Measures urged to mitigate ESG 'greenwashing' risks

Promotional pitfalls

A recent widely known greenwashing lawsuit involved the fast-fashion brand H&M, which was accused of making misleading claims about its products in order to capitalize on consumer green trends.

Bien Wong, board governor and honorary treasurer at Friends of the Earth (HK), said that over 60 percent of people in the US are willing to pay extra for sustainable products and products with sustainable packaging, so many brands claim their products are sustainable — but the public needs to know the reality behind such promotions.

"We need some incentives and penalties because everything has a price and everything needs a price," he said.

Lit Ping Low, PwC Asia Pacific ESG climate change partner, believes some of the risks stem from a lack of understanding. "When we say 'green product', what does it mean?" she asked.

The key to resolving such problems, she said, is to raise public awareness, and to make sure that management teams, marketing teams and senior management teams understand what they mean when they make specific claims, and to make sure those claims can be supported by evidence.

As an expert in the field, Low has reviewed ESG reports from many companies and has noticed that most of them disclose only the positive aspects of their approach. "There is nothing wrong with talking about challenges. Companies should be able to be transparent and say they are still facing challenges and not doing enough in certain areas, and how they are putting in more efforts to manage their risks," she said.

Linda Ho, CEO of Green Council, a nonprofit environmental organization and certification body, emphasized the importance of investigating onsite to see if what the companies write in their ESG reports can be factually supported.

Vivi Hu, CEO and co-founder of ESG data and analytics fintech firm YoujiVest Technology, is a firm believer in the importance of technology and sustainability investment, and said that technology and data analysis can help resolve transparency issues in ESG practices.

"Instead of relying on annual ESG reports only, our technology can cross-check their information with real-time performance."