Tackling corporate greenwashing: G20 backs ISSB’s new global rules

Introduction

In an era of increased environmental awareness, businesses are under scrutiny to disclose their environmental impact accurately. To address the growing concern of greenwashing, the International Sustainability Standards Board (ISSB) has formulated a new set of global rules. These rules, backed by the G20, aim to enhance transparency and hold businesses accountable for their sustainability claims.

In this blog post, we will delve deeper into the significance of these rules and their potential impact on businesses worldwide.

The problem of greenwashing

Every year, large businesses report their carbon emissions data. However, the reliability of this information is often questioned due to inconsistent data quality and the absence of standardized norms. This has allowed companies to exaggerate their environmental credentials, leading to greenwashing. Greenwashing refers to the practice of presenting misleading or false environmental information to create an impression of greater sustainability.

The role of ISSB and G20

Recognizing the urgent need to combat greenwashing and improve transparency, the ISSB has developed new standards to enhance the disclosure of environmental impact. These standards are supported by the G20, a group of the world’s major economies, and are poised to bring about significant changes in the way businesses report their sustainability efforts.

Enhancing trust and confidence

The primary objective of the new ISSB standards is to improve trust and confidence in company disclosures regarding sustainability. By creating a common language for disclosing climate-related risks and opportunities, these standards will enable investors to make informed decisions. With trillions of dollars being invested in businesses that promote their environmental, social, and governance (ESG) credentials, the importance of accurate and reliable information cannot be overstated.

Voluntary adoption and government enforcement

The standards are effective from 1 January 2024, but it will be for individual jurisdictions to decide whether and when to adopt. However, several countries, including Canada, Britain, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya, and South Africa, are considering enforcing these rules on larger businesses. This move aims to ensure widespread compliance and discourage greenwashing practices.

Global adoption and implications

Countries such as the UK, Japan, and China, which have significant economic influence, are expected to make the ISSB standards mandatory promptly. Additionally, the European Union is developing its own standards that encompass biodiversity and human rights, aligning with the ISSB’s goals. As more countries implement similar regulations simultaneously, businesses face the challenge of complying with multiple sets of requirements.

Accountability and anti-greenwashing measures

The ISSB’s disclosure requirements have been meticulously designed to hold firms accountable and deter greenwashing. By mandating the use of the widely accepted Greenhouse Gas Protocol for measuring emissions, requiring emissions data auditing, and promoting the adoption of a climate strategy by top management, these rules create a comprehensive framework for accurate reporting.

Conclusion

As concerns regarding climate change and sustainability intensify, the importance of accurate and reliable information on a company’s environmental impact cannot be overstated. The ISSB’s new global rules aim to tackle greenwashing by pressuring businesses to disclose their sustainability efforts transparently.

With governments considering enforcement and leading economies embracing these standards, businesses must prepare to comply with stricter regulations. By fostering trust and accountability, these rules have the potential to drive genuine progress towards a more sustainable future.

Here are some specific examples of corporate greenwashing, including the companies involved and the false information they provided:

1. Volkswagen (VW) emissions scandal:
   • Company: Volkswagen Group
   • Facts: In 2015, it was revealed that VW had installed software in their diesel vehicles to manipulate emission tests. The software detected when the car was undergoing an emissions test and reduced the emissions accordingly, giving false readings during testing. As a result, VW’s diesel vehicles emitted up to 40 times the legal limit of nitrogen oxide (NOx) pollutants during real-world driving.
   • Consequence: This scandal not only damaged VW’s reputation but also led to substantial financial penalties and legal consequences. The company was fined billions of dollars, faced numerous lawsuits, and had to recall millions of affected vehicles worldwide.
2. Chevron’s “We Agree” ad campaign:
   • Company: Chevron Corporation
   • Facts: In 2010, Chevron launched the “We Agree” advertising campaign, which featured messages like “It’s time oil companies get behind renewable energy” and “Oil companies should support the communities they’re a part of.” The campaign aimed to portray Chevron as environmentally responsible and committed to clean energy.
   • Reality: Despite the green messaging, Chevron continued to invest heavily in fossil fuel extraction, including projects like offshore drilling and tar sands development. The campaign was criticized for misleading the public and diverting attention from Chevron’s environmental impacts.

3. BP’s “Beyond Petroleum” campaign:
   • Company: BP (formerly British Petroleum)
   • Facts: In the early 2000s, BP launched a high-profile advertising campaign called “Beyond Petroleum.” The campaign featured a new green and yellow logo and emphasized BP’s commitment to clean energy and combating climate change.
   • Reality: While the campaign highlighted BP’s investments in renewable energy sources, the majority of the company’s investments and revenue still came from oil and gas exploration and production. In 2010, the Deepwater Horizon oil spill occurred, tarnishing BP’s reputation further and highlighting the discrepancy between its green marketing claims and its actual practices.
4. Nestlé’s “Green” water bottles:
   • Company: Nestlé
   • Facts: Nestlé’s Pure Life water brand introduced a line of water bottles called “Eco-Shape” in 2008, claiming they used 30% less plastic. The bottles featured a leaf-shaped design to suggest environmental friendliness.
   • Reality: While the bottles used slightly less plastic, they were still not environmentally friendly due to the overall negative environmental impact of single-use plastic bottles. Nestlé faced criticism for using greenwashing tactics to distract from the larger issue of plastic waste and the environmental consequences of bottled water.
5. Amazon’s climate pledge and fossil fuel ties:
   • Company: Amazon
   • Facts: In 2019, Amazon announced “The Climate Pledge,” committing to become carbon-neutral by 2040 and meet the goals of the Paris Agreement ten years ahead of schedule. They also pledged to use 100% renewable energy by 2030.
   • Reality: Despite these claims, Amazon has faced criticism for its ties to the fossil fuel industry. The company has contracts with oil and gas companies for cloud computing services and has been accused of supporting climate-denying think tanks. Critics argue that these actions contradict Amazon’s commitment to combat climate change.
6. PepsiCo’s “Green” packaging and plastic pollution:
   • Company: PepsiCo
   • Facts: PepsiCo has made public commitments to reduce plastic waste and use more sustainable packaging materials, including pledges to use 25% recycled plastic content in its packaging by 2025.
   • Reality: In 2020, it was revealed that PepsiCo was among the top plastic polluters globally, according to a study by Break Free From Plastic. The company’s reliance on single-use plastic packaging and its contribution to plastic pollution raised concerns about the effectiveness of its sustainability initiatives.
7. ExxonMobil’s misleading advertising:
   • Company: ExxonMobil
   • Facts: ExxonMobil has faced criticism for misleading advertising campaigns that downplayed the risks of climate change and the company’s role in contributing to greenhouse gas emissions.
   • Reality: Investigations by various media outlets have revealed internal documents showing that ExxonMobil had knowledge of climate change as early as the 1970s but actively promoted climate skepticism and funded organizations that spread climate misinformation. These actions raised questions about the sincerity of the company’s claims to address climate change.

These examples demonstrate instances where companies misrepresented their environmental practices or impact, leading to public backlash and legal repercussions. It is important for consumers to remain vigilant and critically evaluate the claims made by companies, seeking transparency and independent verification of their environmental claims.