Managing Communication to Mitigate Greenwashing

Managing Communication to Mitigate Greenwashing

Beau O'Sullivan

10 years: Communication Strategist

Greenwashing is the practice of pretending to be greener than you actually are and it poses significant risks to all firms, especially financial institutions. In this video, Beau O’Sullivan explains how corporates can avoid the risks that come with greenwashing by having a clear communication strategy to mitigate these risks.

Greenwashing is the practice of pretending to be greener than you actually are and it poses significant risks to all firms, especially financial institutions. In this video, Beau O’Sullivan explains how corporates can avoid the risks that come with greenwashing by having a clear communication strategy to mitigate these risks.

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Managing Communication to Mitigate Greenwashing

11 mins 10 secs

Overview

With the rise in awareness among the public and other stakeholders around the urgency of climate change, companies are keen to prove they are doing their bit, but aren’t always willing to do what is necessary. As greenwashing is increasingly under the spotlight of investors and regulators, it is important for firms to be clear on communication strategies to mitigate greenwashing.

Key learning objectives:

  • Outline examples of reputational risk to firms due to greenwashing

  • Understand the legal and regulatory risks of greenwashing to financial institutions

  • Understand how how the industry is responding to pressure on greenwashing

  • Outline the 3 practical communication tips on mitigating greenwashing

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Summary

What are some recent examples of regulatory action against greenwashing?

In October 2022, the Advertising Standards Authority (ASA) the UK’s advertising regulator, banned ads that HSBC had made about its climate initiatives. This was because HSBC promoted its tree-planting programmes and sustainable projects without mentioning its significant funding of fossil fuel expansion and deforestation-linked companies. 

In another example, DWS, the asset management arm of Deutsche Bank, has also been in a spot of bother after a whistleblower claimed that the firm over-exaggerated how many of its assets were ‘ESG integrated’. This led to an investigation of DWS by the German financial regulator.

What are the risks (other than reputational risk) posed by greenwashing?

There are also serious legal risks associated with greenwashing. Financial regulators are sharpening their tools to crack down on greenwashing. The SEC wants proper data from finance firms to make sure their claims hold water. In November 2022, SEC charged Goldman Sachs Asset Management for policies and procedures failures. Goldman Sachs agreed to pay a $4m penalty, without admitting or denying the SEC’s findings.

Similarly, UK’s Financial Conduct Authority wants fund managers to be transparent about how sustainable their funds actually are. In the EU, financial, supervisory authorities issued a Call for Evidence on potential greenwashing practices in the financial sector in November 2022. 

How are industry participants responding to this external pressure?

Mark Carney, UN Special Envoy on Climate Action and Finance and ex-Bank of England governor, launched the Glasgow Financial Alliance for Net-Zero (or GFANZ), an alliance of more than 550 financial institutions to deal with net zero transition planning. 

However, the requirements of entry into GFANZ are just not tough enough and it doesn’t adequately deal with fossil fuels. 95% of fossil fuel companies are still expanding their exploration and drilling activities, so engaging with these companies on their transition can be seen as greenwashing.

There are still pockets of good practice across the industry. Munich Re, one of the world’s largest reinsurers will no longer insure oil and gas projects, Lloyds Bank will no longer bankroll them, and French bank La Banque Postale won’t extend credit to fossil fuel companies in growth mode, and will get out of fossil fuels entirely by 2030. And there are many more examples.

What are 3 practical tips for near term communications strategy?

  1. Review current climate-focused adverts - Ensure ads across social media and out-of-home are balanced. Ensure future marketing doesn’t omit material information about your contribution to carbon dioxide and greenhouse gas emissions
  2. Ensure authenticity of claims - For media professionals, when it comes to announcing updated climate commitment, transparency is key. Check with compliance, legal, and NGO professionals that your announcement is authentic and clearly deals with priority risk sectors like coal, oil, and gas
  3. Educate staff on greenwashing risks - Offer training to staff on how to spot and deal with greenwashing risks within the firm, or associated with products or clients

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Beau O'Sullivan

Beau O'Sullivan

Daniel Collado-Ruiz is the Chief Product Officer at Earthster, where he builds next-generation tools to measure environmental impact. He was an academic, entrepreneur, and innovation consultant before founding Earthster to turn LCA into what the world needs to deal with environmental challenges.

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