- Published: Fri, Nov 25, 2022 08:55
In this Q&A-style article, Gartner Vice President and Advisory Ian Beale discusses the risks and implications of greenwashing. Greenwashing is the misleading of investors, regulators, and the public about the environmental impact of a product or service, whether intentional or not by an organization.
Q: Why has concern about greenwashing risks accelerated in 2022?
A: As a result of staggering climate change on our planet, business is expected to play an active and visible role in accelerating the transition to a carbon-free world. Consumers, investors, regulators, employees, and the media therefore need to understand what companies are saying and, more importantly, what they are doing – that they are doing enough. whether they are, whether they are acting quickly enough, and whether they accurately convey the big picture in their announcements.
Q: How can an organization be exposed to greenwashing risks?
A: The CEO can make announcements about company performance and plans. They may sign up for protocols and commit the company to specific goals, targets and timelines. We may do this because we try to earn. Unless the process is in place, there is a risk that the wrong objectives will be chosen and the company’s strategy will not be aligned. Resources are not directed to appropriate activities and goals are not achieved.
In today’s world of 24/7 news and instant social media commentary, if a statement is issued and not delivered, or if inaccurate information is reported (whether intentionally or inadvertently), a prompt and have a negative impact. The consequences could be more serious for investors and whether companies are considered “investable” by his ESG mandate. Moreover, the transition to, for example, a carbon-neutral or carbon-negative world presents enormous business opportunities, but without proper strategy, governance, management and reporting, these benefits can be missed.
Q: What role should internal audit play in identifying and mitigating greenwashing risks?
A: First, Audit can challenge commitments made by management. For example, does management make genuine and substantive commitments to meet applicable protocols, and does management align these commitments with new protocols announced by the United Nations or others? Are you aware of the regulations you need and are you making the best decisions when regulations appear to conflict or overlap?
Internal audit leaders need to ensure that the appropriate management teams (in terms of seniority and expertise) are clearly accountable and empowered to carry out the necessary activities quickly enough. We also need to ensure that progress and performance are accurately and consistently reported internally, and that the right metrics are reported externally in the right context and fully, accurately and honestly.
Q: Can the above be achieved by enhancing existing internal audit processes, or does the organization need special controls for this risk?
A: These approaches use standard auditing techniques to understand processes, assess risks to adequately achieve stated objectives, and assess those risks within agreed and defined tolerances. Map the necessary controls to mitigate This approach uses auditing skills to identify and collect data, challenge management, categorically criticize plans and statements, and maintain independence (a key friend in this rapidly changing field). ), you must interact professionally with senior management. All essential.
It is clear that many teams will need to improve their skills in the specific ESG areas most important to their organization so that they can properly assess management statements, activities and system data. This is always necessary in new and evolving complex risk areas.
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