Convergence of Authenticity in Environmental Preservation

Convergence of Authenticity in Environmental Preservation

In the world of Environmental, Social, and Governance (ESG), let's talk salt—not the seasoning we add to our meals, but a metaphor. This mineral, so essential to human life, is known for its ability to preserve and enhance. Yet, it's important to remember the Ghanaian proverb, "salt does not praise itself." This saying suggests that individuals should let their good deeds speak for them, rather than bragging about their qualities. This can be applied to investors and companies when it comes to their environmental sustainability disclosures.

Is it all show and no go when it comes to companies' commitment to ESG practices? How can we ensure that we, as consumers or community members, aren't being duped by profit-hungry investors at the expense of our well-being? This is where the concept of greenwashing raises its head.

Greenwashing, Unmasked

Greenwashing is a cunning communication strategy often employed by corporations to leave a false impression that they're compliant with ESG standards. They may exaggerate their environmental sustainability practices or hide lapses in their own operations or those of their suppliers. The goal? To improve their brand image in the public eye. From the perspective of this assistant, greenwashing is a self-serving move aimed at short-term profits, disregarding the risks it poses to long-term opportunities from genuine sustainability practices. In time, the truth will inevitably come to light, leading to fines, tarnished reputations, bad press, or, in extreme cases, regulatory sanctions.

Sustainability Assurance for Transparency

Sustainability assurance is the tool used to evaluate a company's commitment to ESG standards across their policies and practices. This process bridges the gap between corporate social responsibility and environmental compliance, verifying a company's adherence to sustainability standards and creating value for all stakeholders. The primary objective of sustainability assurance is to demonstrate transparency and accountability to stakeholders, particularly consumers, regarding the sustainability of companies in their communities.

Regular evaluations of a company's ESG performance are crucial because the external environment is continuously evolving and can impact a company's operations. Sustainability assurance typically requires an independent third-party to verify a company's sustainability practices, ensuring the integrity of their sustainability disclosures and the way their data is collected, governed, and controlled.

The need for sustainability assurance has grown in response to consumers demanding eco-friendly goods and services. However, there's a disagreement on sustainability disclosures between various standards, creating challenges for multinational companies trying to comply with a variety of ESG standards in different countries.

Conflicting Standards, Competing Interests

Navigating between ESG standards of parent companies and host countries can be a dilemma for independent third-parties. They must decide which standards to adopt, what information to report, and how to report it, considering the various standards available, such as the SASB, ESRS, EU Taxonomy, GRI, TCFD, CDP, GHG Protocol, and ISO guidelines.

As of February 2023, the International Sustainability Standard Board (ISSB) has been deliberating on its Exposure Drafts S1-General Sustainability-related Disclosures (draft 1) and IFRS S2-Climate-related Disclosures (draft 2). Harmonizing all ESG-related standards would offer a single reference point for stakeholders, including governments, investors, and communities. However, conflicting interests and the resources required to address environmental sustainability projects and activities pose a challenge.

A Comprehensive Approach

Despite the array of standards and conflicting interests, a sustainable sustainability assurance exercise must be thorough by disclosing all relevant information related to a company's sustainability impacts. There are three main factors influencing the standards an independent third-party can employ for sustainability assurance exercises and reporting: regulatory requirements, industry practices, and investors' interests. By considering all these factors, a comprehensive sustainability assurance process will safeguard the interests of all stakeholders by upholding environmental sustainability principles.

Companies that wholeheartedly integrate environmental sustainability practices into their operations and regularly undergo sustainability assurance from independent third-parties continue to earn the trust and support of their customers. But barriers still exist in the pursuit of sustainability assurance. Some companies view it as a low priority, opting not to disclose their sustainability information. Others may lack knowledge or awareness of how to document their sustainability impacts. In some instances, they are deterred by the cost implications and lack a dedicated team to coordinate their environmental sustainability programs. All these interrelated issues explain the importance of sustainability assurance.

BERNARD BEMPONG

Bernard is a chartered accountant with over 14 years of professional and industry experience in financial services and management consultancy. He is the Managing Partner of J.S Morlu (Ghana), an international consulting firm providing accounting, tax, auditing, IT solutions, and business advisory services to private businesses and government.

Our office is located at Lagos Avenue, East Legon, Accra.

Contact: +233 302 528 977 or 233 244 566 092

Website: www.jsmorlu.com.gh

So, who's the salt of the earth when it comes to sustainability assurance? That would be the independent third-parties who play a crucial role in ensuring transparency, accuracy, and credibility of sustainability claims, ultimately helping to prevent greenwashing in ESG practices and supporting genuine sustainability efforts.

1. In the realm of Environmental, Social, and Governance (ESG), the need for transparency regarding sustainability practices is paramount, as greenwashing can mislead consumers and undermine well-being.
2. Sustainability assurance, a tool used to evaluate a company's ESG compliance, bridges the gap between corporate social responsibility and environmental compliance, providing transparency and accountability.
3. Regular evaluations of a company's ESG performance are essential due to the ever-evolving external environment, ensuring the integrity of disclosures and the accurate collection, governance, and control of data.
4. The harmonization of all ESG-related standards would offer a single reference point for stakeholders, simplifying the reporting process for multinational companies facing a variety of ESG standards across different countries.
5. Independent third-parties, responsible for sustainability assurance, must navigate between various ESG standards, making informed decisions about which standards to adopt, what information to report, and how to report it.
6. A comprehensive sustainability assurance process considers regulatory requirements, industry practices, and investors' interests to safeguard the interests of all stakeholders by upholding environmental sustainability principles.
7. In the world of sustainability assurance, independent third-parties play a critical role in ensuring transparency, accuracy, and credibility of sustainability claims, helping to prevent greenwashing and support genuine sustainability efforts.

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