The head of the Global Reporting Initiative says the practice deserves strong repudiation because it misleads investors and other stakeholders.
Greenwashing, when companies give a false impression of their efforts to address climate change, is “nothing more and nothing less than fraud”.
This is according to Eelco van der Enden, chief executive of the Global Reporting Initiative, an independent organisation that provides the world’s most widely used standards for sustainability reporting.
Van der Enden was talking at the CEO Connect Forum hosted at the Johannesburg Stock Exchange on Thursday.
On why greenwashing deserves such strong repudiation, he said: “In fact, when you publish a report to influence decision-making of stakeholders — be it investors or local communities or pension funds or whatever — and you do that by not providing facts, but made-up stories or exaggerated stories, then you are fooling your audience. And when you do that with financial reports, we would call that fraud.”
Earlier this year, the JSE published its finalised sustainability and climate disclosure guidance, to guide listed companies on best practice in environmental, social and governance (ESG) reporting.
The document was formulated as more companies come under scrutiny by investors and other stakeholders for their climate change mitigation efforts.
“The JSE recognises the need to create an enabling environment for better disclosure practices, especially in light of regulation and guidance that are changing rapidly globally. The sustainability disclosure guidance is intended to help companies to align with recent and imminent changes in global standards and international best practice, regardless of their experience in sustainability reporting,” Leila Fourie, chief executive of the local bourse, said at the time.
Van der Enden said he was concerned about what was unfolding in parts of the United States, where lawmakers have taken a stance against ESG investment policies.
Last week, Texas comptroller Glenn Hegar released a list of financial companies that boycott energy companies. Hegar is implementing a law that requires state pension and school funds to divest shares they hold in these companies.
Earlier this week, Florida governor Ron DeSantis led a resolution to stop the state’s pension funds from considering ESG criteria.
“By law,” Van der Enden noted, “you see that ESG management and impact management is being curbed.”
This type of legislation, he added, does not make sense from a business point of view. ESG constitutes proper risk management and good governance, Van der Enden explained. “Not taking these topics into account, at a modern organisation, just won’t do.”