Greenwashing, Social-washing and Conflict-Commodities

Sustainable Investing is a field where business and ethics mix. While business and economics have at times been characterized as separate from or apathetic to social impact and moral considerations, in reality of course this has never been true. Businesses (and economies) after all exist within societies and natural environments, not in a vacuum. In my last post I discussed ideas about viewing the economy and the businesses that it is composed of in a more holistic way to include not just profits and efficiency gains, but also social and environmental impact. As our research has progressed, my team and I are beginning to see a more nuanced picture of the interactions and dependencies between business, society and the environment. Along the way, we have also encountered new challenges as we advance our project objectives.

One of the guiding principles of the work our client does is that conflict and instability can be mitigated through inclusive and sustainable development efforts. Research suggests this is likely true; communities that lack basic infrastructure, economic stability and provision of public goods are more likely to have conflict. This is why the renewable energy projects pursued by our client are located in fragile regions, the idea being that access to clean energy will enhance stability for these communities. 

My teammates and I have embarked on a research journey to discover which industries have significant value chain overlap in fragile countries and identify potential private sector partners that may be willing to finance renewable energy projects. As our research has progressed, however, several challenging contradictions have surfaced.

For countries that are vulnerable to conflict, the industries that drive the domestic economy are often deeply embedded in these conflicts. Many of the primary industries we have identified are potentially dealing in “conflict commodities” which are minerals and other raw materials that fuel conflict by providing revenue streams for armed groups and other entities engaged in violence. Mining, for example, is an industry where commodities such as gold, diamonds and oil have often been linked to bad actors. This phenomenon expands beyond minerals and mining however, as we’ve realized through our research that even agricultural sectors are at times fueling conflict. 

Goods I would have never suspected such as sesame seeds in East Africa and bananas in Somalia have been tied to armed groups that capture the proceeds to finance their operations. Additionally, these industries can also prolong or incite conflict due to competition over controlling revenues and border conflicts.

Although the companies we’ve identified are far downstream of these events, they are linked through the supply chain. This presents a challenging situation; geographic value-chain overlap qualifies a company to finance a project with our client, but what if the overlap occurs through the purchase or processing of a conflict-commodity? Given that a core priority of our client is to mitigate conflict by providing public resources, the contradiction of partnering with these downstream firms is a challenging issue to contend with.

In addition to conflict-commodities, green washing and social washing are issues my colleagues and I are keeping in mind as we move forward with this work. Green washing is when a company misleads the public about their own environmental impact and mitigation efforts or perpetuates inaccurate narratives about climate solutions to avoid more serious action (United Nations). Many of the industries we have identified so far have a significant carbon footprint, large oil companies for example, which makes them a good candidate to partner with our client in the sense that they are more likely to benefit from carbon offsetting measures. 

On the other hand, it is important to be mindful of the environmental impacts of the industries we choose to recommend for our client to engage with. Oil companies, mining companies, garment manufacturers and certain types of agriculture are oftentimes very serious offenders when it comes to pollution and environmental degradation. Leading one to question whether a company may do more harm than good by claiming a renewable energy credit without pursuing more serious climate mitigation efforts.

Our team has also encountered concerns regarding social washing, which is similar to green washing in that companies attempt to appear more socially conscious than they are, to improve their image, without changing their behaviors. Working conditions in particular are a challenging subject matter when we examine the value chains of companies that overlap with the countries our client has specified. Garment factories, for example, contribute a significant percentage of GDP for several of our target countries, and are often manufacturing products for large apparel brands that have the resources to contribute to a renewable energy project. From this perspective, they appear to be good candidates for financing green energy projects in their countries of operation.  However, the social impact and working conditions of these factories are often untenable, once again leading us to question how we should go about making recommendations and identifying partners for our client.

Taking all this together, it feels like a bit of a conundrum. Our client seeks to provide social, environmental and security benefits for some of the world’s most vulnerable populations by building new renewable energy sources in fragile countries. However, many of the corporations that are likely candidates for financing these projects, have a poor social and environmental track record and in some cases are inadvertently exacerbating conflict. This situation has stoked many questions in my mind about private-sector partnerships for impact work. On the one hand, companies that have a negative impact in these communities should contribute to projects like this as part of their responsibility to give back. On the other hand, companies may use opportunities like this to greenwash or social wash their reputation without changing the business practices that are causing harm. Beyond this, does it matter the motivations of a partnering firm as long as the result is the provision of an important public good to vulnerable communities? 

I can’t claim to know the answer to these questions, but I do want to hold these issues in my mind as we continue forward with this work. I do not see this is an impossible situation, but it is a complex one. My teammates and I will need to be mindful of these complexities to ensure that the final recommendations we develop for our client not only make good business-sense and meet our specific project objectives, but that they are also integrated within the broader mission and goals of our client organization.