Page 12 - Luce 2024

P oint of View

Nevertheless, ‘cracking down’ cannot be the only steel. There are questions as to how to decarbonise the built
way forward environment, for example, when there is joint ownership of
Despite the increase in legal interventions to address homes in a large apartment building.
greenwashing, it might be surprising that I am not wholly
convinced that this should be the primary strategy to ensure Despite the fact that there are not yet clear pathways forward,
companies and financial institutions contribute to urgent some have suggested that we should be encouraging entities
climate action. to make big commitments to decarbonise their actions and
then to figure out how they are going to get there once they’ve
Certainly, it is important that companies and financial made the commitments.
institutions are held accountable for the claims made about
their greenwashing. Again, this could potentially put companies and financial
sector entities at risk of allegations of greenwashing. In this
This is for many reasons, including that consumers need to context, cracking down on greenwashing might not be the
be able to make decisions that have a factual basis. Failing to best way forward. It could, potentially, deter companies and
make credible green claims might undermine new markets financial institutions from making commitments on climate
for green products. More fundamentally, misleading and change.
deceptive green claims undermine achieving the goals of the
Paris Agreement. Charting a greener course?
At the end of the day what we really want is for businesses,
Indeed, legal interventions discussed above seem to be financial entities, companies, investors, and others, to support
prioritising the most serious conduct that undermines action the goals of the Paris Agreement.
on climate change.
I do not dispute that greenwashing enforcement action has to
However, I would argue that simply ‘cracking down’ on be an essential part of the effort to transition towards a clean
greenwashing can sometimes fail to acknowledge that what energy future.
is being asked of companies and financial institutions is both
transformative, in terms of how business is done, and really Indeed, regulators ought to make it clear that they will
hard. prioritise enforcement actions where there is an intention or
recklessness to engage in misleading and deceptive conduct,
Why is company and business action on climate or where there is actual harm caused by the greenwashing
change so hard? conduct.
Climate change demands a radical transformation in how
companies and financial sector entities have operated to However, addressing greenwashing is only one part of the
date. For example, traditional financial accounting required story. There need to be creative ways of thinking about how to
entities to look at their past balance sheets and to make transform business.
projections based on this as to how they expect to fare into
the future. For very good reasons, there are strong legal So how can this be done?
protections in place to ensure that these projections must As a lawyer, I would suggest that law and regulation are
have a reasonable basis in fact. crucial in supporting business to transition and align with the
goals of the Paris Agreement.
However, climate change accounting requires a different
approach. Entities cannot simply make decisions based on For example, we could be creating ‘regulatory sandboxes’,
what has gone previously. They are being asked to engage digital platforms or real-life workshops, where companies and
in scenario analysis i.e. thinking about how the world will financial institutions have space to experiment on how they
look in a future warmed by climate change, take actions are going to make changes, encouraging collaboration with
aligned with these, and then disclose their planned actions to policymakers and civil society.
investors and others.
In addition, our policymakers and regulators could be, and
All this is inherently speculative and opens them up to are, issuing clearer guidance as to what they expect business
allegations of greenwashing. In other words, they are being and financial institutions to do.
asked to make plans for the future but they might not be sure
as to how they are going to get there. Businesses and financial institutions themselves need to take
responsibility for their actions. There needs to be, and is, a
There is concern from some that companies and financial ‘step change’ in industry in recognising that climate change
institutions are becoming less likely to engage in such poses risks and opportunities, and that they need to take
forecasting and behavioural change for fear of being credible action to survive in a net zero world.
taken to court for greenwashing if they fail to meet these
commitments, despite their best efforts to do so. In addition, Where does this leave us? I, personally, am hopeful about the
at the moment, for many issues and sectors, there are not future. Perhaps this is naive. Perhaps we need to be hopeful.
clear pathways towards 1.5°C or 2°C. But I have seen much change already, in businesses, financial
institutions, governments and beyond. And I am confident that
For example while it is fairly obvious that fossil fuel more is yet to come.
companies need to transition away from thermal coal,
at the moment, coking coal is still essential to producing

12 LUCE Number 22 2023