The latest acronym most listed companies use is ESG which stands for environmental, social and governance. Environmental refers to the ecological impact of the business operations. Social refers to the relational aspect with the stakeholders. Governance refers to the compliance management of the business owners. ESG is a framework that guides stakeholders in determining the best method to minimize risks and maximize returns associated with sustainability initiatives. We commend the regulatory organizations led by the Securities Exchange Commission (SEC) for encouraging listed companies to have sustainability initiatives. To support the listed companies in the evaluation and management of non-financial performance of the business organization across the ESG aspects and to enable them to measure and monitor the related contributions towards reaching the sustainability targets, the SEC issued Memorandum Circular 4 or the Sustainability Reporting Guidelines for Listed Companies on 15 February 2019. Since the issuance of the guidelines, the SEC has seen an improvement in the submission of sustainability reports among the listed companies as it increased to 95.41% as of 31 December 2023 from 90.40% as of 31 December 2019. Although most listed companies have embraced the ESG framework as shown by the notable compliance rate, we should remember that everything that shines is not gold. Greenwashing has been a common practice by some listed companies as they use ESG as a marketing platform to promote themselves rather than to serve stakeholders. It is conveying a false impression or deceptive information about products, services and business practices and making the most of the ESG investing movement. The most common forms of greenwashing include undistinguishable product labels, unsure service commitment and unsound business practices that dupe investors and delude consumers searching for ESG-driven business organizations. Some listed companies have engaged in greenwashing through newspaper articles, online commercials and print advertisements promoting their ESG compliance but are not making a holistic approach to sustainability initiatives. To ensure strong adherence to the ESG framework, the SEC is studying the adoption of the International Financial Reporting Standard (IFRS) Sustainability Disclosure Standards developed by the International Sustainability Standards Board to validate whether the ESG data are transparent or accurate. In the absence of international sustainability standards that would make the ESG data measurable and comparable, we should accept it while maintaining a degree of skepticism about its authenticity. We are not sure which of the listed companies are submitting sustainability reports anchored on strong commitment or simple compliance.
