Ensuring your green credentials stand up to scrutiny

With the green agenda steadily gathering in importance for consumers, organisations are increasingly feeling the pressure to demonstrate their green credentials. This is a matter of social responsibility and good ethics; it has also become an area of competition to attract consumer business and show differentiation, as well as to respond to disclosure requirements such as TCFD (Taskforce on Climate-related Financial Disclosures) and the forthcoming European and international sustainability standards, which include the CSRD (EU’s Corporate Sustainability Reporting Directive).

As the effects of climate change are increasingly felt and the net zero transition intensifies, these pressures are only going to rise. Consumer demand for sustainable products and services will grow, and regulatory requirements expand. Last month, we saw the launch of the TNFD framework (Taskforce on Nature-related Financial Disclosures), while the ISSB (International Sustainability Standards Board) and EFRAG (European Financial Reporting Advisory Group) both published new sustainability reporting standards in the summer. The SEC (US Securities and Exchange Commission) is expected to release its climate disclosure rules soon.

Richard Andrews

Head of Environmental, Social and Governance (ESG)

KPMG in the UK

Consumers boycotting ‘greenwashers’

This isn’t just an issue for the future. KPMG research shows that it is already a live issue for consumers. Our recent study of over 2,000 UK adults found that two-thirds (67 percent) say they try to seek out green or sustainable options for some of the products or services they buy and over half (54 percent) would stop buying from a company if they were found to have been misleading in their sustainability claims. Nearly one in five (18 percent) said they had already abandoned a brand over concerns about greenwashing.

This means greenwashing is an important commercial and reputational issue that needs to be on the radar at Board level. No organisation can afford to lose market share and revenue through making inaccurate sustainability claims or omitting information about its impact on the environment or society.

Of course, there are different kinds and degree of greenwashing. The most egregious cases are calculated and deliberate – a simple attempt to look better than is actually the case. But in many instances, it is often unintentional and the result of incomplete or inaccurate data.

Gathering robust data

It’s essential for organisations to ensure that they have the systems, processes and controls in place to gather robust data, verify it, and report it in a balanced and accurate way. Only then can they show the outside world that they are taking the green agenda seriously, measuring their position, and taking action to improve.

Increasingly, this will also mean that sustainability and climate-related reporting needs to be externally assured by an independent third party, not least driven by mandatory assurance required under the CSRD and the likely direction of travel when the UK adopts the ISSB standards.

However, as a fast-moving and evolving issue, many organisations may face challenges creating the processes and controls to ensure data is robust enough to meet external assurance requirements. A period of preparation, bedding in and addressing teething problems is likely to be needed.

Are you ready for assurance?

For that reason, organisations would be well-advised to go through a readiness assessment to review and test their systems, processes and controls and the robustness of data capture, and recommend any remediations or improvements needed upfront. There is a way to go on this – in KPMG’s recently launched global ESG Assurance Maturity Index, three quarters of businesses do not feel ready for such assurance.

Fixing issues in advance will also save businesses the potential reputational damage of failing to secure assurance of their sustainability claims.

Leaders pulling ahead

Leading organisations are already advanced in their preparations, knowing that getting the sustainability agenda and its reporting right is a matter of both strategic and commercial importance.

The rest need to catch up. Companies that aren’t in control of their data or that are found guilty of greenwashing could suffer business and reputational damage that takes a long time to repair.

The time to get ready is now.

For more information on how to get started on your journey, get in touch with our team:

Nehal Jilka

Ross Molyneux

George Richards