Can technology help tackle greenwashing?
By the end of this week, sustainable tech firms will have reached the deadline to pitch to the UK’s Financial Conduct Authority (FCA) how their digital tool can help combat greenwashing in the financial sector.
The “TechSprint”, led by the Global Financial Innovation Network (GFIN), among 13 other international regulators including the FCA, hopes to develop a tool or solution that can help regulators and the industry tackle the issue of false sustainability reporting and greenwashing in finance.
As it stands, sustainability reporting in the financial industry is primarily aligned with environmental, social, and governance (ESG) data. However, this method is proving controversial as corporations cut corners to tick boxes such as passing the blame for their emissions onto other companies and publicising only their green initiatives.
As clients and end consumers receive a product or a service, there’s a growing expectation for it to come from a company that is acting sustainably. Yet, some firms have been accused of spending more time and effort into appearing to be sustainable, without actually doing anything to cut emissions.
The reasons for a business investing more in a green image rather than taking any actionable efforts to reduce its carbon footprint often boils down to factors such as cost and time.
The head of the United Nation’s environment programme finance initiative Eric Usher admitted that becoming sustainable in the finance industry requires a complete redesign of their business model.
“Traditional risk (in the financial sector) looks at what failed in the past,” wrote Usher in a blog post by UNEP. “With climate change that doesn’t work. Now it’s about forecasting the future, which isn’t easy.”
A Google Cloud study on greenwashing and enterprises found that firms are often blaming their missed sustainability goals on macroeconomic factors and too much pressure on external parties, although this is arguable.
Most are not ignorant of these green tricks and workarounds within their own industries. For instance, in Google Cloud’s study, over 70% of executives believe that most organisations in their industry would be guilty of greenwashing if investigated thoroughly, and almost 60% admitted to exaggerating their own sustainability activities.
In the technology sector alone, a recent iResearch report found that 91% of its professionals believe some, if not all, companies within the industry are guilty of greenwashing.
Just this week, environmental thinktank Carbon Tracker Initiative found that people who have gone out of their way to invest their pensions into funds that are meant to claim green credentials are actually backing the world’s largest oil and gas companies. The thinktank found more than 160 funds with a green label held $4.6 billion in 15 companies including gas companies ExxonMobil, Chevron, and TotalEnergies.
Plus, in the past several years, many major banks including JP Morgan, Citibank and Bank of America have issued new green investment opportunities, but have since been discovered by the Rainforest Action Network to still be lending enormous sums to fossil fuels and deforestation.
Fossil fuel giants are, by no surprise, also culprits of greenwashing, particularly through marketing. Over the years, it has made notable public sustainability shows by renaming itself Beyond Petroleum, and making a point of broadcasting its addition of solar panels on its petrol stations. It also mainly focuses on advertising its low-carbon energy products, but still, almost double the amount of its spending on green energy will be spent on oil and gas this year according to its annual report.
Digital technologies, even those offering sustainable solutions, do have a tough balancing act between collecting data to provide such advanced technologies like artificial intelligence and machine learning, while also letting that load burn away significant amounts of energy in data centres.
Nevertheless, it will be these digital technologies that the FCA is looking for and according to Accenture’s Sustainable Finance Report, “having the right tools and services in place is critical to capturing and measuring ESG activities accurately and reducing greenwashing.”
While many companies are remaining guarded on the issue of their carbon emissions, many could be given the benefit of the doubt by simply not even knowing.
The second top reason for greenwashing is lacking the tools to measure it accurately, and with digital technologies, companies could have a much more transparent view that would in the long run offer financial gain for attracting more quality talent who cares about sustainability, and customers too.
Likely technologies for helping sustainable reporting include AI, which can provide data in real-time data relating to a firm’s carbon emissions as well as predicting its future footprint, based on data modelling – solving the challenge Usher pointed out with forecasting the future.
IoT devices such as sensors can also help keep track of emissions in office buildings, plus a variety of workplaces, and can send data on how much energy electronics such as the lights and machinery in the building are using too.
Plus, blockchain can offer an accurate and immutable tool that can monitor emissions by looking at the use of fuel, travel, and within their value chains.
With news from the World Meteorological Organisation (WMO) that global temperatures have a 66% chance of temporarily hitting 1.5 degrees Celsius of warming by 2027, big banks need to walk the talk and start reporting too.
With the anticipation of the help of digital tools submitted to the TechSprint, carbon reporting within this sector, as well as many others, will hopefully be more transparent and not only push the big banks to help the environment but allow their customers to know who to use for their own sustainability morals as well.
To read more on how digital technologies can help firms become more sustainable, click here for TechInformed’s Green Enterprise Technology Report.
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