Some of the top problems facing your company may include
- increasing calls by regulators for Scope 3 emissions reporting with no actionable plan
- lack of safe harbor policies to cover Scope 3 reporting
- competing priorities when addressing both the E and S in ESG
- lack of motivation among middle managers to implement ESG policies by the board
- uncertain marketing and communications plan for your sustainability posture
- lack of climate change education among your workforce
- burdensome paperwork for operations to process eWaste
- lack of data on what happens to eWaste
- waste suppliers who mishandle your eWaste
- reputational risk associated with fines or inaction
Is most ESG greenwashing? Roughly 95 percent of CEO compensation includes little or no incentive to carry out ESG. The planet is headed to warming in excess of 3 degrees Celsius. (Societal collapse is predicted between 4 and 8 degrees Celsius).
Greenwashing occurs in part because directors are tasked with a focus on ESG when doing so diminishes financial performance and shareholder value. Directors can do three things
- Commit to temporarily forego exceptional growth
- Revamp their business models to become more sustainable
- Prepare a robust defense of decisions that prioritize planet over profit
Some consultancies will congratulate you and say you are doing an amazing job. That you just need to look at the data you already collect and use that to show you are doing your part.
Others may tell you that you are not doing enough, but that you just need to make a determination of materiality in your operations and do sustainable things in those material areas.
Regulators may offer you a list of activities to prove you don't engage in greenwashing. You can pick and choose which activities to perform.
Environmental activists may try to convince you that the solutions are 'known'. You just need to invest in renewable energy and keep all fossil fuel resources in the ground.
All approaches are inadequate.
The data you have is almost certainly incomplete, inconsistent and requires new data collection methods. Materiality is an outdated concept in a world with advanced algorithms and cloud based computing. Activities lead to anecdotal evidence when a comprehensive approach is necessary. Renewable energy relies on critical minerals. Mining for critical minerals harms biodiversity and human health. Keeping fossil fuels in the ground is the outcome not the solution. The solution is to engage in the difficult process of prioritising the use of fossil fuels.
Preliminary work needs to be done before engaging with a third party for help with your ESG strategy. We outline these steps in 3 projects.
Project 1 will create benchmarks from external sources. An effective ESG strategy closely mirrors the concerns of credible environmental activists and scholars. The resulting indicators should remain relevant over time despite regulatory changes.
Step one is to commit to a preliminary focus on energy, water and waste. Step two is to identify the credible environmental leaders and activists (not consultancies) who specialize in these areas. Step three is to operationalise their views of environmental competence in terms of benchmarks.
Project 2 will result in the harmonization of internal and 3rd party data. You will see how the data you collect, compares to the data collected by your value chain.
Step four is to summarize energy, water and waste data collected in your organization. Make this summary list of data sources widely available to staff. Consider creating a hotline to allow staff to highlight existing data sources not already captured on your list. Step five is to repeat step four only for your 3rd party data. Turn both sets of data into benchmarks.
Project 3 will result in a gap analysis report between the best practices and the data you collect. Use this gap analaysis to create a plan of action for collecting more data.
Step five is to compare and contrast the aspirational benchmarks from Project One with the actual benchmarks from Project Two. At this point, you are ready to engage consultancies and new suppliers.
Project 4 will help you address the following questions (potentially in real time)
- What are the best practices to measure ESG?
- What indicators and ratings are relevant for my organization?
Sample Concerns You Should Judge Your ESG Strategy Against
China's COVD lockdowns add to shipping container backlog.
Your dependence on imports exposes your company to equipment shortages, delayed deliveries and more volatile prices.
The world imports a substantial amount of electronics from China. In the US, the figure is 35%. Large electronics manufacturers with complex products are unlikely to leave China in the short term.
How does your ESG strategy address this issue?
Landfills in India catch fire in places experiencing unprecedented heat waves due to climate change.
The majority of corporate eWaste ends up in countries that lack the infrastructure to ventilate potent greenhouse gas emissions or remove heavy metals from the water.
Modern landfills have soil, pipes for drainage, and plastic sheets. Clay forms the foundation. Landfills in the US and EU also have critical infrastructure missing in developing countries. Some infrastructure ventilates greenhouse gas emissions to prevent explosions and fires. Other infrastructure includes water treatment plants to filter out airborne toxins.
Landfills produce greenhouse gas emissions and pollute the water. Methane is created when bacteria eat away at the waste. Air that contains just 5 percent to 15 percent of methane can explode. Landfilled electronics also release mercury, arsenic, and lead into the water table.
How does your ESG strategy address this issue?
Waste incinerators release toxins that result in a rise in childhood asthma.
