No credible plan ….. Maryam Khan
WHILE impulsively buying clothes online, many of you must have noticed a pop-up informing you about the sustainability policy of the company from which you are making the purchase. That information is likely to be fabricated. According to Reuters, textile industries generate over 10 per cent of total global carbon emissions. And yet increasingly, every year, firms — and not necessarily in the apparel industry — want to broadcast their ‘environmentally friendly’ policies. So, how should you research your purchase? The answer is to notlisten to what the companies themselves say about their sustainability policies. There is a good chance it is an attempt at ‘greenwashing’, or misrepresenting the facts.
‘Greenwashing’ is a term that originated after sustainability and climate action became a Sustainable Development Goal. Ever since the Covid-19 pandemic, consumers have become more aware of their behaviour patterns, and care about the environment at large. Wanting to cater to this, companies now care about the climate too. Still, some of them take the more symbolic route that reinforces sustainability as the norm, but their words do not translate into concrete action. These firms provide only ad hoc ‘win-win’actions that do not make a real difference. A classic example, which has been reported, is that of Inditex, the parent company of Zara. The company claims it is aiming for net zero emissions by 2050. However, a recent analysis by Carbon Market Watch finds the plan to be “uncertain and unsubstantiated”.
Why is the pledge not unique? MNCs are talking about climate more than ever, but a majority of such claims seems to be a questionable concept of ‘sustainability’ and ‘net zero’. CDP, the Carbon Disclosure Project, asserts that some 4,000 companies claim they have “transition plans” compatible with the Paris Agreement, while only 80 appear to actually have “credible” plans.
However, there is something in the world of financial regulation that could help. With incoming regulations, corporations will be legally required to disclose information regarding their emissions, even Scope 3 emissions, which is the technical term for supply chain emissions.
Companies must disclose their emissions.
Pushing companies to release details about the climate risk posed by their operations is a relatively new concept, but it is inspired by the classic recipe of financial disclosures to curb tax evasion. The essence of emission disclosure is that in modern times, emissions have become material — and firms already producing large amounts are considered a threat. They are likely to witness duties, taxes, even lawsuits. In this context, many would be well acquainted with how Exxon’s reputation suffered during the last decade. So, emission disclosure is an industry-transforming regulatory shift that will help investors assess how much climate risk a company poses. Some of these rules assert that companies need to disclose their emissions for their supply (indirect) chains. These emissions are on average 12 times higher than operational (direct) emissions, and ignoring them or conveniently not adding them to disclosure reports amounts to greenwashing.
Europe is taking the lead in the attempt to counter greenwashing, as it makes some information mandatory and non-compensable. In finance circles, this category of disclosures is referred to as ‘double materiality’. It revolves round the concept of third-party impact: for instance, while a potential investor does not care if a company is dumping waste into the river, the town located downstream does. Double materiality asserts that corporations have ethical responsibilities to entities that are stakeholders. It is a radical approach adopted by the EU to ensure a more definitive way of countering greenwashing.
Where does this leave the Global South, which is more a recipient of, and less a contributor to, global emissions? Africa’s carbon market serves as a positive example, where high-income countries (they produce more emissions) are allowed to emit a certain amount of carbon.
In return, they must promote sustainable development projects in Africa. Compare it to a child who is promised a reward at the end of every lesson he or she completes. The carbon offset market works in the same way. Although still relatively new, African credits have grown by 35pc over the last six years.
Pakistan, too, could be a venue for the upcoming carbon market, with CPEC giving us room to expand projects encompassing the sea and land. If leveraged intelligently, it can be successful. The future is, after all, sustainable development and growth, which means countering greenwashing by all means available.
The writer works as an ESG (environmental, social and governance) specialist in New York and Pakistan.
Courtesy Dawn, October 7th, 2023