Greenwashing: Changing Paradigm of ESG in Australia and Canada

There is a growing expectation from company stakeholders, government, society and the general public for companies to tackle climate and environmental issues. A McKinsey & Co. survey found that 66 % of all the consumers surveyed consider sustainability when making a purchase. There is also a global move towards embracing corporate social responsibility (CSR), also referred to as environmental, social and governance (ESG), aimed at achieving sustainability through the sustainable development goals (SDG) of the United Nations (UN).

Given the increased pressure from stakeholders and competitors, some businesses resort to greenwashing to form a positive impression about environmental issues related to their businesses. Greenwashing is when a business makes a false claim about its products or services to combat environmental concerns to attract customers, investors and other stakeholders. Recently many companies have come into the limelight for instances where they have made dubious marketing claims about their green initiatives. This problem stems from the lack of a transparent, consistent and standardised approach to evaluating the sustainability practices of companies across the globe. In the absence of any clear guidelines, it is challenging for investors and other stakeholders to compare the sustainability practices and claims of different companies. This challenge highlights the need for a regulatory framework in each country to protect investors from misleading sustainability and environmentally friendly claims. The current article aims to highlight a few such cases of greenwashing in Australia and Canada that have instigated not only heavy fines/penalties for such companies but have paved the way for ESG regulations in the future.