Paying Attention to the Risks of “Greenwashing”
ESG Special Topic Series (XIV) - Paying Attention to the Risks of “Greenwashing”
Apart from the requirements for listed companies and investors, the establishment of ESG systems generally follow voluntary standards. To what extent can investors claim that they have established ESG concepts and practices? It is not a black-and-white issue; the key point is whether the ESG statements are based on scientific governance systems and supported by factual data. Taking time to consider the following questions regarding climate change may be helpful.
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Reflections on “Greenwashing”
Traditional “greenwashing” activities include the over-exaggeration of a company’s achievements in environmental protection and deliberately hiding ecological misdeeds. We realize that greenwashing is not limited to the act of making misleading or false statements or the legal risks related to the violation of environmental commitments. (The large number of ESG-related penalties published by the SEC can provide examples.) Internationally, climate litigation cases provide warnings: failure to absorb the spirit of the Paris Agreement to make commitments, or making abstract or unclear commitments, may entail legal risks to enterprises. However, legal risks are just the tip of the iceberg for ESG compliance.
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Issues Worth Examining
by Managers and Investors
On the issue of climate change, managers and investors may consider the following questions:
Have they assessed the risk of climate change?
What criteria has been used to assess the risk of climate change?
What kind of climate change risk management objectives have been established?
Have they established company policies and disclosure mechanisms around these objectives?
Are the policies and objectives relating to climate change specific, clear and binding in the long term, and consistent with the industry’s character, status and influence?
Are the statements accurate when disclosing information to interested parties in specific projects, and when disclosing information in the ESG, CSR and annual reports?
When it comes to listed companies, the following questions may also arise:
Have comprehensive, sufficient and accurate statements been made to investors in the information disclosure in the prospectuses or the ESG, CSR and annual reports?
Has the data in the prospectuses disclosed to investors, or the ESG, CSR and annual reports, been independently verified by a professional external appraisal institution?
Have the commitments in the prospectus or CSR reports been abided to? Has any business (including investment and financing) that is against ESG and the concept of sustainability been engaged in?
Have irrelevant ethical signals been made in ESG, CSR and annual reports, such as highlighting initiatives in carbon awareness, when such efforts have a minimal effect on reducing the overall carbon footprint?
Is there a serious gap between climate change plans and action? This could be the gap between the level of ex ante announcements of carbon data (including net zero emissions targets, carbon reduction commitments, etc.) and the level of ex post measurement, reporting and the verification of emissions.
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Our Expectations
China has signed the Paris Agreement and the ESG era has arrived. This signals increasingly stringent domestic regulations and the emergence of voluntary standards for ESG disclosure requirements for state-owned assets companies and listed companies. We expect that more and more enterprises and investors will pay attention to ESG and put these principles into practice. Companies will strive to become “responsible corporate citizens,” and explore ways to gradually implement ESG management and investment systems.
JunHe offers various services to establish and/or improve ESG-related investment or management systems, as well as legal and ESG due diligence investigations. We provide assistance in deal structuring, draft and review transaction documents in relation to M&A transactions and investment projects, as well as draft and review ESG reports, disclosure documents, policies and rules. If you require ESG training or any other ESG-related services, please contact us via email: ecoenvpro@junhe.com.
JunHe’s EHS and ESG Team: JunHe, with over 1,070 professionals, is one of China’s largest full-service law firms with a stellar international reputation for providing high quality legal services. As one of the pioneers in the practice area of ESG in China and with one of the largest teams of environment, health and safety (EHS) lawyers in the country, JunHe provides clients with a full range of EHS and ESG legal services. JunHe is sustainability-oriented and provides EHS compliance audit services to enterprises with different industrial backgrounds depending on the specific needs of the clients, either alone or in collaboration with third-party agencies. JunHe relies on different legal and professional compliance teams (including ESG, EHS, antitrust, labor and employment, intellectual property, trade and data, finance and tax, business, criminal compliance and other professional teams related to ESG) to provide ESG due diligence services in supply chain management and M&A matters. JunHe’s EHS and ESG Team cooperates with enterprises and third-party agencies in drafting ESG reports. Based on our experience in serving clients from different industrial backgrounds, we can provide specialized services for the daily operations of enterprises. This includes specialized ESG-related legal and compliance diagnosis, as well as drafting and reviewing ESG-related terms and clauses in contracts with business partners, construction and enhancement of ESG systems, identification of ESG disclosure requirements, green finance, and ESG training.
George Zhu
zhuh@junhe.com
Practice Area
Corporate and M&A
Infrastructure and Project Finance
Environmental, Health and Safety Compliance
Environmental, Social and Governance
Carey Ni
Partner
nitl@junhe.com
Practice Area
Environmental, Health and Safety Compliance
Environmental, Social and Governance
Corporate and M&A
HUANG, Zhilian
huangzhl@junhe.com
ESG Series
Key Compliance Issues under New Carbon Emission Trading Rules
Breaking News：The National Carbon Emission Trade Scheme is Officially Launched
Policy Developments regarding Carbon Footprint and Challenges for Companies
Origin: From EHS to ESG
EHS Compliance Audit Deconstructing ESG Practice
Changes to ESG Disclosure Rules at the SSE STAR Market
ESG Management for PE Funds: Our Responses to Common Questions
Deconstructing ESG: The Determination of Material Topics
Deconstructing ESG Supply Chain Management
Comments regarding “Enterprises ESG Disclosure Guidance”
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