ESG uncovered: One in four cases of ESG risks linked to greenwashing

Incidents of corporate risk have surged, as cases of greenwashing rise. Now, one in four climate-related ESG risks globally can be linked to greenwashing, which is up by 20% compared with last year. Leading ESG data science firm RepRisk’s latest report reviews the last 12 months of risk incident data (September 2022 – September 2023) – and finds an increase in ‘symbolic sustainability’.

Firms expecting a competitive advantage from presenting a sustainable image are increasingly utilising greenwashing and social washing. Now, we are seeing the impacts. Incidents of climate-related risk are only increasing, with the majority linked to deceptive labeling and misleading communications, according to RepRisk’s research.

Taking a look at the report’s conclusions, we explore the importance of authentic, accountable, high-quality ESG communications, and the risks of greenwashing and social washing.

Greenwashing

Concerningly, the survey has shown that greenwashing is still on the rise. Now, one in every four corporate risk cases are tied to greenwashing, compared with last year’s one in five. Misleading communication surrounding environmental practice is damaging to company reputation, impacting the trust held with stakeholders and customers while dramatically increasing corporate risk.

At its core, greenwashing causes misrepresentation. Importantly, we are seeing the malpractice undermine collective efforts to improve sustainable practices and reporting. We know that transparency is the catalyst for competitive opportunity, our ‘Anti-Greenwash Playbook’ is a great first-step guide to understanding the complexities behind greenwashing.

As more regulations emerge in the UK and EU to tackle misleading communications, ensuring ESG messaging is formed from high-quality, consistent data is the most effective method to mitigate risk.

Social washing

Warning of the extended risks of greenwashing, the report found 55% of companies tied to greenwashed practices were also associated with social washing. Social washing refers to misleading communications surrounding a company’s commitment to social issues, often in an attempt to safeguard reputation and performance.

Importantly, the survey identified that when both environmental and social issues are present, corporate risk incidents are 20% more severe than cases of greenwashing alone. Demonstrating how social and environmental risk come hand in hand highlights the importance of tackling ESG communications with a holistic vision. As we see increasing importance placed on the management of social issues from both internal and external stakeholders, securing a clear, consistent ESG communication strategy is the best route to mitigating risk.

The need for transparent ESG messaging

Over the past year, 1,850 companies in Europe and the Americas were linked to a risk incident involving misleading ESG communication, with 1,160 (63%) associated with the issue for the first time, according to the report. The data shows that greenwashing risk is not limited to public entities and private companies are also exposed, with 73% of greenwashing risk incidents captured over the past year involved at least one private company.

With expectations for corporate sustainable practices on the rise, the landscape for risk has become more complex. Now, a lack of structure and accountability is obscuring the vision for what ESG reporting should be.

Many companies simply don’t know where to start, or worse, get caught attempting to sell unfounded claims.

At Content Coms, we utilise our sector expertise to navigate the ever-evolving landscape of sustainability, working with our clients to understand their values, mitigating green and social washing risk with results-led communications. With B Corp values at the forefront of our service, our award-winning in-house ESG team and wider network of experts simplify the procedure for effective ESG comms.

ESG communications can be complicated – let us make them simple.  Got a vision? Get in touch – we’d love to hear from you!