Eight tips to prove your sustainability credentials

In 2021 the total value of the sustainable finance market in Aotearoa exceeded $13 billion following a global growth trend, according to a KPMG report, which noted sustainability-linked loans have been the biggest growing lending product.

To access that capital though, startups will increasingly be expected to possess environmental, social and governance (ESG) credentials, says Jay Crangle, head of ESG at the Sustainable Business Council.

“How a business stacks up against these can impact on the type, amount and conditions of finance they are offered.”

Renzhu Zhang, project coordinator for the Centre for Sustainable Finance: Toitū Tahua, points to research from the University of Gothenburg, which highlights that investors now value startups with strong, adaptable business models that effectively tackle sustainability issues. 

The research also shows that environmental aspects are prioritised over social and governance ones. 

“Investors assess startups based on both solid numbers and the team's grasp of sustainability. By embracing these factors, startups stand a good chance of catching investors' attention and securing investment opportunities for future growth,” says Zhang.

Adds Crangle: “Investors will be looking at whether a business has set sustainability objectives and targets, such as a target to reduce their greenhouse gas emissions, the data they produce to show they are meeting those targets, and that they disclose this information publicly.” 

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Greenwashing: a growing problem

The growth in sustainable finance has seen an increase in greenwashing, defined by the Australian Competition and Consumer Commission (ACCC) as ‘where a business uses any claim, or omits key information, that makes a product or service seem better or less harmful for the environment than it really is’. 

Zhang says greenwashing is a problem because it capitalises on the increasing demand for investments that consider ESG factors. 

“This can make it difficult for investors, especially retail investors, to distinguish between genuinely sustainable funds and those that only appear responsible.”

A 2022 report by KPMG found that 65 percent of respondents had seen greenwashing in New Zealand’s sustainable finance market. 

Market regulator the Financial Markets Authority has also been providing guidance to investment fund managers who claim green or sustainable credentials after concluding in 2021 that the managed funds sector had ‘an immature approach to their disclosure’.
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Environmental claims: how to do it right

Here are eight tips from founders and others to ensure your company avoids greenwashing. 

1. Set objectives

Focus your sustainability efforts on the issues that are most material to your business. “This ensures you are laser-focused on the things that you can have the most impact on,” says Crangle. “It’s also important to be specific about how you intend to achieve your objectives, and set measurable and achievable goals along the way.”

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2.  Be truthful and accurate

The ACCC advises businesses to consider the overall impression created and to avoid exaggerating the benefits of a claim. Adds Zhang: “Use straightforward language that everyone can understand and ensure that visuals don't mislead; don’t leave out essential information and if there are conditions or limitations to your claims, explain them clearly.”

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3. Be specific

A claim should detail the specific part of the product it relates to. Avoid broad claims – such as ‘eco-friendly’, ‘recyclable’ or ‘green’ – that can be interpreted in different ways and mislead consumers. If broad claims are used, be prepared to rigorously back them up with scientific evidence. 

Mark Sorensen, co-founder of sustainable cleaning product business Cleanery, says investors frequently question the company’s tagline ‘super clean, super green’. “We get asked to back up the ‘super green’ part all the time. For us, ‘super green’ means we are 99 percent less waste and 99 percent fewer emissions, and we’ve got the scientific evidence and hard numbers to back that up.” 

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4. Be genuine

“If you put decisions on the environment at the same level as your business decisions, then that will come across naturally,” says Jonathan Ring, co-founder and CEO of Zincovery, which works to decarbonise zinc recycling. 

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5. Substantiate your claims 

Ensure claims are backed up by clear evidence that is easily accessible to consumers. Independent scientific evidence is the most credible, and Sorensen says it’s vital that results are interpreted properly by experts. “We have the ability to do that within the company, but investors pay little attention to claims we’ve developed ourselves, so we get the numbers peer-reviewed by Oxygen Consulting.”

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 6. Be transparent‍

Be open and honest about your company’s environmental impact. “Consumers and the public don’t expect businesses to have solutions to all the sustainability challenges they face, but they do expect businesses to be upfront about the efforts they’re making, how they are making progress, and challenges they’re facing along the way,” says Crangle. 

Amy Klitscher, founder of the Sustainable Food Co, agrees it’s important to be fully transparent about the losses, as well as the wins. “Even though we say we are ‘zero-waste’ we are honest about our mistakes – for example, if the chef orders the wrong packaging. We let our audience know, then work to make sure it doesn’t happen again.”

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7. Consider certifications‍

More and more companies are considering certification to provide a third-party verification of their efforts, “which helps validate and provide an external perspective on their delivery”, says Crangle. Sorensen, whose company has B-Corp certification, believes that when it comes to proving claims, certifications are best if they are specific. “A good example is organic certified – it can be easily proved.”

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8. Seek advice

Ring recommends engaging with other SMES who will help build a sustainable supply chain. Sorensen agrees: “Find the right experts in individual subjects; for example, we engaged with sustainable packaging expert Nikki Withington from Square One, who guided us through our packaging claims.”

Sorensen adds that both the Ministry for the Environment and NZTE have developed good guidance on environmental sustainability claims. Klitscher recommends The Ākina Foundation, which holds various workshops on measuring and communicating impact.

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