In the last five years, the push for a green-first attitude has become extremely prevalent in the fintech sphere. However, some firms are going too far, reveals Ivalua, the cloud-based spend management software provider, and unintentionally greenwashing.
Greenwashing, the practice of exaggerating a company’s or product’s green credentials, thereby misleading consumers and hindering meaningful climate action, has become a mainstream thing that many firms wish to avoid. In 2022, a Google Cloud report revealed that 58 per cent of executives believed their companies were overstating their green initiatives. While there has been a strong effort to be rid of greenwashing, research from Ivalua has shown that 53 per cent of firms are still doing it unintentionally.
“Organisations are aware they must urgently address sustainability, and understand the cost consequences of not doing so. But this lack of confidence paints a negative picture,” comments Jarrod McAdoo, director of sustainable procurement at Ivalua. “A lack of perceived progress could fuel accusations and fears of greenwashing, so it’s important to remember that obtaining Scope 3 data is part of the natural maturation process.”
The study reveals that less than half (44 per cent) of organisations claim they are “very confident” that they can “accurately” report on Scope 3 emissions. While nearly two-thirds (61 per cent) say reporting on Scope 3 emissions feels like a ‘best-guess’ measurement.
Proactively managing Scope 3 reporting
With the UK government considering the inclusion of Scope 3 emission disclosure within the Streamlined Energy and Carbon Reporting (SECR) framework, it’s imperative organisations manage Scope 3 reporting proactively. Over time, organisations must substantiate green claims with verifiable data rather than relying on best guesses.
The research also shows nearly two-thirds of organisations agree that the cost of not taking action will far outweigh the cost of implementing green initiatives. But while 87 per cent of organisations are confident they’re on track to meet net zero targets, many don’t have comprehensive, fully implemented plans in place for:
Adopting renewable energy (77 per cent)
Reducing carbon emissions (73 per cent)
Adopting circular economy principles (73 per cent)
Reducing air pollution (71 per cent)
Reducing water pollution (68 per cent)
McAdoo added: “Many sustainability programs are in their infancy, and organisations need to start somewhere. Estimated data can help determine climate impact and contribute to building realistic, actionable net zero plans. Over time, organisations will need to make significant progress on obtaining primary Scope 3 data and putting plans in place, or risk financial penalties as well as ruining reputations in the long run.”
How to build trust
“The findings demonstrate that to build trust and credibility in sustainability programmes, organisations need to find ways to best measure and gauge the impact of their Scope 3 emissions,” said Oliver Hurrey, founder and chair, Scope 3 Peer Group.
“But absolute accuracy could be hard to achieve without significant investment. Organisations shouldn’t spend time and money fixating on 100 per cent accuracy. Instead, they need to equip procurement teams and the wider business with good data and insights. This will empower procurement teams to start taking action to identify unsustainable suppliers and ensure the business is headed in a greener direction.”
Working with suppliers will be critical in achieving net zero. The research found that over half (55 per cent) of organisations agree that green initiatives to reach net zero goals that don’t involve suppliers are a waste of time. Ineffective supplier collaboration (26 per cent) was also among the top challenges organisations must overcome, with other challenges including:
Other objectives being prioritised, such as cost and risk (27 per cent)
Supplier resistance to reduce emissions (26 per cent)
Supplier inability to assess emissions (25 per cent)
Poor visibility into sub-tier suppliers (22 per cent)
Incomplete, absent or unreliable data on sustainability (22 per cent)
“Nearly two-thirds of organisations agree that an inability to measure supplier emissions accurately makes it hard to turn words into action”, concluded McAdoo.
“There is a clear need to adopt a smarter approach to procurement. Organisations need granular visibility into their supply chains to ensure they can measure the environmental impact of suppliers, but also collaborate with suppliers to develop improvement plans. Only with this transparency can organisations showcase meaningful sustainability progress and avoid accusations of greenwashing.”