ESG Audit & Greenwash - The Carbon Scam Against Which The Social Auditor Be Careful And Alert:
Volkswagen emission scandal had global implications, including in India. The case involved Volkswagen installing software in its diesel vehicles, which manipulated emissions testing results. This allowed vehicles to pass emissions tests. This was the worst example, where deceitful route has been used to promote green environment- This was "Greenwash."
In Reckitt Benckiser (India) Pvt. Ltd. vs. Hindustan Unilever Limited case, a complain was filed against the Reckitt Benckiser (India) Pvt. Ltd. for wrong advertisement for claiming better environmental impact than the Hindustan Unilever’s product. Reckitt Benckiser was given a directive to delete the advertisement. This was a "Greenwash" activity
In Wipro vs. Hindustan Unilever Limited case, the Kissan Tomato Ketchup of HUL promoted an advertisement, claiming Tomato Ketchup contained with “natural ingredients.” On examination this was found that other food grade chemical substance was also there. This was deceptive practice, in the name of green products. This was challenged by Wipro. Hindustan Unilever was directed to remove the advertisement. This was "Greenwash"
Tracking "Greenwash" is an important aspect in the ESG compliance and audit. In hardcore concept this is an intentional deceitful and fraudulent route to gain big market share in the name of environmentally friendly products or actions. The ugly deceitful tactics for promoting the green economics, now a days is safest route. This safest route has made deep settlement inside the ESG compliance.
In this situation, Social Auditor has higher responsibility to look for the "Greenwash" practices, inside the organization where audit is conducted. This needs highest degree of alertness when the company has taken carbon credit from the United Nation.
Greenwash also occurs when a company promotes sustainable aspect of any product, with clear involvement in environmentally damaging practices. This route is adopted through advertisements, labels, imagery, tradeoffs etc., where environment damaging bad factors are hidden behind such practices.
The ultimate mandate is, actual practice of waste elimination like 5S in business practice; lean business practice; cutting emissions, making recyclable products and using renewable energy are green activities. The financial instrument issues is required to maintain highest level of standards for maintaining the highest rating in the ESG. False claim or false certification by company are "Greenwash" activities.
The Environment Protection Act, the Wildlife Protection Act, the Consumer Protection Act are sustainable business laws that minimize harm to the environment and promote conservation. The Environmental Impact Assessment (EIA) Notification, 2020, highlighted the necessary impact studies when requesting approval for initiatives are given, which could have an influence on the environment. Similarly, the Advertising Standards Council of India, a self-regulatory organization has curbed many negative advertisements having negative influence on the environment.
The 'Business Responsibility and Sustainability Reporting' circular (BRSR) by SEBI in 2021, the Principle No. 6, protects and restores the environment by Indian entities. The role of the Reserve Bank of India (RBI) also here monitors the “green washers”. The RBI has collaborated with the Global Financial Innovation Network (GFIN) like agency to mitigate the risks of greenwashing in financial sector.
Case Study: Social Auditor - Extra Alertness & Care Required In Auditing Carbon Credit Matter with Reference To The Gujarat Fluorochemicals Ltd:
Social Auditor should be extra careful in company, if covered under the carbon credit benefit. The carbon credit is now a bogus and fraudulent route of corruption. United Nation, has caught Indian companies involved in such scam. Not to mention, United Nation, compensates several projects in India, with big and huge compensation to the Indian companies, in the developing world for adopting green & clean technology. But, unfortunately, fraud has entered in this "noble and pure sanctity" activities. The Indian companies, have manipulated the carbon markets by producing more potent greenhouse gases just so they can get paid to destroy them. Not to mention, a company pays less than Re. 100 to dispose of a ton of HFC 23, a chemical byproduct, but earns as much as Rs. 1.8 crore from the UN for doing so.
Some years back, Gujarat Fluorochemicals Ltd, which received the UN benefit on the CDM project for removal of HFC 23 chemical , made Rs. 47,295 lakhs from the sale of carbon credits from the United Nation, which was nearly half of the company’s revenue for that year.
Mahesh Pandya, who is executive director of the Indian environmental group "Paryavaran Mitra", is raising voice from a very longtime against this company. So Social Auditor should be extra careful here, while auditing the project. Such Social auditors, should move outside the plant periphery and watch closely the surrounding environment. Gather data from the nearby villages and use them in reporting. A deep examination reveals that ATHKUVA is a village nearby Gujarat Fluorochemicals Ltd where company's coolant gas plant is situated. The environmental groups and residents have been at loggerheads with the company over pollution since it opened in 1989. Villagers complain of rashes and birth defects and display warped ears of corn, which they contend are the result of pollution from the plant. This complain, needs more scientific data and examination. The company for receiving carbon credit from the United Nation, have shown in documentation, green forest surrounding industry. Infect this is village ATHKUVA, not any green forest. This deficiency is required to be highlighted in the Social Audit Report.
If you see website of this company at the GFL. The company claims:
"Our products stand for high performance with sustainable processes and applications".
This is Greenwash! If nearby villages are complaining of "rashes and birth defects" and only chemical plant is the Gujarat Fluorochemicals Ltd. This is the social responsibility and the obligatory part of the company. Rather than hiding error and mistakes. Company officers can, meet the village people and make their life comfortable. The ESG Audit in this company is more challenging then the CSR Audit. This is challenging because, the company has received United Nation's carbon credit compensation for showing excellent environmental compliance, but at the same time the noble system seems collapsed. This is very disturbing, when the site is audited by a Social Auditor.
There is serious environmental complain from the village people, which can't be denied. This complain should must be a part of the ESG Audit.
( Birendra K Jha, is a Pan India practitioner on the "Social Impact Assessment Audit" & "ESG Audit". He is a Qualified & Certified Social Auditor from the ISAI (ICAI). He is Director of HR Lab, a Social Audit firm. Apart from Social Audit, he provides consultation on the ESG Audit & Practice; CSR Audit, CSR funds; CSR Programs; CSR Need Assessment; CSR Program Measurement; Entry & Registration- Social Stock Exchange & provides Capacity Development Training to industries on the CSR & ESG. He is based at Delhi-NCR. He overlooked at senior position as General Manager and Deputy General Manager in the previous South Korean MNC Company in India handling human resource practice and social audit on the ESG practices for more than a decade. He may be approached at: birendrajha03@yahoo.com )
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