Despite growing global momentum to curb greenwashing, financial and green analysts say the fact there are no uniform environmental, social and governance (ESG) and sustainability standards mean that even defining the problem, let alone finding consensus on it, is difficult.
This lack of uniform standards may change. The European Union and the US have drafted respective corporate disclosure rules, and the G20-backed International Sustainability Standards Board (ISSB) in February announced it would support two sets of rules ‒ one on climate and one on sustainability ‒ to form a “global baseline” beginning in 2024. ESG advocates said this could compel ‒ and incentivise ‒ companies to put climate at the core of their operations, and signal that greenwashing will not go unchecked.
In the interim it is essential for companies to have a clear view of what it means to claim to be “sustainable”, “100% recycled” or “environmentally friendly”. Overall, transparency and credibility in ESG reporting is crucial to avoiding being shamed because of “green sheen” marketing.
A recent event in Australia has thrown a spotlight on the increasing risks of greenwashing ‒ when companies make misleading claims about their environmental credentials. In February this year, the Australian Securities and Investments Commission filed a high-profile lawsuit claiming substantial damages against Mercer Superannuation, a pension fund, for alleged greenwashing regarding the sustainability of its investment options. It was decided by the courts that their investment options, including companies still involved in high carbon fuel extraction and processing, was misleading and insufficient care was taken in making these “sustainable investment” assertions. The courts drew a nexus between greenwashing and fraud and had little difficulty in awarding damages to the Commission.
Following suit, last month the Australian Competition and Consumer Commission revealed that over half of the 247 companies reviewed online for potential greenwashing had made "concerning claims" about their environmental credentials. In a statement, the watchdog noted that companies are obligated to substantiate any green or sustainable assertions with evidence such as reliable scientific reports, transparent supply chain information, and reputable third-party certification. The Commission said it is taking steps to name these companies and demand they rectify their misleading assertions.
ESG in Thailand: a wilting revolution?
It has been widely reported that it is becoming increasingly difficult to breathe in Thailand due to smoke from fires in northern Thailand, causing respiratory issues for many individuals and motor vehicle pollution rising in Bangkok. For at least seven days straight in April 2023, Chiang Mai ranked as the world’s most polluted city according to the Air Quality Index (AQI).
The fires are readily tracked using NASA satellites with imagery available to the general public through its ‘Fire Information for Resource Management System’. A number of the fires have been attributed to farms, and these farms supply some of Thailand’s biggest companies. The farmers complain that without assistance from the government, they are unable to afford the machinery to avoid burning the excess biomatter. There are clearly easy ways to prevent the unnecessary burning.
Research clearly indicates that addressing air pollution and environmental degradation has significant benefits for the climate, economy and people, but it hasn’t become a significant election issue. Overall, it seems that, at a minimum, the environmental components of ESG initiatives are still evolving in Thailand. How any ESG initiatives progress will largely depend on the way stakeholders and regulators hold Thai companies accountable for their actions and claims. However, regulatory intervention is rare in Thailand.
On a positive note, there have been several initiatives taken by both the Thai government and the private sector to promote ESG standards and reporting, including the Thailand Sustainable Investment (THSI) Initiative, launched in 2015, and the Bio-Circular-Green (BCG) economic model which aims to promote sustainable investment practices. Even the Stock Exchange of Thailand has introduced sustainability-related guidelines and reporting requirements, including the adoption of the Global Reporting Initiative (GRI).
ESG is slowly evolving in Thailand, but a lot will depend on the financial impact to Thai companies for not adopting a credible ESG agenda. Thailand has come a long way since the days of open building sites which allowed concrete dust to blanket Bangkok. Thailand also recently adjusted the level of PM 2.5 ppm from 50 microns down to 37.5 microns, but no real meaningful change was implemented to keep the air quality better aside from this change.
Western companies may create change as they are now demanding ESG and supply chain audits to assure they, themselves, can meet their more rigorous ESG reporting requirements. Time will tell whether this green sheen will last or if the dust from the bad air is already affecting its lustre.
By Dr Paul Crosio
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