Nearly half of the environmental incidents caused by big energy companies are going unreported in their sustainability reports, a study published by the University of the Basque Country, Spain in the Journal of Behavioural and Experimental Finance in June 2024.
Economists from the university analysed 47 events related to 30 European energy companies and found that:
- Only 23 per cent of incidents were clearly mentioned in reports
- 47 per cent of damage remained hidden
- 22 of the 47 incidents were not mentioned at all
Goizeder Blanco, a research scholar with the Faculty of Economics and Business, highlighted that European regulations require large companies to publish environmental and biodiversity related documents, but the specifics of what must be included are not clearly defined. This lack of clarity allows companies to selectively report information that softens their image.
The research carried out by the UPV / EHU’s Research Group on Circular Economy, Business Performance and Sustainable Development Goals addressed critical problems such as deforestation, bird electrocution, and habitat destruction. The group’s efforts are aimed at encouraging sustainable development and ensuring companies are responsible for their environmental effects.
Blanco pointed out that corporations often use ambiguous language to minimise their negative impacts, highlighting positive actions such as tree planting while concealing the deforestation resulting from their operations.
The level of transparency differs based on the nature of the event; companies usually report accurately on straightforward issues like bird electrocution but are less transparent about more complex problems like ecosystem destruction.
Energy companies have routinely faced criticism and controversy related to their environmental impact and sustainability reporting practices.
ExxonMobil, a major oil and gas company, has been controversial for many years due to its environmental impact. Even though they knew about climate change risks since the 1970s, they denied and minimised the issue.
The company said its direct emissions (Scope 1 and 2) in 2019 were 5 per cent lower than in 2010. However, this claim doesn’t mention that emissions were higher in other years and completely ignores their much larger indirect emissions (Scope 3). According to a report by ClientEarth called The Reality, these indirect emissions are about seven times greater. This report is part of ClientEarth’s Greenwashing Files project.
The study employed counter-accounting, collecting data from external sources such as news outlets, social media and counter-information websites to expose concealed details. These sources were examined for events causing biodiversity loss, and then official documents from the relevant institutions were reviewed to uncover the true environmental impact. Blanco admitted the study has its limitations but stresses the need to go beyond company-provided information to gauge transparency.
The results highlighted the need for increased accountability from energy firms concerning their effects on biodiversity. The report acts as an alert for energy companies to be transparent and ethical in their disclosures.
Amid climate change and environmental degradation, it is essential that these companies are held responsible for their actions.
The primary author Goizeder Blanco and the research team are addressing the increasing call for corporate responsibility and openness in environmental reporting. Their study offered important perspectives on the deficiencies in existing sustainability reporting methods and emphasised the necessity for more precise and thorough disclosure of environmental effects.