This journal aims to be a reliable early warning system for how frontier topics in governance and risk management are likely to impact the roles of governance professionals. This month’s CGj addresses one such topic – greenwashing.
Our cover story this month demonstrates that, while there is as yet no specific legislation addressing greenwashing in Hong Kong, making unsubstantiated or exaggerated claims about an organisation’s environmental standards entails very serious risks. These risks fall into two broad categories – regulatory and reputational.
In relation to the regulatory risks, organisations should not assume that the absence of specific greenwashing legislation in Hong Kong will reduce the likelihood of enforcement action. Our regulators have the ability to take action against companies making misleading statements and they have made it very clear that they intend to use such tools to crack down on greenwashing.
While these regulatory risks should be a sufficient disincentive to get caught up in greenwashing allegations, the reputational risks are likely to be even more serious. Issues relevant to environmental sustainability are the ultimate test of how genuine an organisation’s culture is. Lofty rhetoric about intentions to decarbonise or reduce environmental impacts is not what investors and other stakeholders are looking for – they want to see concrete actions and measurable targets. Where these are lacking, however impressive an organisation’s ESG or sustainability report might sound, the message they will be taking away will be that the organisation lacks integrity, honesty and, ultimately, credibility.
Our cover story this month does not leave the issue there however. It points out that the message for members of our profession is that seeing an organisation’s green credentials through a marketing lens is the wrong way to go – greenwashing is a governance issue. Avoiding the regulatory and reputational risks mentioned above will require boards to have sufficient expertise to address greenwashing issues. It will also require company secretaries to keep directors informed of developments relevant to greenwashing and to ensure that this issue is a regular item on the board’s discussion agenda.
Needless to say, to be effective in this role, company secretaries will need to remain well informed both of the rapidly evolving regulatory regime locally, regionally and internationally, but also the macro economic, social and political factors that are shaping this space. Greenwashing is one of those issues that perfectly demonstrates the necessity for members of our profession to take a broader view of compliance. In today’s operating environment, best practice is just as important as strict rule adherence and successful governance professionals are increasingly relied upon for strategic advice and good judgement, in addition to the technical skills in regulatory compliance that they bring to the organisations they work for.
Rest assured, this journal, along with our Institute’s broader CPD, research and thought leadership initiatives, will continue to help you rise to this challenge and stay tuned to the issues that really matter.
Our cover story this month demonstrates that, while there is as yet no specific legislation addressing greenwashing in Hong Kong, making unsubstantiated or exaggerated claims about an organisation’s environmental standards entails very serious risks. These risks fall into two broad categories – regulatory and reputational.
In relation to the regulatory risks, organisations should not assume that the absence of specific greenwashing legislation in Hong Kong will reduce the likelihood of enforcement action. Our regulators have the ability to take action against companies making misleading statements and they have made it very clear that they intend to use such tools to crack down on greenwashing.
While these regulatory risks should be a sufficient disincentive to get caught up in greenwashing allegations, the reputational risks are likely to be even more serious. Issues relevant to environmental sustainability are the ultimate test of how genuine an organisation’s culture is. Lofty rhetoric about intentions to decarbonise or reduce environmental impacts is not what investors and other stakeholders are looking for – they want to see concrete actions and measurable targets. Where these are lacking, however impressive an organisation’s ESG or sustainability report might sound, the message they will be taking away will be that the organisation lacks integrity, honesty and, ultimately, credibility.
Our cover story this month does not leave the issue there however. It points out that the message for members of our profession is that seeing an organisation’s green credentials through a marketing lens is the wrong way to go – greenwashing is a governance issue. Avoiding the regulatory and reputational risks mentioned above will require boards to have sufficient expertise to address greenwashing issues. It will also require company secretaries to keep directors informed of developments relevant to greenwashing and to ensure that this issue is a regular item on the board’s discussion agenda.
Needless to say, to be effective in this role, company secretaries will need to remain well informed both of the rapidly evolving regulatory regime locally, regionally and internationally, but also the macro economic, social and political factors that are shaping this space. Greenwashing is one of those issues that perfectly demonstrates the necessity for members of our profession to take a broader view of compliance. In today’s operating environment, best practice is just as important as strict rule adherence and successful governance professionals are increasingly relied upon for strategic advice and good judgement, in addition to the technical skills in regulatory compliance that they bring to the organisations they work for.
Rest assured, this journal, along with our Institute’s broader CPD, research and thought leadership initiatives, will continue to help you rise to this challenge and stay tuned to the issues that really matter.
