45% of US Organizations Worry They are Participating in Greenwashing

Nearly half of U.S. organizations are worried they are unintentionally greenwashing, according to a new survey from Ivalua. 

In fact, 45% of companies said they were worried, and only 48% claimed they are “very confident” they can accurately report Scope 3 emissions. Another 62% in the survey said reporting on Scope 3 emissions felt like a best-guess measurement. 

Reporting Ramps Up

The survey findings come as reporting requirements for environment, social and governance are ramping up, with the European Union recently agreeing on its mandates for ESG ratings and the International Sustainability Standards Board issued its first-ever standards related to sustainability disclosures by companies last year.

However, just as companies aren’t sure if their own emissions reporting is solid, the vast majority of investors believe corporate reporting on sustainability performance contains at least some unsupported claims, according to a 2023 PwC survey.

Greenwashing typically misleads the public to believe that a company or entity is taking action to protect the environment, but actually promotes false solutions. For example, a company may claim to be on track to reach net zero emissions when it has no credible plan in place. 

The Securities and Exchange Commission is adding emissions disclosures including Scope 3 emissions in its long-awaited final Climate Disclosure Rule that was first proposed in March 2022, but organizations are still responsible for their own emissions management. Soon, companies will need to substantiate their emissions claims rather than rely on their best guesses.

Net-Zero Plans

Surprisingly, while most organizations in the survey agreed that the cost of not taking action would far outweigh the cost of implementing green initiatives, not all had comprehensive plans. Of the 88% that believed they were on track for meeting net-zero goals were actually missing out on key implementation plans, including adopting renewable energy (78%); reducing carbon emissions (68%); adopting circular economy principles (72%); reducing air pollution (67%); and reducing water pollution (63%).

“Many sustainability programs are in their infancy, and organizations need to start somewhere,” said Jarrod McAdoo, director of sustainable procurement at Ivalua. “Estimated data can help determine climate impact and contribute to building realistic, actionable net-zero plans. Over time, organizations will need to make significant progress on obtaining primary Scope 3 data and putting plans in place, or risk financial penalties as well as ruining reputations in the long run.”

Organizations also noted that working with suppliers is critical to achieving net-zero goals, and 26% cited supplier compliance as a top challenge to overcome.

“Nearly two-thirds of U.S. organizations agree that an inability to measure supplier emissions accurately makes it hard to turn words into action,” McAdoo said. “There is a clear need to adopt a smarter approach to procurement. Organizations need granular visibility into their supply chains to ensure they can measure the environmental impact of suppliers but also collaborate with suppliers to develop improvement plans. Only with this transparency can organizations showcase meaningful sustainability progress and avoid accusations of greenwashing.”