Higher levels of greenhouse gasses produced by businesses initially result in negative associations from stakeholders, however, a company’s market value remains positively linked if they promise climate change initiatives, new research shows.
An analysis published by the British Journal of Management found the actual outcome of sustainability measures is less important than the optics they create, blurring the line between authentic environmental improvements and deceptive corporate greenwashing. The study reviewed 592 firms from 35 countries that have operated between 2002 and 2019
“Despite the steadily growing research within the climate change literature, limited attention has so far been paid to process-based corporate climate change initiatives aimed at improving corporate carbon performance by actual emissions and financial outcomes,” the study reads.
The research compared the effects of carbon reduction measures and the actual outcome of these measures amongst companies operating in various national economies. The data also considered the impact of carbon-reduction measures being moderated by company boards.
The findings demonstrated that, although carbon emissions rose along with climate change initiatives, low results from those projects did not actually weaken company value.
“The presence of a board sustainability committee, which plays a crucial role in designing environmental initiatives and introducing the best sustainability management practices, was also associated with higher greenhouse gas emissions,” read a press release.
The authors of this study suggest that companies are likely to deploy greenwashing strategies to “create positive impressions among stakeholders and protect legitimacy.”
Although carbon-reduction boards throughout companies are working to promote sustainability and satisfy stakeholders, researchers suggest that deeper investigations should be conducted on the results of such efforts to ensure that measures are actually achieving what they set out to do, rather than just appearing to do so.
“We suggest that examining the moderating role of sustainability boards in this context may provide useful insights into corporate climate change strategies/practices across countries with different institutional frameworks and regulatory systems,” the study says.
Amazon is another company with ambitious climate-related objectives, the retail giant is aiming to achieve net zero by 2040 as part of its Climate Pledge, 10 years ahead of the Paris Agreement requirement. Despite outlining strong climate targets, Amazon’s recently published ESG report for 2021 revealed an 18% increase in its overall footprint.
It’s important to note that while some companies may see short-term benefits from misrepresenting their sustainable activities, being accused of greenwashing can erode consumer trust and undermine the credibility of genuine sustainability efforts within the organisation. The repercussions of such accusations can have long-lasting ramifications on a business’s bottom line.
To avoid the risks associated with Greenwashing, make sure to learn the 5 ways to avoid Greenwashing accusations.
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