The green betrayal: Consumers and investors are being duped
This week investors and shareholders have been given a glimpse of the extent to which their trust has been betrayed by corporations marketing false, misleading claims about their green credentials.
Millions of Australians who choose a managed fund based on its ESG (environmental, social, and governance) credentials and those that prioritise eco-friendly, socially responsible goods and services, have been duped by deceptive marketing claims that consumers are incapable of verifying.
The scale of this cozenage is now in focus as a regulatory pincer movement is beginning. The Australian Securities and Investments Commission this week launched legal action against retail superannuation giant Mercer for allegedly misleading members about its green credentials.
And the Australian Competition and Consumer Commission backed up on Thursday by issuing research that found more than half of the businesses it had monitored had made “concerning claims” about their environment or sustainability practices.
The issue is exacerbated by a lack of transparency, deficient or inconsistent guidelines to measure what are often vague references to things like “sustainable” or “zero emissions”, “non-polluting” displayed on goods and their packaging.
Companies are adroit at capitalising on the increasing consumer desire to do their part in improving their environment and reducing their own carbon footprint or their social duty by fostering inclusion.
As consumers or investors we are too often trusting of the claims made and/or unable to verify them.
For a while now ASIC has been tinkering around the edges of dealing with funds that engage in greenwashing, but this week it took a targeted strike against one of the largest and most respected asset managers, Mercer Superannuation Australia.
Based on the allegations made by ASIC, Mercer was a large target, and one which the regulator presumably believed would act as a strong warning to others.
ASIC alleges Mercer made statements on its website about seven “Sustainable Plus” investment options offered by the Mercer Super Trust, of which Mercer is the trustee. It marketed the Sustainable Plus options as suitable for members who “are deeply committed to sustainability” because they excluded investments in companies involved in carbon intensive fossil fuels such as thermal coal and companies involved in alcohol production and gambling.
As consumers or investors we are too often trusting of the claims made and/or unable to verify them.
But these sustainable funds had investments in Australia’s biggest emitter, AGL, pure-play coal company Whitehaven, and resources giants BHP and Glencore. There were 15 companies in the portfolio that produced alcohol, including Treasury Wine Estates, Budweiser and Heineken, and 19 companies involved in gambling including Crown, Tabcorp and Aristocrat.
Until this week, ASIC had issued $140,000 of infringement notices to fund managers and corporations for greenwashing.
This amount is tiny in the scheme of things and reflects that ASIC has belatedly included greenwashing as one of its priorities.
ASIC chairman Joe Longo said it had long supported voluntary disclosures on climate-related disclosure but was now a convert to the need for mandated climate-related reporting.
The ACCC, which has been on the greenwashing bandwagon for longer, nominated several industries where concerns were identified – including cosmetics, food and packaging, cars and energy.
The competition regulator’s “sweep” of companies identified a number of issues around greenwashing that included vague or unqualified claims, a lack of substantiating information and the use of absolute terms such as “100 per cent plastic-free”, “made from 100 per cent recycled content” or “zero emissions”.
The ACCC is concerned businesses may be exaggerating the sustainability benefits of their products or omitting negative attributes.
For example: a business promoting its investments in renewable energy projects, but still sourcing most of its products from fossil-fuel based industries.
Or what about the business asserting a product is recyclable or compostable when there is no system in place to collect it.
And beware of the business that claims offsetting its carbon emissions has a “positive” impact on the environment but it hasn’t taken steps to reduce its overall emissions.
There were also explicit claims made about compliance with environmental regulations.
But how does the consumer wade through a confusing array of promotional material and weasel words to find the truth? They can’t.
That’s a task for the competition and corporate cops.
So when it comes to ESG it’s buyer beware.
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Source: Thanks smh.com