Digital technology can play a crucial role in efforts to eradicate the use of greenwashing – the presentation of false information to improve an organisation’s environmental, social, and governance (ESG) practices and ratings.
This is according to Wale Arewa, CEO of IT asset disposition company Xperien, who adds that businesses are now paying closer attention to ESG.
“Businesses want to capitalise on related benefits like optimised risk management, secure investment, cost reduction, increased worker productivity, and creating an atmosphere conducive to innovation,” says Arewa.
These benefits are compelling and, in some instances, lead to businesses manipulating ESG data to secure these advantages.
“Tech plays a pivotal role in holding companies accountable for their environmental claims, especially in the IT recycling environment,” says Arewa.
“While precise statistics regarding the prevalence of greenwashing in South Africa are not readily available, heightened public awareness of environmental issues underscores the urgency of addressing deceptive corporate practices.”
He encourages company executives responsible for IT asset management to review the principles of IT Asset Disposal (ITAD) – an industry practice to manage the reuse, recycling, repairing or disposal of IT no longer fit for purpose or unwanted – through an ESG lens.
This review should also encompass regulatory compliance, protection of company information, and adherence to legislative requirements. Among the related legislation, he says, are the Protection of Personal Information Act 2013, the Consumer Protection Act 68 of 2008 and the National Environmental Waste Management Act 2008.
“To combat greenwashing, collaborative efforts of consumer groups, regulatory authorities and government are crucial. Tech helps a huge deal by enhancing monitoring and enforcement mechanisms, thereby ensuring trust and accountability within the industry,” he continues.
XHEAD: Compensation for ESG outcomes
Arewa says companies are increasingly linking executive compensation to ESG outcomes as it can serve as a powerful tool for aligning incentives with broader objectives. This may well lead to increased greenwashing by individuals.
“More businesses are adopting different approaches to incorporate ESG considerations into executive compensation. These include the use of stand-alone ESG metrics, integration into business strategy scorecards, individual performance assessment, and modifiers,” he says.
There are challenges and considerations that companies must navigate when considering linking compensation with ESG outcomes. These include the lack of standardisation in ESG metrics, concerns about transparency and effectiveness, and the need to carefully evaluate the materiality, durability, and auditability of ESG goals.
Companies must also communicate clearly with investors and other stakeholders about the rationale behind incorporating ESG into compensation plans and the expected impact on long-term performance, says Arewa.
Mark Walker, vice president, data and analytics, Middle East, Turkey and Africa at IDC, and country manager, South Africa, adds, “Technology can certainly help in monitoring, via the use of a variety of sensors, telemetry, IoT to measure impacts and of course the use of AI to consolidate, validate, and report these data. The challenge is to determine who watches the watchers, and to ensure that actions that are taken by civil society to mitigate any negative impacts highlighted by the data.”
Walker says that having ESG as a KPI would be great in theory but – like typical annual financial reporting – would be open to abuse or data could be skewed to represent the most beneficial outcome for the executive while misrepresenting the reality.
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