Driving Authentic Sustainability: Leveraging Data Science to avoid Greenwashing
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Countries and corporations are incorporating environmental goals into their strategic plans and visions. Yet, a significant 59% of global executives worldwide admit to potential greenwashing due to inadequate measurement tools.
Sustainability has gained prominence among senior executives. According to GlobalData’s analysis1, the number of ESG mentions in company filings in APAC has grown from 1.2 million in 2018 to 2 million in 2022, indicating a CAGR of 13% between 2018 and 2022 (Fig. 1). According to the 2023 Google Cloud Sustainability Survey2, 96% of the 1,476 surveyed executives mentioned that their company has at least one program in place to advance their sustainability initiatives.
However, the growing emphasis on sustainability is not without its pitfalls. The same survey reveals a concerning trend: 59% of these executives within the same cohort acknowledge the overstatement of their organizations’ sustainability efforts, potentially indicating the presence of greenwashing (referring to the practice of providing misleading or incorrect information about a product or operation and their impact on the environment). And, 67% of the interviewees admitted their organizations do not have measurement tools in place to measure the impact of their actions, leading to uncertainty and potential misrepresentations of sustainability efforts.
Fig. 1. Mentions of ESG in Company Filings in APAC
What has been revealed in the survey is that despite a unanimous commitment to climate action, there exists a glaring gap in the availability of efficient data tools for measuring sustainability activities. It is crucial to recognize that making environmental claims without robust supporting evidence can pose substantial risks to a brand’s reputation. The burgeoning demand for verifiable ESG metrics, particularly in the APAC region, is primarily motivated by the influential forces of governmental bodies and discerning consumers.
According to The Organization for Economic Co-operation and Development (OECD), throughout the last two decades, APAC governments have been strengthening their environmental policies3 to catch up with Europe and North America (Fig. 2). On the demand side, the growing environmental awareness among APAC consumers has diminished the feasibility and profitability of climate effort inflation. An experimental study4 conducted by The Behavioural Insights Team reveals that when consumers identify greenwashing, it significantly undermines the company’s marketing activities and has the potential to negatively impact sales. Research5 shows that greenwashing will decrease brand credibility, which ultimately lowers customer purchase intention.
Fig. 2. OECD Environmental Policy Stringency Index Evolution in APAC, Europe and North America
Greenwashing issues in APAC have witnessed a notable upsurge. As the energy sector being a prime target, PetroChina and CNOOC in China faced criticisms from environmental activists for engaging in deceptive practices by procuring “carbon neutral” liquefied natural gas (LNG)6. Adaro Energy, the Indonesian coal giant, encountered challenges in securing funding for a $2 billion aluminum project that claimed to expedite the transition to sustainable energy but, in reality, relied heavily on coal-generated income7. Similarly, the vehicle industry (closely associated with energy consumption) has come under scrutiny for alleged greenwashing practices. Greenpeace Australia Pacific lodged a complaint with the Australian Competition and Consumer Commission against Toyota, citing misleading or deceptive environmental claims in the car manufacturer’s advertisements, which potentially created a misleading perception of the company’s leadership in clean vehicle transition8. These instances underscore the pressing need for increased transparency and authenticity in sustainability efforts across APAC brands.
We believe that both companies and individuals inherently aspire to make a positive impact. However, it is not easy task when a company does not have a reliable grasp of how their sustainability efforts are paying off. A brand cannot derive a good action plan if they are unable to measure sustainability efforts, which may lead to unintentional greenwashing. Therefore, it is fundamental to leverage technology to accurately measure the impact of sustainability efforts. The prevalence of vague or overstated greenwashing claims primarily originates from two challenges:
- Information Deficiency: The absence of energy and emission data across the company’s value chain hinders organizations from gaining a holistic understanding of their overall environmental impact.
- Knowledge Gaps: A lack of familiarity with sustainability reporting principles among management and employees can lead to misrepresentation of efforts or the use of ambiguous language.
Indeed, these challenges are not new. Companies have already demonstrated their commitment by investing in robust data collection, education, training, and the establishment of clearer reporting guidelines. However, these solutions require time for implementation and tangible outcomes, placing companies under immense pressure, particularly as sustainability goals often come with tight delivery timelines. Faced with such pressure, companies must seek innovative alternatives to overcome these obstacles and concentrate on actionable steps towards achieving their sustainability objectives.
Fortunately, recent advancements in technologies such as Machine Learning (ML) and Generative AI (GenAI) present an opportunity to expedite the process. Below are illustrations of how ML and GenAI can aide an organization’s sustainability efforts.
Empower Businesses with AI-powered carbon footprint emission prediction:
Carbon footprint emission calculation usually requires expert input and can be time-consuming, especially due to data scarcity and integrity along the entire value chain. Small and medium-sized enterprises (SMEs) often grapple with reporting challenges as they may lack the expertise required to assess their own carbon footprint emissions. Larger corporations face the ongoing struggle of obtaining precise reporting from their suppliers across the entire supply chain, both upstream and downstream.
At Ekimetrics, we firmly believe that measurement is the foundation of all actions. However, the focus should be on executing sustainable actions. We have developed a carbon emission prediction solution – Eki.Copilot – powered by AI, using the globally recognized Greenhouse Gas (GHG) framework. The solution enables companies to obtain carbon data estimates in minutes by providing a few data points, such as company size, key business activities, and product portfolios. This rapid understanding allows organizations to focus their energy on planning and executing subsequent actions, thereby driving their sustainability efforts forward.
Empower businesses with a GenAI-based ESG Assistant:
In the complex and ever-evolving realm of ESG, staying compliant and informed is a formidable challenge for businesses. Recognizing that in-depth ESG expertise is not feasible for all team members, Ekimetrics developed Eki.Copilot – a GenAI-powered assistant designed to simplify ESG compliance and knowledge. It functions as an expert chatbot, allowing users to interact and get answers to critical ESG-related questions. Whether it is understanding new regulations, implementing best practices, or simply gaining insight into ESG trends, Eki.Copilot is equipped to guide organizations.
In summary, the fight against greenwashing requires robust data tools for credible sustainability reporting. Leveraging advanced technologies like Machine Learning and Generate AI is critical. These tools provide carbon footprint assessments and simplify sustainability compliance, bridging knowledge gaps and ensuring authentic sustainability efforts. This technological embrace is key to achieving genuine environmental progress and maintaining consumer trust in an increasingly eco-conscious marketplace.
Ready to talk or curious to learn more about Ekimetrics? Reach out to our data experts to understand how your sustainability concerns can be tackled through data science.
1GlobalData, Asia-Pacific: ESG Mentions in Company Filings (2018 – 2022), 2023
2Google Cloud, 2023 Google Cloud Sustainability Survey, 2023
3OECD, Measuring Environmental Policy Stringency in OECD Countries, 2022
4The Behavioural Insights Team, Two Interventions for mitigating the harms of Greenwashing on consumer perceptions, 2023
5Ulun Akturan, How does greenwashing affect green branding equity and purchase intention? An empirical research, 2017
6Reuters, Greenpeace accuses China oil and gas firms of ‘greenwashing’ LNG purchases, 2023
7Financial Times, Indonesia’s Adaro struggles to secure funding for $2bn aluminium project, 2023
8Greenpeace, Greenpeace files ACCC greenwashing complaint against Toyota, 2023
