Reported by: Natalie Runyon Director / ESG content & Advisory Services / Thomson Reuters Institute

Greenwashing allegations continue to make headlines, but only recently have they started to impact the stock price of companies that are accused of the offenses.

However, are these incidents considered fraudulent? It depends on whom you ask.

Vincent Walden, CEO of Kona AI and FRAUD Magazine columnist, says maybe. In his view, fraud is fraud regardless of context, and he references the Association of Certified Fraud Examiners’ definition of fraud as being any activity that relies on deception in order to achieve a gain.

Fraud becomes a crime when it is a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment,” according to Black’s Law Dictionary. In other words, if a person lies in order to deprive another individual or organization of their money or property, it is fraud.

From a legal point of view, greenwashing involves allegations of fraud related to environmental, social & governance (ESG) matters around misconduct or misstatements. Yet, while claims of greenwashing get the most attention, allegations involving environmental fraud are potentially very expansive. For example, if a company — while claiming publicly and in its required reporting to be socially responsible — is found to have been covertly taking steps to cover up harms to the environment it may have had a hand in causing, then this is an example of how vast the definition of environmental fraud could be. Similarly, bribing officials to allow illegal dumping or unauthorized permits, or misrepresenting or flat out lying about certain environmental controls or initiatives on a company’s public disclosures when indeed those statements are false or exaggerated is another example of this type of fraud, according to Walden.

Read full report: https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/greenwashing-esg-fraud/