Stringent greenwash curbs are coming to Asia. How can companies prepare?
Greenwashing has emerged as a leading material risk for businesses globally and in Asia. In this latest subscriber-exclusive newsletter, part of a series of special updates from the Eco-Business ESG Intelligence team on trends and insights relevant for businesses and corporate executives in the region, we zoom in on the emerging rules and regulations on greenwashing which could change how organisations communicate and disclose their sustainability-related goals.
Greenwashing happens when an organisation makes a false, misleading, or inaccurate claim about the environmental benefits of their products, services, or practices. Exaggerated, misleading, falsified, or unsubstantiated “green” or “sustainable” claims are leaving companies around the world - even in Asia - exposed to rising regulatory clampdown, increasing consumer pressure, and targeted media scrutiny.
The challenge for organisations, especially those with genuine intent to “go green,” is how to communicate their sustainability efforts honestly, transparently, and in way that can be backed by facts and evidence. The United Nations highlighted some of the main ways companies perpetuate greenwashing – from misleading “eco-friendly” labels to vague and unsubstantiated green claims.
In this edition, we draw on key insights from Eco-Business' ESG Intelligence Briefing, “Greenwashing risks: all you need to know,” focusing on the emerging trends and regulations designed to eradicate greenwashing from the corporate landscape.
Our monthly virtual Intelligence briefings condense the latest developments in ESG and sustainability for practitioners and senior leaders. This month's upcoming briefing will put a spotlight on sustainable aviation, as we discuss the challenges and opportunities of decarbonisation, featuring guest-speaker Gabriel Ho from the Asia Sustainable Aviation Fuel Association. To find out more and register, click here.
Development of a global baseline: The ISSB dissclosure standards aim to create a “consistent, comparable and verifiable” baseline for companies to report their sustainability risks and performance, addressing key weak points which had allowed greenwashing to occur in the first place.
The new set of standards is backed by G20 economies and built off the Task Force on Climate-related Financial Disclosures or TCFD, signalling greater harmonisation across international benchmarks.
Major economies in Asia, including Singapore and Malaysia, are planning to integrate ISSB into disclosure requirements to keep pace with global developments.
While assurance – or third-party verification – is not directly within ISSB’s remit, investors and consumers alike continue to pressure companies to transparently disclose their sustainability risks in lieu of direct regulation.
"The ISSB framework raises the level of disclosures in terms of the data that we will see companies report quantitatively and qualitatively. In Asia, different companies are at different stages of maturity in disclosures, but organisations are starting to realise that greenwashing builds a lot of mistrust and the public and consumers will reject it. They must guard against the erosion of trust, and at the same time they should not be discouraged and continue to try to communicate their green credentials.”
— Jessica Cheam, Founder and Managing Director, Eco-Business
🏭To watch: Scope 3 Greenwashing risks
A push for greater transparency and disclosure:SBTi, alongside carbon disclosure databases like CDP, regularly track companies’ climate ambitions against science-based and Paris-aligned pathways. These independent databases have limited companies’ scope to engage in greenwashing.
These independent bodies help to hold organisations accountable for their climate commitments, discouraging greenwashing and ensuring that their actions are aligned with their stated goals.
📰 The role of the advertising and public relations industry
The communications industry is also taking a hard stance against companies potentially guilty of greenwashing, heeding calls by António Guterres, Secretary-General for the United Nations, to “stop acting as enablers to planetary destruction.”
The Clean Creatives Pledge is a call to action to categorically decline work with the fossil fuel industry, recognising the role the advertising and PR industry plays in helping fossil fuel companies resist international pressures.
"Many people in the industry think we are mad men if we walk away from millions of dollars that can be made if we decide to take on the accounts of fossil fuel clients. Some argue that we need to have a seat at the table and change can happen from within if we work with these clients. I think we have seen that that is not true. By the time the agencies or consultants get involved and we are at the table, the menu is fixed. Our role is just to help neutralise the image.”
— Lin Kuek, Managing Director, Singapore and Head of Sustainability Communications, Asean, Vero
🏛️ Countering greenwash
Regulations are swiftly emerging in response to the rise of unverified green claims. Here are some jurisdictions that have introduced law or signalled their intent to crackdown on corporate greenwashing:
All products and services claiming to be "eco-friendly" or "green" are required to be clear, comprehensive, data-backed, and extend to the product or service’s entire lifecycle – from production to disposal. Failure to address these codes can lead to regulatory action by UK authorities.
Latest updates: The Council of the EU adopted approach in June 2024
What is it?
A set of directives requiring all green claims and labels to be reliable, comparable, and verifiable across European Union markets. Green claims and labels need to be approved by an independent and accredited verifier.
A classification system established to provide a common language for investors and businesses to understand and compare green investments, setting a clear criteria for sustainable activities.
Latest updates: Currently in draft, with guidelines to be released in October
What is it?
The South Korean government plans to introduce heavy fines (3 million Korean won) for companies found to have engaged in misleading or false green claims. This is part of wider efforts in the country to strengthen its environmental laws.
Provides detailed thresholds and criteria for defining green and transition activities across eight sectors using a traffic light classification system, identifying green (sustainable), amber (transition) and red (ineligible) activities.
Singapore Green Claims Guidelines
Jurisdiction: Singapore
Latest updates: Currently under development
What is it?
In response to the rise of greenwashing claims, the Competition and Consumer Commission of Singapore (CCCS) is developing a set of guidelines to provide greater clarity to suppliers on the environmental claims that could amount to unfair practices under the Consumer Protection (Fair Trading) Act.
Though the regulatory landscape remains inconsistent, countries across the globe could take a cue from these markets amid growing calls to nip greenwashing practices in the bud.
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