By Lin Lerpold, Uta Hönemann and Elisabet Ålander
Volkswagen's "Dieselgate" has intensified the debate on corporate sustainability greenwashing. Although companies have increasingly professionalized their sustainability communication, external stakeholders are also voicing their concerns that there is more "talk" than "walk" in practice.
In our recent study, "Walking the Talk", we explored how Sweden's largest listed companies communicate and follow up on their sustainability work. We hoped to contribute with an external and independent stakeholder perspective on the interpretation of companies' own publicly available sustainability information.
The study comprised the whole population of the NASDAQ OMX Swedish Large Cap companies (72) and included annual and sustainability reports for the year 2014, as well as all publicly available information on the companies' group websites. More than 9,000 pages were analyzed for the companies' "talk and walk" - i.e. what the companies communicate with regards to their sustainability work, and how they communicated the measures to implement the work.
The review of the data and the subsequent analysis resulted in a scoring scheme including 26 indicators where points were given for sustainability communication and sustainability implementation. In view of Sweden and Swedish companies' positive reputation with regard to sustainability, the results were disappointing.
In general, we can conclude that the majority of listed Swedish companies do not seem to practice what they preach. 88% of the companies talk more about sustainability in general terms (the "talk") rather than about completed activities, monitoring and implementation (the "walk").
The study also shows that sustainability is largely a marginalized, short-term issue - over half of the companies did not acknowledge sustainability in their corporate strategy and less than 1 out of 7 companies have sustainability targets with a time horizon beyond 2016. Furthermore, 75% of the companies do not have a representative with clearly defined sustainability responsibility in the top management team. Despite an increased focus on social sustainability, this is not reflected in equality work - only 11% of companies have a board where the proportion of women / men is in the range of 40-60%.
A more positive aspect is that companies have set measurable goals with established time frames, albeit short term, for at least two areas of environment, social sustainability or corporate governance. But only half of the companies in the sample have communicated how they follow-up, measure and implement their set sustainability goals.
Needless to say, it is discouraging that so few Swedish companies practice what they preach, or follow up on their sustainability work in a satisfactory manner. With increased requirements regarding transparency, companies must be able to show its stakeholders how they systematically work to create long term, sustainable value and greater accountability in the societies in which they operate.
In order to achieve a positive and lasting change, a greater commitment to the sustainability work is required at the executive management level. The management team has a critical responsibility to clearly integrate measurable and long-term sustainability targets in the company's strategy, operations and financial ratios. Management commitment may seem obvious, but our study shows the opposite - only one quarter of the companies in the study have people with defined sustainability responsibility present in their top management teams.
As the study indicates, there is undoubtedly great potential for improvement in large Swedish companies' sustainability work. But the responsibility does not only lie within the hands of the companies. Conditions and tools must be created in order for the communication and the implementation to be as effective, consistent and comparable as possible. For example, legislative and regulatory frameworks can drive important changes. The EU Directives for mandatory sustainability reporting for large companies is a step in the right direction and more stringent requirements on anti-corruption policies have resulted in a large majority of companies now having public anti-corruption policies. Integrated reporting and reporting standards by the GRI will also continue to play an important role.
Greenwashing practices are still prevalent in the corporate world. As the COP21 Paris climate summit entered its second week, Corporate Europe Observatory exposed the greenwashing of some of the world's biggest polluters' by European public relations and lobbying consultancies in a report. Our study highlights the importance of using fact-based research to counter destructive greenwashing practices. We hope that our work will inspire organizations and institutions in other countries to conduct similar research. It is through spreading this knowledge that we can achieve a lasting positive change.
Press release: https://www.hhs.se/walkingthetalk
Lin Lerpold, Acting Professor and Executive Director
Uta Hönemann and Elisabet Ålander, MSc Students
Stockholm School of Economics
Mistra Center for Sustainable Markets