The Role of Government in Reducing the Risk of Corporates Misusing Net Zero Commitments to Greenwash – By Ayushi Mistry
The Role of Government in Reducing the Risk of Corporates Misusing Net Zero Commitments to Greenwash – By Ayushi Mistry
Greenwashing refers to companies misrepresenting (intentionally or unintentionally) their environmental performance, leading to them misleading stakeholders about their actual environmental performance.
As net-zero targets have gained widespread adoption among corporations, the risk of greenwashing has escalated, raising concerns about the credibility of these commitments. This issue is critical because it represents a form of market failure where the lack of proper governance and clear frameworks allows corporations to make misleading environmental claims.
My research highlights several issues:
1. The frameworks governing net-zero commitments are inadequate and ambiguous. This lack of clarity leads to uncertainty about what constitutes a credible net-zero commitment, allowing firms to exploit these ambiguities to greenwash their environmental impact.
2. There is a pressing need for standardised definitions and robust regulations to enforce accountability. Governments must establish clear guidelines to differentiate between genuine commitments and greenwashing efforts.
3. Non-state actors, including NGOs and the private sector, play a crucial role in defining and promoting standards. However, their efforts have resulted in heterogeneous frameworks, creating confusion. Collaboration between governments and these actors is essential to develop unified standards and leverage their broader outreach and resources.
Key Recommendations to Governments and Policymakers
To enhance the credibility of net-zero commitments and to reduce the risk of corporations misusing these commitments to greenwash, governments and policymakers should:
1. Enhance Regulation to address ambiguities in current net zero frameworks. This includes implementing mandatory disclosure requirements with credible penalties for non-compliance. By enforcing stringent regulations, governments can ensure that corporate net-zero commitments are transparent and credible.
2. Regularly Evaluate and Update Regulation to adapt to changing circumstances. This approach will help identify and address loopholes, ensuring that regulations remain effective and relevant in the dynamic landscape of net-zero commitments.
3. Collaborate with Non-State Actors to enhance the effectiveness of anti-greenwashing strategies. By leveraging the resources and expertise of these actors, governments can develop more robust frameworks and improve communication regarding greenwashing issues.
Ayushi Mistry’s policy brief “The Government’s Role in reducing the Risk of Corporates Misusing Net Zero Commitments to Greenwash” was shortlisted for the Chronos Sustainability Undergraduate Prize 2024. Her policy brief can be found here
Ayushi has completed her undergraduate BSc Economics degree at LSE and is now moving on to work in Investment Banking at Santander.