6 ESG Trends: Greenwashing Bandwagon or Climate Game-Changer?
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Environmental, social, and governance (ESG) goals are among the most popular green frameworks. It motivates companies to publicize eco-conscious practices by setting a precedent for transparency. Organizations that aren’t posting their goals and progress will receive questions from business partners and customers alike. Let’s analyze the most common ESG trends to see if they’re worth the hype and making the environmental impact they claim.
Companies are setting trends for standard ESG practices, and regulatory bodies are setting trends for how the public and government will treat them. It’s critical for corporate success to know how others will review and respond to their frameworks.
1. Regulatory Bodies Are Investing in ESG-Led Companies
Investing in startups and businesses with more sustainable ideals is popular. The kicker is that regulatory bodies are refining standards and regulations related to ESG investing for greater consistency and accountability. Entities want to know where money is going, who’s putting forth the cash, and how it’s influencing the global, greener picture.
The European Union has inspired this behavior ever since they announced the Sustainable Finance Disclosure Regulation. Other nations like Australia and Singapore have followed suit with a potential for $3.6 trillion in ESG investments. It outlines comprehensive financial strategies and requirements, including anything related to ESG. Investors will notice the uptick in stricter compliance and pay attention to when companies publish their numbers.
It’s more relevant to established companies. Startups and small businesses can hop on these bandwagons early on to solidify their chances at early-stage funding.
Does this work: Yes — the COP26 Summit’s discussions created the Venture Climate Alliance. Over 20 industry leaders committed to evaluating startups to distribute $62.3 billion in assets to promote novel, green ideas — because they know early investing is the cornerstone of expedited progress.
2. Greenwashing Will Have Repercussions
Whether or not a company gets punished after greenwashing claims is mixed. Some say a customer’s brand loyalty before the claim supersedes public drama like this, reverting customers to their old purchasing habits. The future may pose a different challenge for companies that try to get away with greenwashing.
The proliferation of online content has only intensified with TikTok and other vocal online communities. Everything from boycotts to bans could happen in minutes from one viral short-form video, ruining customer loyalty more profoundly.
However, governments that want support from constituencies could soon see standards coming out of the woodwork that provides actual consequences for greenwashing accusations.
Does this work: Customer-led greenwashing claims sometimes divert customers away from brands, but it’s so minimal and short-lived that it doesn’t make a difference to the bottom lines. More aggressive regulatory action will need to keep corporations in the hot seat.
3. Corporate Disclosures Will Be the Name of the Game
The trend used to be making carbon-related or renewable energy pledges by a particular year. Pledges won’t be enough anymore — governments and customers will begin anticipating action upon those so-called pledges with intense scrutiny. Will companies keep their promises, or is everyone a greenwashing scandal waiting to happen?
Data tracking can prevent the destruction of many reputable companies. The trend will be increased transparency and consistent reporting based on published evidence. Everything from software to sensors can validate ESG, even when looking at air quality, waste management, and carbon emissions.
Shareholders will play a vital role in this as activism grows — in financing and disclosing ESG info. Shareholders have reputations on the line, and it’s easier for them to pull funding out of a company that would tarnish their image than a company to cover up greenwashing. Stakeholders pulling out of a company would get public admiration as they redistribute money to more ethical avenues.
Does this work: Strategies for gathering metrics are becoming easier to navigate and implement. Therefore, more companies should be able to provide evidence of their efforts, whether they’re making as much progress as promised. Luckily, activists and shareholders can realign corporations toward true sustainability.
How do companies translate that knowledge into the most well-known, actionable ESG objectives in response to these auditing actions?
1. Sending Workers Home
The remote and work-from-home revolution appears here to stay. Numerous companies are touting this newfound flexible scheduling benefit as a win for the planet.
Because of this, workers have higher standards and are negotiating with current and prospective employers to have hybrid or fully remote working capabilities. It has carbon-intensive commutes and technological strains on commercial buildings.
Does this work: Working from home has numerous benefits for the planet, despite an increase in electricity usage in some households. Offices are spending less on more intensive utilities. The extra amount for residential homes is negligible compared to energy-intensive office spaces with more than expensive electricity. In general, businesses can downsize these spaces to further ESG efforts.
2. Smarter Carbon Offsets
Carbon offsets have a mixed reputation. Everyone has seen a company say they’ll plant trees or offer carbon-offset shipping options. Is there validity behind these — usually premium — services?
Some offsetting companies claim to execute environmental advocacy that would neutralize company emissions. Some succeed. Others are too early in their tenure to execute long-term offset plans or greenwash their services themselves. Only some uphold their high standards. In time, corporations will be more decisive about who they partner with for practical, relevant carbon offsets related to their industries.
Does this work: Right now, carbon offsets do not work as effectively as they claim. Everyone must communicate with these outfits to see how they can deliver what their services promise.
3. Tackling Scope 3 Emissions
There are three scopes companies must meet within ESG compliance:
- Scope 1: Includes direct emissions enterprises make.
- Scope 2: Related to utilities and related services that are indirect.
- Scope 3: All indirect emissions from supply and value chains and customer-related end-of-life actions for products.
Companies with strong ESG principles must focus on the entire picture instead of only Scope 1. How are they empowering customers to treat products when finished with them? How are they helping and collaborating with communities and third-party providers to make their practices more sustainable throughout production?
Does this work: A long battle exists between corporate and individual responsibility for climate crisis burdens. If corporations and consumers struck the ideal compromise, it could have the most impactful influence in history.
However, when companies pressure customers to do most of the work, they question how companies tackle their side of the story when they generate more emissions. Ultimately, attacking Scope 3 can only work if businesses uphold their ESG promises for Scopes 1 and 2 before moving to customer-facing requests.
Making ESG Matter
ESG has had a recent reputation for not being taken seriously. Increasing climate responsibilities and urgency drive regulatory bodies, companies, and consumers to change their tune about upcoming ESG trends. As companies practice with implementation and execution, they will refine in time to become even more effective for public reception and the planet’s betterment.
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About the author
Rachel serves as the Assistant Editor of Environment.co. A true foodie and activist at heart, she loves covering topics ranging from veganism to off grid living.