Ethics, the other ‘E’ of ESG

The need to eradicate bad actors that carry out greenwashing should not dissuade genuine companies from sharing their progress in sustainability as ESG disclosure and reporting become the norm.

ESG – the buzzword in the corporate world for the last few years – stands for environment, social and governance. Much has been written about each of these three aspects.

However, one other “e” which is increasingly looked into, is the “ethics” behind all three aspects. From the environmental side, greenwashing has emerged as a serious and complex ethical issue widely discussed and hotly debated on.

Defining the terms

Before delving into greenwashing in digital sustainability, it is important to understand greenwashing as a concept. The Merriam-Webster dictionary defines greenwashing as making a product, policy or practice “appear more environmentally friendly or less environmentally damaging than it really is”.

The United Nations Climate Action page goes one step further in listing several ways greenwashing can be seen. One of the listed examples include the intentional mislabelling of products as “green” or “eco-friendly” when there are no audits or tests backing the claim.

Another possible manifestation of greenwashing is when the sustainability attributes of a product is over-emphasised while the non-sustainable aspects are glossed over or completely omitted.

How prevalent is it?

Greenwashing is not limited to several bad actors from industries known for high carbon emissions. In fact, it is common in the digital space too.

One instance I regularly cite is the claim that technology solution providers make on how digitisation is guaranteed to reduce a company’s carbon footprint. The “going digital equals going green” mantra is greenwashing in the digital space.Chew: “Embracing digitisation brings access and opportunities, but it’s crucial to remember that going digital doesn’t always mean going green.”Chew: “Embracing digitisation brings access and opportunities, but it’s crucial to remember that going digital doesn’t always mean going green.”

This oft-repeated claim in mass advertising and even in some government messaging campaigns is a partial truth at best and blatant greenwashing at its worst. Consumers need to be keenly aware of this. For example, switching from physical mail to emails might eliminate the physical transportation of letters and reduce the manufacturing of envelopes. However, there is also a carbon footprint from the operation of cloud-based servers and the manufacturing of such electronic equipment in the first place.

Any reduction in physical carbon emissions needs to be weighed against the increase in digital carbon emissions. Digitisation is only good for the environment if there is an overall decrease in the carbon emission of the activity. That may not always be the case.

With reference to the prior illustration on physical mails compared to emails, a small-business owner can send a large volume of emails at a high frequency throughout the year to keep his or her prospective clients engaged. When compared to the limited number of physical mail this small-business owner could have otherwise afforded to send – potentially several hundred mailers only during the festive season – there is arguably a net increase in overall carbon emissions through digitisation.

Digitisation, therefore, does not only democratise access and opportunity, it also lowers the barrier of entry to emit carbon dioxide. Corporates and the general public wanting to avoid greenwashing need to be mindful that going digital does not always equate to going green.

Avoiding the other extreme

While governments, corporates and the public should be encouraged to strongly oppose greenwashing, caution must be exercised to ensure that there is no extreme swing to the opposite side of the spectrum. Overtly harsh responses to unintentional ESG reporting lapses by well-meaning companies may well result in further harm. In response to potential public relations backlash on greenwashing, there has been an anecdotal rise in “green-hushing” – which is the deliberate hiding or under-reporting of ESG related work from the general public to evade scrutiny.

As recently as 2022, a report by sustainability consultant South Pole stated that almost 25% of 1,200 companies with a head of sustainability were not sharing about their ESG achievements beyond the “bare minimum”.

The need to eradicate bad actors that carry out greenwashing should not dissuade genuine companies from sharing their progress in sustainability. Companies sharing their success in achieving environmental related goals can encourage collaboration and inspire others. As such, it is critical to ensure a balanced approach in encouraging ethical behaviour.

‘E’ for ethics, ‘E’ for Everyone

With global warming accelerating and the urgency to tackle climate change ever increasing, it is important to harness ethical behaviour when dealing with both sustainability in general and in the digital space.

Behavioural nudges via government incentives and guidelines can help steer the majority of corporates in the right direction.

Calling out unethical behaviour – and perhaps even penalising such behaviour - could also have a deterrent effect against bad actors.

The letter “e” is the most common letter in the English alphabet and perhaps, that serves to remind us that “e” also stands for everyone. It is only through collective awareness and action that ethical ESG behaviour can be encouraged and continued for the benefit of all.

Ian Chew is founder of Greenie Web – a climate tech startup that decarbonises computer code. Since its inception in 2009, Greenie Web has evolved from a side project to a full-fledged digital decarbonisation start-up that focuses on sustainable digitisation in the B2G and B2B space.

The views expressed here are the writer’s own.

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