Greenwashing Implications for Listed Asian Companies
With data from Morgan Stanley’s “Sustainability AUM in APAC” research in January 2022 showing funds flowing into ESG investing reaching US$100 billion, the possibility of “greenwashing” is a growing concern for both investors and organisations.
At an organisational level, greenwashing can take many forms. The most common one that Hauman Yeung, Co-Founder and Director of Ascent Partners has come across, is using incorrect data and algorithms to calculate Greenhouse Gas Emissions (GHG), thereby underreporting total GHG emissions on their annual ESG report.
Once your ESG report has been filed, when inconsistencies or errors are flagged it can have some very serious implications for organisations in Asia.
In the worst-case scenario, misleading ESG claims can lead to your organisation being investigated by the relevant regulators, and potentially sued by investors who provided capital based on false pretenses.
Litigation is expensive not only in purely financial terms, but also in the significant amount of time and resources spent on fighting the allegations. Often the process becomes highly public with adverse media coverage, and puts the spotlight on your organisation for all of the wrong reasons.
Whilst being sued is the worst-case scenario, it has trickle-down effects for your entire organisation. Reputational damage can actually be worse than litigation in the long term.
By undermining your organisation’s image you run the risk of alienating not only existing customers, but potential customers as well. This can lead to a snowball effect, where your reputation amongst consumers takes a serious hit that may take months or even years to mitigate.
The reputational damage will not be limited to consumers either, as it is highly likely it will affect the confidence level of existing and potential business partners. If it looks like your organisation comes with a reputational risk because of a lot of adverse media , it may deter investors and limit the number of companies willing to work with the company due to the risk of being associated with your organisation.
So, in conclusion, greenwashing comes with several adverse impacts on organisations, that can, and most probably will, impact adversely your organisations bottom line!