Challenging Voluntary CSR-Initiatives A Case Study on the Effectiveness of the Equator Principles

Hennig, Alicia; Wörsdörfer, Manuel

doi:10.2139/ssrn.2627193

Cited by 8 publications

(6 citation statements)

References 33 publications

(3 reference statements)

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“…proceeded to demonstrate what self-regulation meant: making Agenda 21′s chapter on business and industry compatible with their positions; lobbying, most often successfully, for the elimination of references to transnational corporations wherever possible throughout Agenda 21; and ensuring that the idea of even a minimal system of international regulations never gained public acceptance" (Karliner & Bruno, 2002, p. 3). 6 Third, in lieu of more coordinated and forceful approaches, voluntary, market-oriented mechanisms multiplied, which have had weak or ineffective outcomes (Clapp, 2017;Dauvergne, 2018;Hennig & Wörsdörfer, 2015). Meanwhile, in the years since Rio, financial flows fueling environmentally harmful industries like agribusiness, mining, oil, gas, and forestry have grown exponentially (Clapp & Isakson, 2018;Monteiro & Mark, 2021).…”

Section: Private Sector Engagement In Global Environmental Governancementioning

confidence: 99%

Risky business: Protecting nature, protecting wealth?

Irvine‐Broque

Dempsey

2023

Conservation Letters.

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Finance is a precondition for many of the activities that harm ecosystems, but how to address this underlying driver of biodiversity loss remains a topic of debate. This paper reviews the Task Force on Nature‐Related Financial Disclosures (TNFD), a corporate‐led effort that aims to identify how changes to biodiversity may create financial risks for companies and investors. This approach is also promoted as a strategy for managing the impact of business on biodiversity, with the assumption that risk disclosure will more effectively price biodiversity‐harming activities. We assess the potential of the TNFD toward this end, and invite conservation scientists, practitioners, and policymakers to engage critically with its theory of change. We find that the relationship between disclosing biodiversity risk and redirecting finance away from environmental degradation is tenuous and unproven, making this mechanism insufficient for addressing the impact of the financial sector on nature. We question the embrace of another industry‐led mechanism that implies that a lack of information is the greatest barrier to stopping biodiversity loss. Further, there are risks that this financial sector approach to biodiversity will reinforce the highly unequal concentration of power and wealth, which is itself inimical to transformative change, as called for by the Intergovernmental Science–Policy Platform on Biodiversity and Ecosystem Services.

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Section: Private Sector Engagement In Global Environmental Governancementioning

confidence: 99%

Risky business: Protecting nature, protecting wealth?

Irvine‐Broque

Dempsey

2023

Conservation Letters.

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“…However, at what point does a firm’s cheap talk drift from Quadrant II to fraudulent Quadrant I when tracking environmental harm is as murky as tracking environmental disclosures? For example, heavy crude oil extraction industries such as those using the Athabasca oil sands contribute a significant amount of water pollution and deforestation (Hennig and Wörsdörfer, 2015). However, as the heavy, bituminous tar extracted from the sands often replaces even-more-damaging coal in power plants, it is plausible (but far from certain) that using oil sands are a net-positive trade for reducing pollution.…”

Section: Deconstructing Greenwashing With a Harm/no Harm Dichotomy: Fraud Vs “Cheap Talk”mentioning

