Audit standards 'undermining' supply chain sustainability efforts

30 November 2022

A lack of standardised sustainability auditing is resulting in greenwashing along the supply chain, a group has claimed. 

The Global Reporting Initiative (GRI) has called for mandatory audit regulation on sustainability reports to eliminate greenwashing in supply chains. 

The report, Auditing to save the planet: the battle against greenwashing, said: “Inaccurate and incomplete data undermines the credibility of sustainability information.”

Eelco van der Enden, CEO of GRI, said: “To put it simply, greenwashing is akin to fraud: it misleads stakeholders, markets and consumers – and must be stopped. We need to view exaggerating sustainability efforts as on the same level as overstating revenues or profits, because both can be equally damaging to investors and public trust.

“Increasingly, stakeholders are demanding that companies provide transparency on their activities. Crucially, this includes their procurement practices, and impacts throughout the supply chain.”

The report said having multiple sustainability reporting standards and frameworks is increasing the cost of compliance and auditing.

It continued: “With an array of global and national sustainability frameworks and approaches to consider, as well as capacity limits for the auditing profession, this transition requires standard-setters to work together, to establish a clear system for disclosure that leads to comparable data,” GRI said.

Comparable data is essential to assess risks and mitigate their supply chain impact on the environment, it said. 

The report continued: “The shift to a sustainability-focused economy affects supply chains, finance flows and education systems – and proper audits are one of the main value drivers. If business, investors and other stakeholders cannot trust published sustainability information, from both the financial and impact perspectives, it will be hard to demonstrate how they are contributing to a better world for everyone.”

Not addressing greenwashing accusations can cause reputation damages, GRI warned, which could cause “severe” impacts on firms as they also battle supply chain challenges from the energy crisis and labour shortages.

Van der Enden added: “The transition to mandatory auditing of sustainability information is only a matter of time. Not only will this address the legacy of greenwashing, intentional or otherwise, it will provide a level playing field for all.”

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