Week 7 - Measurement Difficulties Flashcards
How are the Big Four accounting firms leveraging the sustainability boom to expand their services and rebrand their profession?
Investment in ESG Initiatives: PwC announced a $12 billion investment plan focused on ESG advice, which includes adding 100,000 employees and launching “trust institutes” to train clients in ethics . Deloitte introduced a “climate learning program” for its employees .
Focus on Trust and Sustainability: PwC’s strategy announcement emphasized “trust” and “sustainability,” with a significant portion of the investment going towards these areas . This rebranding aims to position the firms as experts on climate change, diversity, and consumer trust.
Expansion into New Markets: A quarter of PwC’s new investment is directed towards doubling its business in Asia, recognizing the growth opportunities in the region . This expansion into new markets aligns with the increasing focus on sustainability and ESG factors globally.
Example of ESG funds not being accurate
Boohoo was included in most UK ESG funds, and given a high ESG score because it had a lot of domestic production (and played this up).
In 2020, came to light that Boohoo’s supply chain involved modern slavery in factories in Leicester
How is most carbon emissions data estimated in the US
by vendors
How do vendors that estimate carbon emissions data do the estimation?
As a function of financial fundamentals (net sales, PP&E, various financial ratios)
What mandate is an example of the push towards mandatory disclosure
UK ‘Gender Pay Gap’ mandate, enacted into law 2015, took effect 2017 - UK EHRC tasked with enforcement, but have been criticised for their ‘light-touch’ approach, which focuses more on the timeliness of disclosure, and not the accuracy - 13% of companies openly misreport
list examples of firms providing external scoring/certification include
Morningstar’s ‘Low Carbon’ Designation for investment portfolios with low carbon risk
Great Places to Work Institute (GWPI) survey on employee satisfaction
Fair Trade certification on produce, to signify that workers are being fairly compensated
classic examples of how firms greenwash
- Utilising vague terminology / promises - Claims that sound impressive, but are hard to challenge, or non-specific
- Overstating claims to customers and investors
- False / misleading imagery and marketing
- False accusations - lying, unspecific claims
how can greenwashing be combatted
- Third-party certifications
- Regulatory changes
- Public pressure towards bad behaving businesses
What are the two defining characteristics of ‘hard data’ (reliable esg scores)
has it been;
- subject to mandatory disclosure
- checked by independent auditors and regulators
