We all are working tirelessly, creatively, and innovatively to make our organizations greener places for all who come in contact with our products, people, and supply chain. In many cases, we have developed reporting systems to evaluate our progress. When the numbers look good, we are eager to broadcast our results enterprise-wide to prove that our ideas, training programs, and blood, sweat, and tears actually made a difference.
What is Greenwashing?
Organizations that report results on their green initiatives are now coming under scrutiny by skeptical competitors, investors, and the general public. Some parties may doubt the fact that an organization’s results are completely accurate and not embellished in any way. The term for over-reporting results for green projects has come to be called “greenwashing”. Greenwashing at its core is overestimating and overstating the results of a green initiative.
When this term first appeared it was assumed that this was an innocent mistake made on the part of overzealous environmentalists who did not have sophisticated systems to track the results accurately. As time progressed the outlook turned darker towards a possible intentional misleading of the public to promote goodwill to the organization for something they didn’t actually earn or deserve.
ESG: A Changing Discipline
It is now a necessity for organizations to have verifiable, accurate numbers to report for each of their sustainability or ESG results as compared to their goals and commitments. This can be achieved through several different paths. The best analogy is to think of sustainability numbers as a type of P & L financial statement. No one would believe unaudited financial statements as proof of a company’s financial strength and integrity. Likewise, sustainability reports are now coming under a similar type of scrutiny.
Questions are being asked of sustainability professionals as to their methods, processes, and transparency that lead to the compilation of the reports being released.
This level of scrutiny has caused these processes to be reviewed, reworked, and made available in a more transparent way to all levels of the organization. Many are now grasping the concept that nonfinancial factors have a broad relevance of measuring, managing, and disclosing key sustainability issues.
ESG Reporting Challenges
One of the biggest ESG reporting challenges is the lack of consistency. Organizations often change or tweak what they report each year. It is not uncommon for different industries to utilize different metrics. Sometimes, even in the same industry companies use different thresholds for performance on sustainability or ESG issues. This approach makes it difficult for investors to equitably compare how companies are thinking about and managing these programs.
Corporate leaders want simpler reporting processes while investors want clearer more concise data. All parties have indicated they are looking for a more standardized way to report and assess sustainability and ESG activities and impacts for themselves.
SASB: Best in Class ESG Reporting
Several different approaches have surfaced. SASB (Sustainability Accountability Standards Board) is often considered the best in class for publicly traded companies. SASB’s mission is to provide information in a format that the financial community can use to understand current ESG issues and make good long-term investment decisions. It was patterned after FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board).
SASB standards are focused on ESG issues that are likely to have material financial effects. At a base level, companies report on legacy information which is reflected in their financial documents. Organizations such as GRI (Global Reporting Initiative) focus on matters that affect the broader economy, environment, and society.
What is Greenhushing?
All this can be confusing to even the most astute sustainability professional. In an attempt to avoid the ramifications of greenwashing some have now swung the pendulum to the opposite extreme and are now “green hushing”. These organizations are so concerned about being accused of greenwashing they are intentionally suppressing their results so as not be challenged. Neither of these extremes is the answer.
How to Avoid Over/Underreporting ESG Performance
We believe a clear overview, evaluation, and audit of an organization’s processes is the place to start. This gives leadership at all levels of an enterprise confidence that a third party has reviewed their sustainability processes and that transparency has been achieved throughout the organization.
In this review, we look to identify possible roadblocks in establishing these frameworks. There are so many different silos in a typical organization that have their own goals and don’t share the vision and commitment of the leadership team. It’s important to conduct cost benefits analysis for each link of the ESG strategy chain. When you look at supply chain, inbound packaging, output of all facilities, product packaging, greenhouse gas emissions (Scope I, II, and III), water and power usage, wasted resources, and social components of team members and suppliers, it is certainly a lot to review. Many organizations have looked at this overall process and published goals for 2040, 2050, and even beyond. This sounds promising but is so far away it is easy to push items back year after year.
Okapi Provides Tailored ESG Solutions
Okapi looks to help streamline the review process by preparing an overall Master Plan which includes processes that are broken into smaller, quantifiable sections which can be attacked in a more incremental approach. Everyone in the enterprise needs to be sure that their goals are aligned and be able to witness the progress being made. Progress must be seen and heard to be recognized as actual progress.
Okapi consultants have provided experience molding substantive change with sustainability initiatives for a wide range of participants. We have seen not only process and reporting changes but also cultural shifts in participants from high-tech employees of Fortune 100 companies down to kindergarteners and even rabid soccer fans. We have found the audience is not the differentiator, but the quality and reliability of the process is what makes all the difference. If the vision and commitment from the top are clear and the organization understands what’s at stake, we have found we can create processes that lead to true changes and shifts in the results from the C Suite to the street. We have the secrets to ESG success.
Okapi provides individualized solutions to unique challenges. Our services are many and varied but all begin with a conversation about shifting paradigms, making financial justifications, and partnering with a team whose hands know what it takes to get dirty and affect change.