Most eWaste is not processed in developed countries. The waste is shipped to developing countries where it is treated by chemical means that poison the water tables, or burned in rudimentary ways that cause air pollution. Air pollution leads to a rise in health conditions such as ashtma.
Waste incineration is sometimes classified as renewable energy. A waste plant has a combustion chamber and a generator. An overhead crane puts some waste into the combustion chamber. Next to the plant, lies a man made lake. The heat from the chamber converts the nearby water into steam. The steam flows in to a turbine generator. The generator produces electricity.
A crane is an imprecise way to sort mixed waste streams. Electronics will undoubtedly end up in the pile of waste deposited into the combustion chamber. When electronics are burned, toxins are released in to the air and cause asthma.
How does your ESG strategy address this issue?
Sample Solutions for Your ESG Strategy
BY 2024, Fortune 500 companies must disclose Scope 1, 2 and 3 emissions across their entire value chain.
On quarterly basis, report financial losses from climate related events; e.g., decreased productivity due to supply chain disruptions.
On an annual basis, report qualitative measures such as how much greenhouse gas is created across you operations?.
NOTE: Smaller companies with less than $250m in float will be exempt forever from reporting Scope 3. To report Scope 3, you need Tier 2 or Tier 3 small suppliers to report. Therefore, ask them to provide
- a list of the inputs they use to create products, and
- an explanation of what happens to the products at the end of life?
Ensure compliance among your supply chain with audits. Discuss with your auditor if they are willing to say they are confident that there are no material issues. Alternatively, will they confirm the report correct in all material aspects?
Behavior change is important. Combine on site training with automated workflows and apps to make compliance simple and straightforward.
The EU's attempts to prevent greenwashing throught categories has limitations.
Waste should not be viewed as a category on the same level as pollution or water. Water is wasted. Water is polluted by waste. The problem with water is not water. It is how it is wasted and how it is negatively impacted by waste. Therefore, water should not be a category.
Waste should be deemed the overarching category. The EU should focus on waste streams. The priority should be what waste is allowable and in what quantity.
Two, the EU attempts to define sustainable activities through a series of lists. Lists ignore the interdependent nature of excess waste. The planet can not absorb the amount of waste being created. We would need two to four planets to acccommodate the amount of waste current and future populations generate. Ad hoc activities will not address the runaway consumption. At worst, the list could enable and entrench greenwashing.
The difficulties in the EU's current approach can be considered on a deeper level. Just as waste should be addressed in connection with other categories, the E, S and G of ESG should be approached as a whole.
Take for example the E in ESG. How often are the people making decisions about Environmental strategy from the underrepresented communities identified Social? Put another way, where is the Social in the E of ESG? If we consider the S in ESG, where is the environmental consideration of the acitivities taken to make a social impact? And where is the governance (G) to deter greenwashing in the E or the S?
Background on the EU's regulations.
The EU has two Directives for eWaste: the WEEE Directive and RoHS. The implementation of these directives has not resulted in the separate collection and proper treatment of WEEE at scale, a substantial curtailment of illegal waste exports or effective national registers.
The EU Green deal was created to address shortcomings of previous Directives such as WEEE and RoHS. The Deal created several platforms, one of which is the Platform on Sustainable Finance. This platform is run by the UN's PRI (Principles for Responsible Investment), and represents over 3500 investors and institutions. The PRI focuses on ESG and has six guiding principles for responsible investment.
The Sustainable Finance Platform is responsible for the EU Taxonomy. It The EU Taxonomy is a list of activities your company can get credit for and prove you are sustainable.
The Platform has a technical working group (TWG) . The TWG develops new criteria for the EU taxonomy. Criteria include contributing to the circular economy, protecting biodiversity and pollution prevention and control. eWaste relates to the transition to a circular economy and pollution prevention and control.
To be taxonomy aligned is to substantially contribute to at least one of six environmental objectives and not harm the other five. Activities must also comply with minimum safeguards such as the OECD Guidelines or UN Guiding Principles.
As a Fortune 500 company, you will almost certainly be ranked. The most efficient way forward is to ensure the activities you engage in genuinely address issues identified by experts - climate change scholars and activists. Over time, the ratings agencies are likely to merge or be replaced by quasi-governmental institutions.
In the long term, advocate for eWaste mining. The world can not keep mining for new critical minerals to power our devices, wind farms and electric vehicles. We must extract or "mine" the minerals we need from already abandoned electronics and electricals.
eWaste mining is a term that has been around for a long time without any tangible practices. But eWaste mining can become the new standard once we set targets.
Start by actively publicising your efforts. Create an eWaste mining program. Partner with others. Work with us.