Sustainability Certification – Only one part of an effective sustainability strategy
While the pandemic undoubtedly shifted the emphasis on corporate conversations around sustainability and ESG, it is now most firmly back at the top of the agenda. It is shaping consumer behaviour, investor decision-making, and compelling companies to integrate sustainability into their business strategies. Organisations that are not talking about this most important of issues will be left behind. However, there is a very fine line when it comes to companies implementing and demonstrating their commitment while avoiding the pitfalls of greenwashing.
Against this backdrop, at Reputation Inc across our global client portfolio we have seen first-hand the market for sustainability certifications growing exponentially. Over the past ten years, we have supported our clients on their ESG journeys and also in their interactions with the wide range organisations offering sustainability auditing, certification and customer-facing eco-labels. These organisations provide companies a tool to operationalise sustainability and a way to display their performance, either overall or on a specific topic such as raw material sourcing, to their stakeholders. Obtaining sustainability certifications has become a part of corporate sustainability strategies alongside establishing internal sustainability departments and roles, participating in global sustainability rankings, and integrating the topic into corporate branding and communications.
While these certifications can help, the over-saturation of the certification market and recent greenwashing scandals involving certification bodies have put a spotlight on the role of sustainability certification. As companies embark or begin to embark on the certification process, it is important to take a number of considerations into account on their role.
Fulfils informal industry expectations for a license to operate
In certain industries certification has become the norm and something resembling a box ticking exercise for sustainability. With the growing conscious consumer movement, there are B2C product categories where a company without certification might struggle to compete, e.g., coffee beans, tuna, etc. Many of the eco-label providers have suffered from transparency issues and concern for their ability to keep up with their auditing responsibilities in a timely matter. This poses the question for who audits the auditing companies and whether companies paying for the eco-labelling benefits anyone but the certification company.
Provides a measurement and evaluation framework for ESG
Comprehensive business sustainability certification companies, such as B Corp and Planet Mark, provide assessment tools and services that can be used to identify areas of improvement and potential sustainability risks within company structures. Standardised measurement methodology works well for systems where companies need to be consistently scored and compared, but this disregards all the unique circumstances impacting individual companies. These methodologies while very useful for some organisations can fail to take into account company specific stakeholder expectations and cannot provide contextual recommendations for best courses of action.
Fills a regulatory void
The third-party certification organisations have operated as a replacement for the regulatory requirements have been largely missing in the sustainability space. The governance sector is now finally catching up with examples such as European Union’s ‘Corporate Sustainability Reporting Directive’ being rolled out and the UK government introducing mandatory climate change reporting rules. The certification industry will have to evolve to operate alongside the developing regulatory environment and its varying forms by market.
Can help companies gain a competitive advantage vis-à-vis peers
Being able to attain widely recognised certifications and eco-labels can provide a valuable boost to a company image and its brands. Studies have shown that a growing number of consumers are more likely to purchase products that are perceived as sustainable, and certification can also provide access to investment opportunities and a talent pool with sustainability as a key priority. The flipside of this has been the number of greenwashing claims that have hit especially the textiles and the FMCG industries where companies have heavily relied on the certifications to demonstrate their commitment to sustainability. Consumers and ESG campaigners are now raising concerns over the real state of the sustainability of these companies and their supply chains, not accepting the labels for their face-value alone. Perception of deceit and greenwashing can have a significant impact on trust and have long-lasting impact on company reputation.
Sustainability certification industry is not going anywhere and certain brands within the industry have come to be seen as a benchmark for sustainability, however, stakeholder expectations from companies and from the certifications they obtain has increased and so has the scrutiny on how watertight the claims made truly are. Relying on certification alone will not be enough for a comprehensive sustainability strategy, but they can be useful for communicating values externally. Companies should thus, simultaneously ensure that they are prioritising the correct ESG topics their stakeholders care about and that their activities are converting into improved perception of the company.