Outline

  1. Ensuring accurate and substantiated claims
  2. Clarity is key
  3. Full disclosure: the good and the bad
  4. Aligning with standards
  5. Thoughtful visuals and honest comparisons
  6. Continuous updates and engagement
  7. The role of third-party verification

Claims, clarity and credibility

What does the FCA's Anti-Greenwashing Rule mean for UK-listed companies communications?

The Financial Conduct Authority's (FCA) Finalised Guidance on the Anti-Greenwashing Rule sets out strict criteria to ensure that sustainability claims by companies are honest and substantiated. For UK-listed companies on the London Stock Exchange (LSE), this guidance means that their corporate communications and annual reports must not only be accurate, but also transparent in presenting their environmental efforts. Let’s walk through what this looks like in practice, offering some clear, real-world examples of how companies can stay compliant.

Ensuring accurate and substantiated claims

Accuracy is non-negotiable. If a company reports a 25% reduction in carbon emissions, this statement needs to be backed up with concrete evidence such as emissions audits or validations from credible third parties. This is about avoiding the pitfalls of greenwashing by making claims that are not just hopeful but are rooted in real, measurable progress.

Clarity is key

The clarity of the information presented is critical. Companies must steer clear of technical jargon that could obscure the real meaning of their sustainability efforts. For example, if a company claims to be "advancing towards zero waste," it should clearly define what "zero waste" means in their specific context, outline the strategies being used, and set a clear timeline for achieving these goals.

Full disclosure: the good and the bad

Transparency doesn’t stop at successes. It also involves openly discussing areas in which the company might not have met its sustainability goals. For instance, if a company has made strides in reducing water use but has seen a drop in recycling rates, both outcomes should be reported. This balanced approach ensures that stakeholders have a complete and honest picture.

Aligning with standards

It’s also important for companies to align their reporting with internationally recognised standards, such as those from the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). This alignment helps ensure that the sustainability data presented is robust and comparable across the board. For example, reporting greenhouse gas emissions should follow the Greenhouse Gas Protocol to ensure accuracy and comparability while supporting SASB and TCFD and forming the backbone of your Science Based Target Initiatives.

Thoughtful visuals and honest comparisons

The choice of visuals and the framing of comparative claims must be handled with care. If a report features images of reforested areas to highlight biodiversity efforts, these images should accurately reflect the actual work done and not embellish it. Any AI-generated imagery would be a big ‘no no’ within this visual narrative space. Similarly, claims of having the most sustainable product on the market need a clear basis for comparison, ensuring that they are fair and meaningful.

Continuous updates and engagement

Keeping sustainability information up to date and relevant requires ongoing effort. Regular sustainability audits and feedback mechanisms can help companies keep their data fresh and reflective of current conditions. This continuous loop of feedback and updates is key to maintaining compliance with the anti-greenwashing rule.

The role of third-party verification

Engaging independent third parties to verify sustainability claims can add an extra layer of credibility to a company’s disclosures. This could involve audits from environmental specialists or certifications from sustainability standards bodies, providing stakeholders with assurance that the company's claims are both accurate and compliant.

By embracing these practices, LSE-listed companies can produce corporate stories that not only meet the FCA's strict anti-greenwashing guidelines, but also build trust with their investors and wider stakeholder groups. It’s about setting a standard for transparency and reliability in sustainability reporting, ensuring that every claim made is as robust as it is responsible. 

As we assist many of our clients in reviewing their current communications and crafting robust solutions to present their stories compellingly and credibly, we view these updates as a valuable opportunity. This is a chance to step back, assess, and implement strategies that are not only effective, but also make a positive impact. By embracing these guidelines, we can enhance the transparency and reliability of sustainability reporting, thereby strengthening trust with stakeholders and supporting long-term success.

The FCA's Finalised Guidance on the Anti-Greenwashing Rule is scheduled to come into force on 31 May 2024. This timing aligns with the implementation of the Anti-Greenwashing Rule itself, providing firms with clarity and guidance on how to comply with the new standards from the outset.