'Greenwashing' and why companies should avoid it
Some companies are manipulating the content of their public reports in order to make their operations appear ‘greener’.
Dr. Gaia Melloni of the University of East Anglia, UK, led the study which examined a sample of firms involved in a pilot programme to produce integrated reports. These reports should were designed to communicate more concisely how a company’s strategy, governance, performance, and prospects – in the content of its external environment – lead to the creation of sustainable value. The reports should be balanced, including any relevant information, positive or negative.
The findings, however, published in the Journal of Accounting & Public Policy, show that in the presence of the company’s weak financial performance, the integrated report tends to be significantly longer, less readable and concise, and more optimistic – therefore, less balanced – which suggests attempts to ‘greenwash’ the true performance picture.
Businesses with a worse social performance were also found to provide reports that disclosed less information on their environmental, social, and governance issues.
Dr. Melloni said of the research: “Our evidence implies that early adopters of integrated reporting manipulate the content and tone of their reports as an impression management strategy. The lower the performance, the poorer the disclosure.
“The results also suggest that such strategies depend not only on the level of firms’ performance but also on the type of performance, for example financial versus sustainability.
“One of the main challenges when you are studying communications on sustainability is whether companies are reporting what they are actually doing. The big issue here is that companies are using integrated reporting to greenwash, to make up for very poor actions on their environmental and social impact.”
Melloni and colleagues Dr. Ariela Caglio from Bocconi University, Italy, and Dr. Paolo Perego of Erasmus University Rotterdam, The Netherlands, focused on 148 integrated reports issued by 74 firms. They examined conciseness and completeness/balance in the reports, which covered industries including oil and gas, utilities, financial and consumer goods, healthcare, and technology and telecommunication. They also looked at the quality of communication and the relationship between what was reported and performance.
Melloni said producing good quality reports had implications for firms’ reputations: “Companies cannot only report the positives if they want to be credible. Integrated reporting allows firms to talk about the future, something traditional reports don’t particularly like. If they include less positive details but set out what actions are going to be taken to address those, shareholders will want to know that.
“If there is a consistent message and firms are seen to be taking action, it can improve their reputation and make them more appealing, for example to staff, as a potential employer and to investors.”
‘Saying More with Less? Disclosure Conciseness, Completeness and Balance in Integrated Reports’, Gaia Melloni, Ariela Caglio and Paolo Perego, is published in the Journal of Accounting and Public Policy.
Read the April 2017 edition of Energy Digital magazine
Trafigura and Yara International explore clean ammonia usage
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How more than 70,000 ships can decrease their reliance on carbon-based sources is one of transport's most pressing decarbonisation challenges.
Yara and Trafigura intend to collaborate on initiatives that will establish themselves in the clean ammonia value chain. Under the MoU announced today, Trafigura and Yara intend to work together in the following areas:
- The supply of clean ammonia by Yara to Trafigura Group companies
- Exploration of joint R&D initiatives for clean ammonia application as a marine fuel
- Development of new clean ammonia assets including marine fuel infrastructure and market opportunities
Magnus Krogh Ankarstrand, President of Yara Clean Ammonia, said the agreement is a good example of cross-industry collaboration to develop and promote zero-emission fuel in the form of clean ammonia for the shipping industry. "Building clean ammonia value chains is critical to facilitate the transition to zero emission fuels by enabling the hydrogen economy – not least within trade and distribution where both Yara and Trafigura have leading capabilities. Demand and supply of clean ammonia need to be developed in tandem," he said.
There is a growing consensus that hydrogen-based fuels will ultimately be the shipping fuels of the future, but clear and comprehensive regulation is essential, according to Jose Maria Larocca, Executive Director and Co-Head of Oil Trading for Trafigura.
Ammonia has a number of properties that require "further investigation," according to Wartsila. "It ignites and burns poorly compared to other fuels and is toxic and corrosive, making safe handling and storage important. Burning ammonia could also lead to higher NOx emissions unless controlled either by aftertreatment or by optimising the combustion process," it notes.
Trafigura has co-sponsored the R&D of MAN Energy Solutions’ ammonia-fuelled engine for maritime vessels, has performed in-depth studies of transport fuels with reduced greenhouse gas emissions, and has published a white paper on the need for a global carbon levy for shipping fuels to be introduced by International Maritime Organization.
Oslo-based Yara produces roughly 8.5 million tonnes of ammonia annually and employs a fleet of 11 ammonia carriers, including 5 fully owned ships, and owns 18 marine ammonia terminals with 580 kt of storage capacity – enabling it to produce and deliver ammonia across the globe.
It recently established a new clean ammonia unit to capture growth opportunities in emission-free fuel for shipping and power, carbon-free fertilizer and ammonia for industrial applications.