Research Seminar by Magdalena Krukowska

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Impact of the EU legislation on CSR and sustainability issues on the prevention of greenwashing and social washing practices

The HSBC survey shows that as much as 97% European companies intend to start the transition to CSR/ESG-friendly business models within the next 5 years. ESG-related assets are likely to exceed $50 trillion by 2025, when they will represent more than 1/3 of the projected global assets. Additionally, more than 90% of S&P 500 companies now publish ESG reports. In practice, however, the CSR/ESG label does not necessarily means what it should. The surveyed European investors admit that issuers need to improve the quality of disclosure of environmental information, they are also concerned about greenwashing/socialwashing. There is also growing pressure from consumers and regulators (a 2021 report published by the UK Competition and Markets Authority found that 40% of green claims made online were potentially misleading). The nebulous nature of CSR and/or ESG is clearly illustrated by even the lack of agreement on its meaning.

The European Commission (EC) has put greenwashing at the front and centre of its agenda. Its aim is to prevent consumers from being misled by unsubstantiated or inaccurate ESG claims, and to require disclosure of ESG data so entities along the value chain can make informed decisions on which materials or products to purchase and to whom they should sell. That is why in June 2022 the project of Directive on Corporate Sustainability Reporting Directive (CSRD) was published to replace the current Non-Financial Reporting Directive (NFRD) and works on EU's common sustainability reporting are supposed to be finished in 2022. Currently, there are no common standards in place enabling a comparison of the sustainability information published by different entities. Moreover, in its proposal for a Corporate Sustainability Due Diligence Directive adopted in February 2022, the Commission set out due diligence obligations for larger companies to identify, prevent, mitigate and account for actual and potential adverse impacts on human rights.

However, many NGO’s points out that new directives (especially CSDD) might not prevent companies from green/social washing practices as that directive does not cover sufficiently all human rights and environmental impacts, it targets only very large companies meeting high employee and turnover thresholds and does not cover business relations outside of companies formal subsidiaries. Besides, already existing legislature (SFDR and NFDR) has not prevented the companies from greenwashing, still investing in „dirty” fuels or not complying with UN development goals. That is why the thorough and constant research is still needed to check if and how the new EU legislation will really prevent greenwashing and social washing practices.

Magdalena Krukowska's Bio

Magdalena Krukowska, PhD: https://www.linkedin.com/in/magdalenakrukowska/

Scientist with specialization in CSR/ESG/sustainability issues, visiting professor of Koźminski University in Poland, journalist of the Polish edition of Forbes magazine (editor of CSR section), host of the Forbes #wecare program. Fellow of the Bernheim Foundation in UCLouvain (2017) and fellow of the Japan Foundation, Kobe University (2013). Author of several hundred articles on ethics and corporate social responsibility, global problems related to sustainable development. Co-founder of the first Corporate Social Responsibility index in Central and Eastern Europe listed at the Warsaw Stock Exchange. Author and co-author of the books: "How to assess the corporate responsibility", "Responsible education management", "Ethical Business". Author of the film reportages "Mantra of Bhutan", "Shule Bora", "War for the minerals of war", broadcasted, among others in VOD.pl, TVN24, forbes.pl and of the documentary „New City" about the environmental and social costs of building the alternative capital of the Philippines.