Transparency is Key to Reconcile the Opportunities and Challenges for Public Relations Practice in Company's ESG
The Environmental, Social, and Governance (ESG) criteria are becoming increasingly important in the context of Industry 4.0, as companies and investors recognize the potential risks and opportunities associated with sustainable business practices.
In 2023, it is likely that companies in the Industry 4.0 sector will need to demonstrate strong ESG performance in order to attract and retain mutual benefits with customers, investors, and talent, which is an ideal situation for companies' public relations.
However, along with the bright future ahead, the focus on the pursuit of fulfilling the ESG criteria also created challenges for companies and their public relations. The element of puffery and misleading information in a company's strategic communication prevail, as the 'greenwashing' practice is unfortunately common all over the world.
There are cases where companies took the opportunity from the increasing focus on sustainability by providing false or misleading information in their sustainability reports. This can happen through various means such as exaggerating the company's performance in advertisements, selectively reporting data, or using non-standard reporting methods.
Such practices are detrimental to the companies themselves as well as to the stakeholders who rely on the information provided in the sustainability reports, undermine the credibility of sustainability reporting, and thus reduce the effectiveness of sustainability initiatives. Hence, governments and regulators should implement more stringent requirements for companies in this sector, such as increased transparency and disclosure around ESG issues.
For example, Tesla has faced some criticism in South Korea for its advertising and marketing practices. In 2019, the South Korean Ministry of Environment issued a warning to Tesla for making false or exaggerated claims about the environmental benefits of its electric vehicles (EVs) in its advertising.
In January 2023, South Korea's antitrust regulator said it would impose a 2.85 billion won ($2.2 million) fine on Tesla Inc?(TSLA.O)?for failing to disclose to its customers about the shorter driving range of its electric vehicles (EVs) in low temperatures.
The Korea Fair Trade Commission (KFTC) said that Tesla had exaggerated the "driving ranges of its cars on a single charge, their fuel cost-effectiveness compared to gasoline vehicles as well as the performance of its Superchargers" on its official local website since August 2019 until recently.
Additionally, in 2020, The Korea Transportation Safety Authority (KOTSA) has been limiting Tesla's Autopilot driver-assist system after receiving multiple reports of accidents involving Tesla vehicles. For now, it is unclear if Tesla has made any changes to its advertising and marketing practices in South Korea to address these concerns.
A quite similar instance of misleading information is observed in the Volkswagen diesel emission scandal (Dieselgate), which came to light in 2015, as the result of the company installing software in its diesel vehicles that allowed them to cheat on emissions tests. This allowed the vehicles to emit pollutants at levels much higher than legally permitted.
The strict regulations and competition in the car market played a role in Volkswagen's decision. Apparently the tightening of emissions regulations in the wake of concerns about air pollution and climate change had increased pressure on car manufacturers to produce vehicles that met these standards.
In this case, Volkswagen attempted to gain an advantage over its competitors by installing the 'defeat device' software that allowed its vehicles to pass emissions tests while emitting pollutants at much higher levels. The case was officially closed in 2018 after Volkswagen paid for environmental mitigation, promote zero-emissions vehicles, settlements for all courts, and customer repayments that are estimated to be 15 billion dollars altogether.
Besides those billions of dollars in fines, the scandal had significant consequences for Volkswagen's reputation. It also had a broader impact on the car industry, as it increased scrutiny of emissions testing and led to more stringent regulations. In such instances, public relations should abstain from further disseminating harmful and damaging information to their strategic public.
Companies should be transparent and accurate in their reporting and independent third-party assurance should be obtained to mitigate this risk. Public relations practitioners should observe ethical conduct and compliance since in ethical decision-making, one's personal ethics is barely associated with the organizational ethical climate [1]. In other words, regardless of the ethically challenging situations, public relations practitioners can intentionally opt to do better.
At the same time, governments and regulatory bodies can implement regulations and guidelines to ensure the accuracy and comparability of sustainability reports. Claims about achieving 'net zero emissions', carbon neutrality, adequate living standards, end-user well-being, and other sustainability-related statements must be scrutinized more closely, as companies may use these claims to divert public attention away from certain ESG issues.
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Stakeholders also have an important role to play by demanding transparent and accurate sustainability reporting and by not relying solely on sustainability reports in their decision-making process. They also need to do thorough research and analysis of the company, its industry, and its competitors.
Public relations practice contributes a significant impact on the communication process about the company's operations, supply chain, and products to the environment and society. Therefore, it is important for these companies to be transparent about their sustainability performance, so that stakeholders can understand the impact of their business and make informed decisions; as well as to help companies to:
Sustainability reporting frameworks such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide guidance on what information should be included in sustainability reports and how it should be presented. Additionally, some countries and regions have mandatory sustainability reporting requirements for companies.
In the context of public relations practice in Malaysia, greenwashing a brand or an organization through misleading information is a breach of several ethical codes for public relations that are issued by the Institute of Public relations Malaysia (IPRM) - including Code No. 1) a member shall conduct his professional activities with respect for the public interest; Code No. 2) a member shall at all times deal fairly and honestly with his client or employer's past or present, with his fellow members, and with the general public; Code No. 3) a member shall not intentionally disseminate false or misleading information and shall use proper care to avoid doing so. He has a positive duty to maintain truth, accuracy, and good taste; and Code No. 9) a member shall not cause or allow to be done anything to tout or advertise calculated to attract business unfairly.
IPRM is the governing body for the public relations profession which is responsible to promote the interest of public relations practitioners and enhancing its practice in the country [2]. IPRM issues a list of 14 codes to encourage and foster the observance of high professional standards by its members and to establish and prescribe such standards, based on the ‘Code of Athens’ by the International Public Relations Association (IPRA) which guided its members and encourages international public relations practitioners to refer the code[3].
In conclusion, the only acceptable way to communicate organizational ESG messages to the strategic public for prolific sustainability while avoiding harmful and damaging practices is through transparent reporting and communication. Transparency in communication is essential for building trust with stakeholders and maintaining integrity. Adhering to basic principles of communication to align promise and action is the best approach for companies to take when discussing their sustainability efforts.
REFERENCES
[1] Safiah, M., Hamdan, A., Syahruddin, A. A. 2019. The Dynamics of Personal Ethics and Ethical Climate in Public Relations Practitioners' Decision Making. In Dzurizah Ibrahim (Eds.), Seminar Kebangsaan Pascasiswazah Sains Sosial dan Kemanusiaan. (pp. 279-290). Fakulti Kemanusiaan Seni dan Warisan, Universiti Malaysia Sabah.
[2] Latif, A. L. C. C. 2015. Public Relations and Sport in Sabah, Malaysia: An Analysis of Power Relationships.
[3] Safiah, M. 2022. Relationship Between Ethical Evaluation and Ethical Climate in Decision Making among Public Relations Practitioners in Kota Kinabalu, Sabah. [Masters Thesis, Universiti Malaysia Sabah].
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