Sustainable initiatives or greenwashing? New research project examines sustainability efforts in the private sector
Danish companies are legally obligated to document sustainability initiatives in their annual reports. A new research project will create a basis for studies and quality assurance of the legal requirement. Postdoc, Michael Hockenhull, explains how and why.
When large companies publish their annual reports, they must, according to article 99a of the Danish Financial Statements Act, contain a non-financial statement of social responsibility. The statement must, among other things, include information on environmental conditions, including the company's work to reduce the climate impact of company activities.
According to postdoc at the IT University, Michael Hockenhull, the companies are required to address their sustainability responsibility, not just in the climate field. However, the Annual Act does not contain any specifications of the quality of reports, which makes it difficult to find out what they represent and whether they result in, for example, actual climate-friendly actions:
- Reporting is defined as non-financial and there are no adopted national standards for how these large companies should report on their sustainability efforts. There are a number of different standards that companies can choose to use, but no uniformity that applies to everyone. As researchers, we are interested in creating a basis for comparing what companies say they do, with what they actually do, he says.
Michael Hockenhull is part of a working group consisting of researchers from the IT University, the Faculty of Law, and the Human- and Legal Innovation Hub at University of Copenhagen and ØICC (Ørestaden Innovation City Copenhagen). The group wants to create a basis for investigating the large companies’ statements on sustainability which can hopefully lead to a quality assurance of the law; that is, whether the intention of the law translates into actions that are actually sustainable. The Carlsberg Foundation has funded the group's project SSH and Sustainable Business: Building a database for SSH impact on sustainability in private sector companies, and from May 2021 and 22 months onwards, Michael Hockenhull and his colleagues aim to create a basis for comparison in order to increase transparency in the field.
- The companies' reports on their sustainability responsibility – that is, what they claim to do – are publicly available on the Danish Business Authority's website. In our project, the goal is to collect these reports in a database; in a structured and scientifically based way so that researchers can investigate what companies do – or say they do – In the field of sustainability, says Michael Hockenhull, who has been in contact with representatives from some of Denmark's large companies in the project’s start-up phase:
- We have a dialogue with the companies to learn more about their practices and to find out what they think of the database that we are creating. Some of the companies have expressed a wish for a tool that would allow them to compare themselves with their competitors. This means that it’s not only researchers, who want to find out what the companies are actually doing. In the companies, there are doubts in terms of how they are ranked sustainability-wise. Many companies compete on sustainability. It is something that they need to take seriously. Therefore, the companies’ representatives have also been cautiously curious about, what they’ll be able to use our database for.
Researchers like Michael Hockenhull work to increase transparency is to some extent welcomed by companies, because many of them have already invested millions in sustainability. For some companies, the green, climate-friendly color has become part of their DNA and brand. If a company’s claim to sustainability is drawn into question, it could have major consequences. Conversely, being able to document sustainability may create economic opportunities.
- The fact that the reporting is non-financial and non-quantitative, basically means that it is up to the companies themselves to decide how to describe their actions, and this is a problem in terms of finding out how sustainable the companies really are. At present, we can only find out how they communicate on their sustainability, and this creates an opportunity for greenwashing, that is, they say a lot of things that wash the company's dirty activities green. From that perspective it would make sense to have more specific requirements for companies’ reporting, so that it would become comparable and reflect their actual activities. Some of the representatives from large Danish companies that I’ve been in contact with believe it to be a good idea, says Michael Hockenhull. However, he does not expect to be able to rank the large Danish companies, according to how environmentally friendly they are by the project end.
- I expect us to uncover general trends in the companies’ communication and to be able to divide that into sectors and other areas. Maybe, we will be able to show a connection between what they communicate and figures, that show what they are actually doing. But this does require links, such as figures that we can compare our data to, and we do not have them yet, he says.