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Sustainability Talks

Investors Clamp Down on Corporate Greenwashing

AUDINDesign/ThinkstockPhotos 100 Bill Stock Market
Consumers and environmental groups’ voices are getting louder in their protest of corporate greenwashing, and policy is beginning to make this practice harder. Still, reporting on sustainability practices has not caught up to ensure corporations and other companies with sustainability goals are delivering on those goals.

Consumers and environmental groups’ voices are getting louder in their protest of corporate greenwashing, and policy is beginning to make this practice harder. Still, reporting on sustainability practices has not caught up to ensure corporations and other companies with sustainability goals are delivering on those goals.

Graham Rihn, CEO and founder of RoadRunner Recycling, is among industry folks who believe the scrutiny on, and expectations of,  producers is going to get a lot tougher as investors ask for more environmental data and  metrics.

In this Q&A Rihn explains why companies should prepare to deliver and report on their sustainability goals. He discusses a new proposed SEC reporting rule and what companies need to know about it.  He advises on roadblocks they may hit as they prepare to disclose more, and how they  might get around them.

Waste360: What’s driving greenwashing and how might SEC’s proposed reporting guides address the problem?

Rihn: Sustainability and climate-risk are now key factors that consumers are considering before choosing products. Because sustainability goals are trendy and almost necessary to continue demand for a product, there have been many hints of companies “greenwashing,” or promoting questionably effective sustainability efforts for marketing purposes. The accountability for those companies is no more than their consumer base following up on the trends, rather than government push-back or investors pulling out of deals.

The SEC has proposed reporting guidelines to be rolled out as early as the fiscal year 2023 that would address the lack of standardization for climate risk financial reporting and cause more accountability for sustainability efforts. Publicly traded companies would be required to tell shareholders and the government how they are impacting the climate under a standard metric of greenhouse gas emissions. This data could then be used by investors and consumers to make more climate-conscious decisions.

Waste360: What additional data will investors be asking for and why?

Rihn: There is an undeniable push for metrics on the climate-risk of companies, especially large companies. Investors are looking at and adhering to Environmental, Social, Governance (ESG) criteria to support businesses. There have been reports that ESG funds perform the same or better than traditional ones.

The ESG criteria cover everything from the climate change fight to socially responsible behaviors. However, these factors don’t mean that the impacts of climate change or social unrest won’t interrupt or interfere with a company’s bottom line. For climate-risk-specific reporting, some are hoping that the proposed SEC guidelines will offer more standardization.

At the end of the day, both consumers and investors care about accuracy and real impact in the metrics that are being reported. They care about having confidence that there is a standard in place so that if a company says we are carbon-neutral, there’s transparency to audit that statement and a standard for reporting on what makes up that statement.

Waste360: What’s key to companies’ success in incorporating ESG within their operations?

Rihn: Education and thought-out processes are key to success for incorporating ESG within operations. Education throughout the company ensures not only buy-in and compliance from employees but also serves to keep everyone accountable. Without proper education on how things should be done, there can be many instances of miscommunication and ultimately others falling back on what is easy or how things used to be done.

Along those same lines, well-thought-out processes are essential. That would entail thinking through exactly where changes will be made, how they will affect employees and their day-to-day, and ensuring that there are reasons behind changes that make larger impacts on any major pieces of the day-to-day flow of work. The last thing you want to do is make something difficult for your employees seemingly without reason and not share the potential consequences or benefits of their actions.

Waste360: How can companies prepare for sustainability disclosures? What are main roadblocks they may hit, and how can they bypass them?

Rihn: Sustainability disclosures are coming in the form of not only what is directly causing emissions, but also indirect causes. Roadblocks might include their service/suppliers not having their data in order or prepared in a usable format. It’s important to work directly with any services that companies might need data from to ensure they are getting what they need in the format they need. These are new requirements and regulations. There will be a learning curve for everyone.

Waste360: How can companies be profitable while addressing this work?

Rihn: Companies should think about sustainability initiatives from a return-on-investment standpoint. There will be upfront costs with the research, design, or programming of any new initiative. But if initiatives are prioritized based on impact in terms of carbon reduction and impact in terms of ROI, companies can bring clarity to a process that may seem intimidating up front.

Going green and sustainable can end up profitable for companies. It may take a few years to see the profits, but there are ways to see the benefits immediately in small ways. Yes, bigger changes like switching up packaging or manufacturing processes may cost a bit at first and may boost the prices of products. However, changes within the office can give a breath of relief as well.

Simple things such as making sure to turn the lights off at the end of the day, switching to a paperless office, or removing paper plates and plasticware from the kitchen can significantly reduce costs. Additionally, making sure your clients and customers are aware of the efforts you’re taking to do better can help draw customers and also explain any changes in costs.

We hear many different terms: net zero, carbon neutral, among others. How do companies who want to develop ESG ambitions know which one to use and what it means?

Every industry has jargon. To navigate the space of climate change and climate-risk, it’s important to understand what these terms mean and use them appropriately. However, it can be intimidating. There are so many different terms because scientists and researchers are constantly learning new information regarding the climate crisis and how we can best help our environment. 

Likewise, marketing can play a large role in this too. As new standards or goals are announced, new terminology is created to better fit the companies and organizations. You might remember that climate change started as global warming, but was found not to be a fully accurate, or transparent, term. Terms change as information is presented to be more accurate so that we can be more specific about what we are doing.

The terms a company uses should reflect the company’s goals. If a new term comes up that suits the goals better than the ones previously available, it’s better to switch than use incompatible terms. If a company has ESG ambitions, starting with research into which terms best describes their current situation would be their best launching point.

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