How academics are getting to grips with corporate greenwashing
With more firms self-promoting by virtue of their green credentials, how do we know what’s true?
What’s true, what’s a greenwash, and what’s out and out hogwash?
A whitewash gets a guilty perpetrator off the hook. A greenwash, the environmental equivalent, does the same for a business, at the expense of the planet.
But with more and more businesses promoting themselves by virtue of their green credentials, how do we know what’s true, what’s a greenwash, and what’s out and out hogwash?
A crack team of academics is on the case.
Sustainable finance takes centre-stage as investors reassess the risks attached to many sectors. Check out the Green Finance special report in full in Friday's print edition of The Irish Times, via The Irish Times ePaper, or via The Irish Times special reports digital hub.
The Greenwatch Project, which launched last year, is developing artificial intelligence-based methods to detect greenwashing, in order to improve the measurement of progress towards the UN’s Sustainable Development Goals (SDGs).
It was set up by Prof Andreas Hoepner full professor at UCD Michael Smurfit Business Graduate School.
The team includes Theodor Cojoianu, assistant professor at Queen’s University Belfast; Yanan Lin, a post-doctoral researcher at UCD’s Michael Smurfit Business Graduate School, and doctoral researcher Fabiola Schneider.
“The Greenwatch project looks to detect the pervasive practice of ‘greenwashing’ which is the attempt of corporations to mislead stakeholders, including investors, consumers and policymakers, by making inaccurate, exaggerated, or false claims on their environmental performance or sustainability,” explains Schneider.
The most direct impact of greenwashing is that it hampers the accurate measurement as well as meaningful progress towards the UN’s Sustainable Development Goals (SDGs), she says.
Both the EU Commission and the Irish Government have called for a sustainable finance policy that discourages greenwashing, but so far there are no tools to detect the type and extent of greenwashing practices taking place across different types of organisations.
“In the Ireland for Finance 2025 strategy for the Irish financial sector, the government envisages that Ireland could become a leader in the detection of greenwashing globally, in a similar manner to the way Ireland leads in anti-money laundering applications,” she points out.
“Detecting and discouraging greenwashing is crucial not only for developed countries, but equally important and even more so in the context of developing countries and emerging markets where progress on the SDGs is likely to have the most impact on the local population and economies.”
The Greenwatch Project is funded by Science Foundation Ireland’s Future Innovator Prize 2019, a challenge-based funding scheme for innovations around the theme of “Artificial Intelligence for Societal Good”. It is co-funded by the Department of Foreign Affairs and Trade.
The high-level interest no doubt reflects the scale of the greenwashing issue, which has caught some big-name brands in its net, such as car maker Volkswagen.
The new tool is set to have a significant impact on the investment sector too.
“The Greenwatch project employs a robust process to detect greenwashing and verify whether corporations are honest on their claims related to sustainable development performance. In the investment sector, the Greenwatch tool provides valuable information for investors to assess companies’ claims on their environmental performance,” explains Asst Prof Cojoianu.
It will enable investors to accurately measure whether companies are genuinely making progress towards climate change mitigation too, and assists investors to effectively allocate capital towards “green leaders” and away from “greenwashers”.
“The Greenwatch tool is also useful to rating agencies and data providers in improving the accuracy of dataset related to companies’ environmental performance. It will benefit policymakers to ensure the effectiveness of policies related to companies’ sustainable development activities,” he says.
Tariq Fancy, former chief investment officer for sustainable investing at BlackRock, an asset manager behemoth, suggested in a recent Guardian interview that climate crisis could in fact never be solved by today’s free markets.
For a man tasked with embedded ESG policies across BlackRock’s portfolio, it caused a stir.
“Tariq Fancy’s point in the article seems to focus on which way is more effective in pushing companies to address climate change – relying on free market versus government intervention,” says Yanan Lin.
“Mitigating climate change calls for joint efforts from the broader community including investors, policymakers, consumers, the media, the community and so on. While government intervention is useful to ensure climate change mitigation within the remit of a country, it is not able to deal with the cross-country capital flows in fossil fuels. In this respect, both government action and investor action are needed – such as debt denial of new fossil fuel infrastructure – to be able to deal with global problems such as climate change.”
The Greenwatch tool is currently at beta testing stage, gathering feedback from early users. Looks like it can’t come soon enough.