Weekly Report – ESG

Environment

Greenwashing lawsuit reinforces importance of environmental transparency for businesses

On 6 July, KLM was sued by environmental groups Fossielvrij NL, ClientEarth and Reclame Fossielvrij for allegedly “greenwashing” in their ‘Fly Responsibly’ campaign. Greenwashing is defined as disinformation disseminated by an organization to present an environmentally responsible public image. A spokesperson from ClientEarth said KLM’s advertising breaches the Dutch implementation of the European Union’s Unfair Commercial Practices Directive by giving customers a false impression that flights would not exacerbate the climate emergency. In recent years the EU has put ESG at the centre of its regulatory framework to prevent greenwashing and provide increased transparency to investors.

Businesses operating within and outside of the aviation sector should be aware of the increased scrutiny they face from stakeholders for greenwashing. There is a notable uptick in stakeholders holding companies accountable for their operations not aligning with national and international sustainability campaigns following COP26 and further indications of global warming. To mitigate against reputational damage through greenwashing, companies such as Vienna-based RHI Magnesita, have opted for more transparent Carbon emissions reporting. RHI Magnesita is the first company within the refractory industry to do so. While RHI Magnesita still releases tonnes of CO2 into the atmosphere every year, more transparent Carbon emissions reporting has persuaded stakeholders that the company is taking steps to reduce its environmental impact by setting realistic targets over time. Other companies can equally benefit from transparent reporting as it demonstrates to stakeholders that the business is aware of its impact on the environment, and can therefore change to greener and more sustainable operations over time.

Social

Insufficient support for free school meals over summer offers businesses an opportunity to demonstrate social responsibility

 High demand for the UK Government’s Holiday Activities and Food Programme means not all eligible children will receive free school meals over the summer holidays. The programme is run by local councils, providing holiday clubs for children receiving free school meals. The  cost of living crisis has left many families struggling as vouchers from councils to help feed their children do not stretch as far as they did. Russia’s war in Ukraine and the global economy recovering from the Covid-19 pandemic have resulted in inflation rates hitting a 40 year high of 9.4%, and subsequently increased the number of families reliant on free school meals by 10% over the last year.

As the cost of living crisis worsens, businesses have an opportunity to demonstrate their social responsibility by backing local functions like the Holiday Activities and Food Programme through donations, volunteering or fundraising. Local initiatives can build a positive relationship with community members and initiate social change. Businesses displaying corporate social responsibility will see a number of benefits including greater employee retention levels as studies found employees took pride in businesses reflecting the same ethical standards as them. In 2021, the pandemic encouraged US-company Synchrony Finance to offer greater support to their communities by creating a virtual summer camp for children, and subsequently secured a 92% approval rating from employees, and a certification for being a great place to work by Great Place to Work. Synchrony Finance’s initiative demonstrates that corporate social responsibility can have a positive impact on their surrounding environments and initiate change by building trust within local areas.

Governance

Menstrual leave policies show how good corporate governance practices can boost inclusivity and productivity in the workplace

Companies and countries like Spain are looking to adopt menstrual leave policies for impacted staff, offering paid time off and flexible work times over one - three days per month to accommodate for period pain. Menstrual policies are a good form of corporate practice as it can boost inclusivity and productivity in the workplace by removing the stigma around periods.

Companies which refrain from adopting good corporate practices like menstruation policies have faced legal backlash. In 2021, ex-CEO of Asiana Airlines, Mr. Kim, was fined for refusing 138 requests for menstrual leave in 2014 and 2015 by 15 flight attendants. Mr. Kim claimed that this was because there were “many suspicious cases” where “employees requested leave around holidays”. While there is a risk that employees could exploit the policy, the potential positive impact of menstrual policies outweighs the risk of employees abusing the policy as it can boost inclusivity and productivity. A 2019 Radboud University survey involving 32,748 women in the Netherlands found period symptoms account for an average of nine days of lost productivity per person per annum. If companies prioritise the wellbeing of individuals in the workplace by implementing menstruation policies, they actually place themselves in a better position as employees feel more energised to put work into a company which values their best interests.

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The ESG Weekly supports businesses on their journey to incorporating more sustainable business practices. The piece analyses three current news stories through an Environmental, Social and Governance lens. The Weekly touches on a range of important topics including how businesses can mitigate reputational risk by avoiding greenwashing; participate in social change by giving back to communities; and incorporate corporate governance practices to boost inclusivity in the workplace.

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