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ESG: are ICT companies guilty of greenwashing?

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Incredibly high temperatures remind us that we urgently need to reach net zero. Some experts say the ICT  sector produces 5.5% of the world’s GHGs, a billion metric tonnes of greenhouse gases every year. So if the industry can become more sustainable it will make a difference and companies want to communicate their progress. Unfortunately, some businesses have been guilty of making misleading statements in their advertising.

The technology sector is not necessarily bad, many technology companies are also helping to create more sustainable lifestyles, cutting emissions from travel and developing more energy efficient devices, and most recognise that ESG (environment, social and governmental) policy is a top priority. Accordingly, they are working on reducing their emissions and communicating their progress in their official reports and corporate messaging.

Are ICT companies mis-reporting their CO2 emissions?

Most companies are already taking steps to use energy and resources more responsibly and providing the necessary reports. However, there has been criticism that some may be overstating their sustainability credentials.

Researchers at the Technical University of Munich surveyed 56 large technology companies and found that many may be significantly under-reporting their Scope 3 emissions, maybe by as much as 50%. Scope 3 emissions are those created within a company’s supply chain. The data suggested that hardware companies tended to omit more than half of their Scope 3 emissions, and software companies up to half. This is significant because Scope 3 makes up the largest part of a company’s emissions; in the case of Cisco it is actually 99% of the total. This is serious.

To be fair, most businesses struggle with Scope 3 emissions which they cannot measure or control directly. Most are genuinely trying to find their way through the maze of legislation and make the necessary declarations. Ideally they would gather the data from their suppliers but this is challenging. Fortunately new tools are appearing on the market to make all this easier.

ESG remains full of pitfalls. For example, a business may have taken steps to reduce their own emissions but if it is owned by a holding company which has not done so, or if  it has a director who also sits on the board of a less sustainable business such as an oil company, this will damage its environmental credentials.

Besides this, ESG is not just about the environment, it is also about social and economic responsibility. Companies are expected to act responsibly in these areas as well.

Greenwashing explained and avoided

ESG reporting is now mandatory for large UK companies. Smaller companies may also want to make disclosures to reassure their customers and investors, but companies under pressure to make these reports should take care to be sure that they can’t be accused of “greenwashing”. This is where businesses try to appear more sustainable than they really are.

Last month the UK Advertising Standards Authority, ASA, advised Anglian Water to discontinue an advert with environmental statements which they felt were misleading while the authority releases untreated sewage into rivers. Similarly, the ASA slated Shell for advertising low carbon products while they continue to invest in the large scale production of oil and gas.

Although these two cases are not technology businesses we can learn from them. ICT businesses need to take care with their ESG messages. They should acknowledge that they create carbon and offer their employees and customers a balanced view supported by facts. The ASA has just published a comprehensive guide to environmental claims in advertising which may help you to present the facts responsibly in your corporate messages.

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