confidence: 99%

The greenwashing triangle: adapting tools from fraud to improve CSR reporting

Kurpierz

Smith

2020

SAMPJ

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Purpose The purpose of this paper is to show a significant overlap in the models accounting research uses for fraud and the models other research disciplines use for greenwashing, and show how researchers and policymakers interested in the application of effective sustainability policy can draw from fraud accounting literature to better understand, and therefore, combat greenwashing. This is illustrated by showing multi-actor information-asymmetry models from other branches of accounting literature and synthesizing them with the fraud triangle model to suggest new avenues for reducing greenwashing and strengthening corporate social responsibility (CSR). Design/methodology/approach This paper reviews the current literature surrounding the greenwashing aspect of corporate camouflage compares the legal and technical definitions of fraud and synthesizes a new variant fraud triangle that more usefully describes greenwashing. Findings This paper is able to show that other areas of accounting research in North America have already tackled similar systems of multiple actors in an information-asymmetric environment and that a recurring trait is the emergence of a more robust reporting system. CSR reporting is currently in the process of emerging and could develop more swiftly by copying extant fraud-fighting tools. This is particularly salient given the increasing amount of liability legal regimes are giving to both sustainability activities and sustainability reporting from firms, as evidenced in both guidelines and scandals over the past decade. Research limitations/implications Sustainability reporting is not unique in comprising a large number of interrelated entities with non-financial information asymmetry between actors. Previous researchers have encountered similar situations in government accounting and public administration and developed network models to study these relationships as a result. In government accounting, this led to the development both of better diagnostic tools for further research and better models for local governments to use to prevent fraud and malfeasance. This paper suggests that using such research methods in the area of CSR will allow for the development of similarly-useful tools and models. Practical implications Visualizing greenwashing as a form of fraud allows policymakers to use tools from the fraud-fighting literature to improve CSR reporting and produce a more robust regime in the future. As governments increasingly seek to respond effectively to material misstatements with an intent to deceive in sustainability reports, understanding the underlying information asymmetry as it is found in other private-public interfaces is critical. Similarly, researchers can analyze CSR reporting through the lens of fraud researchers to gain novel insights into how information asymmetry in CSR reporting works. Social implications Greenwashing is not traditionally seen as a form of fraudulent reporting, even though it often meets the same technical test used to determine fraudulent reporting. The realization that the two are structurally similar allows the authors to better understand how CSR reporting works and how CSR reporting can be falsified. By understanding the latter, governments, firms and non-governmental organizations (NGOs) can develop tools to prevent CSR reporting from being falsified. Originality/value This paper suggests a new suite of tools with which to study greenwashing, and with which to fight greenwashing in a sustainability accounting context.

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“…Yet, as empirical studies show, in practice, almost all of the ICP/FPIC requirements are de facto disregarded by the major project finance players (Hennig and Wörsdörfer ) . Some of the Equator Principles Financial Institutions' clients make considerable use of external manipulation, interference, coercion, and intimidation and collaborate with paramilitary security forces and/or authoritarian–totalitarian regimes.…”

Section: Bridging the Gap: People Planet And Profitmentioning

confidence: 99%

Equator Principles: Bridging the Gap between Economics and Ethics?

Wörsdörfer¹

2015

Business and Society Review

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The hypothetical conflict between self‐interest, corporate interest, and the common good is one of the hottest debated issues in business ethics. This article focuses on a particular corporate social responsibility approach within the field of sustainable (project) finance, which has the potential—given that certain reform measures are adopted—to overcome the alleged trade‐off between self‐interest and the common good. The approach is labeled as the Equator Principles (EPs) framework, which celebrated its tenth anniversary and the formal launch of the third generation of the EPs (EP III) in 2013. The article shows how companies can theoretically be both profitable and socio‐environmentally responsible by adhering to the EPs. The article proceeds as follows: Before moving on to the EPs, section 2 defines the key terms self‐interest and common good. Section 3 then analyzes the EPs from a business ethics perspective. Section 4 shows how the EPs can help in solving the potential trade‐off between self‐interest and the common good—provided that the EPs are substantially revised. These required reform steps are discussed in section 5. The article ends with a summary of the main findings.

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Challenging Voluntary CSR-Initiatives A Case Study on the Effectiveness of the Equator Principles

Cited by 8 publications

References 33 publications

Risky business: Protecting nature, protecting wealth?

Risky business: Protecting nature, protecting wealth?

The greenwashing triangle: adapting tools from fraud to improve CSR reporting

Equator Principles: Bridging the Gap between Economics and Ethics?

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