary teaching strategies truly made an impact on how I think about environmental, energy, and sustainability issues. She also always shown a certain amount of humility since, despite being a former two-term governor of Michigan and having a very busy schedule, she was gracious enough to support my career over the years by consistently replying to my numerous requests for letters of recommendation.
I began seeking for potential doctorate advisors as a result, and I eventually found one in a University of Tokyo professor who had previously worked for the Tokyo Electric Power Company (TEPCO). His resume was quite intriguing because I could use both his extensive network of connections in the energy business and his academic experience. Renewable energy, sustainability, and the environment are subjects that I feel extremely comfortable with, and as my PhD studies progressed, I began to realise more and more that my love and my profession were beginning to overlap.
My personal and educational backgrounds have taught me to value different points of view and the significance of correctly comprehending context when trying to comprehend the viewpoints of others. The development of strong sustainability-related skills is equally crucial.
Has your international education given you the tools you need to tackle global sustainability issues?
I won’t argue with that at all. Learning from a range of techniques can lead to the best outcomes because climate change and sustainability concerns are genuinely global in nature. Solving these significant problems becomes quite challenging if you don’t have a thorough understanding of how people live and work in other regions of the world. I can respect people who follow the law and adhere to established norms, for instance, in Japan. Depending on your viewpoint, you may consider the restrictions to be either too stringent or too loose, which, again, depends on the circumstance.
How can students prepare themselves for a job in sustainability?
Follow my advice! (Laugh) In all honesty, Japan still lacks business courses that focus on sustainability. Particularly those that go beyond the overused platitudes that sustainability is vital and demonstrate in specific terms what true sustainability means in the context of business or the financial industry. In Japan, there are frequently noticeable differences in how businesses attempt to present themselves favourably, emphasising the advantages heavily while frequently omitting the drawbacks, such as how climate change would effect them and how their actions can make the issue worse.
The importance of professional training in sustainability is due to the continual improvement of practitioner-level abilities; nevertheless, the level of applicability of each training programme must be determined. We must now talk about materiality, which denotes contextual applicability. I frequently use the scenario of someone passing out on a plane as an illustration of the idea of materiality. When the flight attendants ask if there is a doctor on board, someone raises their hand and declares, “I have a PhD in history,” which is technically true but actually relevant in that situation? Actually, no.
Whether a skill is material always relies on the scenario and the context. Is the skill I possess sufficient to solve the issue or problem at hand? is the question that those who work in the fields of sustainability and ESG need to ask themselves. This is significant because while all knowledge has worth, not all knowledge is tangible. Any education, certification, or training is worthwhile, but, as before, the context will determine its applicability.
What are some ways that investors might set the bar for sustainable investing?
by beginning to incorporate suitable MRV structures and sustainability impact assessments within their enterprises. Unfortunately, many financial products or services that are ESG- or sustainability-related only have positive effects on paper because of overstated ESG/sustainability claims, a severe lack of data collection, and a lack of genuine sustainability or environmental subject matter expertise throughout their governance and management structures. It is difficult to determine how much sustainable investing is genuinely sustainable due to the rising prevalence of greenwashing and competency greenwashing. More transparency is one way to achieve this. As a result, sustainable investing needs to gain credibility rather than remaining limited to sustainability-related marketing.
What can we anticipate in the future in terms of finance, technology, and the environment? Is it really so hopeless?
When you’re dealing with concerns like biodiversity loss, climate change-related temperature records, and sustainability challenges, the future can sometimes seem rather dismal. News that has been “greenwashed” creates the impression that sustainability is progressing, but later it is discovered that the communications or reporting were false. Companies seem to worry more about their sustainability-related investments becoming greenwashing the more they appear to invest in sustainability marketing.
People occasionally ask me why I don’t just give up given this seemingly hopeless perspective.
People occasionally ask me why I don’t just give up given this seemingly hopeless perspective. Realistically, I believe there are currently two basic possibilities: Every person wishes that they will either not live long enough to suffer the repercussions, or that they will live long enough for technical progress to solve our climate and ecological problems. These possibilities give me optimism since they both demand delay methods to limit either negative sustainability implications as much as feasible.
Should we be worried about rules and regulations having unintended consequences?
The debates around carbon and green leakage, as well as, green vs. green are always used to question stronger climate or environmental regulation and the expansion of sustainable infrastructure. For example, wind turbines are an efficient technology to reduce carbon emissions, but at the same time, they can kill birds and bats. Opponents of wind power development often use these incidents as arguments to either prevent the construction of wind turbines in their areas or just out of principle. In numerous instances, I consider many of the arguments around potential bird and bat killings from wind turbines to be smoke screens as they often completely exclude the fact that climate change-related natural habitat destruction will kill many more birds and bats and risks pushing many species to extinction. Thus, local issues have global implications, yet individual circumstances often have a larger impact than the considerations about what benefits society at large. The same goes for company pay. I do understand that people’s feelings change depending on whether it affects them personally in their immediate surroundings.
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