Misleading communications by companies about environmental, social and governance issues, also known as “greenwashing”, is on the rise, with 70 climate-related greenwashing incidents in the past, according to a report by RepRisk AG, an ESG research provider. It has been revealed that there has been a % increase. Yearly among banks and financial companies.
This report focuses on risk incidents that can have a direct negative impact on the environment through a company’s business operations and is aimed at investors in these companies and activities, such as companies financing oil and gas operations. The target is
“The association of financial institutions with fossil fuels is widely understood to be risky, and investors are calling for an end to financing of new oil and gas projects,” the report said.
According to the report, nearly 1,900 companies were involved in risk incidents involving misleading communications in the past year. Of these, 1,160 people, or 63%, were related to this issue for the first time. The report also found that 25% of climate-related ESG risk incidents worldwide are related to greenwashing, up from 20% a year ago.
This year’s report also expands on so-called “social cleansing,” which RepRisk describes as the link between positive images and underlying social problems such as human rights abuses, corporate collusion, and child labor. Defined as a contradiction. According to the company, social washing occurs when companies obscure underlying social issues and present themselves in a positive light to protect their reputation and financial performance.
“Like greenwashing, social washing is driven by multiple interrelated factors, including changing consumer expectations, increasing competition, and an evolving regulatory landscape,” the report said. “On average, misleading communications about social issues are 12% more serious than environmental claims, indicating the severity of the risk.”
The report added that misleading communication risk incidents are 20% more serious than greenwashing alone when both environmental and social issues are involved.
RepRisk cited a public washout of human rights abuses and corporate collusion in the software and computer services sector, where risk incidents are linked to privacy violations and supply chain issues.
“Although sometimes overlooked, data privacy is a human right, empty promises of data protection can have real financial and reputational consequences for companies, and this year the global average cost of a data breach is 4.45 million,” the paper said. report. “Furthermore, the risks associated with data privacy can also have negative implications for consumers.”
RepRisk’s report also found that many companies in the travel and leisure industry hide human rights issues related to discrimination and negligence. It added that poor employment conditions are common in the retail and food and beverage industries, particularly related to supply chain issues, migrant labor, pay and benefits.
However, unlike greenwashing, social washing practices escalate at a slower rate. The number of social cleansing risk incidents without an environmental element rose by 15% year-on-year in the past year to September, compared to a 35% increase for greenwashing alone, according to the report.
“The expectation of competitive advantage derived from a sustainable image has opened the door to green social cleaning,” RepRisk CEO and co-founder Philipp Aeby said in a release. Stated. “A lack of accountability for the rapidly evolving landscape surrounding corporate sustainability has kept this door open for too long. Nevertheless, in recent years the media, public and regulators have Symbolic sustainability is backfiring for many because it criticizes the claims.”
Aeby added: “Banks, asset managers, investors and other market participants need to assess the true business operations of companies and mitigate green and social cleansing risks in their portfolios and supply chains. “We need transparent data on negative impacts,” he added.
RepRisk’s ESG dataset dates back to 2007, according to its first greenwashing report last year.
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Tags: governance, equity, diversity, environment, ESG, greenwashing, human rights, inclusion, RepRisk, research, social, socialwashing