Enhancing Stakeholder Trust through Transparent and Credible ESG Reporting
Transparent and credible ESG reporting is critical to prevent greenwashing, build stakeholder trust, and ensure genuine sustainability impact. Clear, verifiable disclosures help companies demonstrate real progress, reduce reputational risks, and create long-term stakeholder value. It also enhances accountability and regulatory compliance.
Sorotan Sigma
Environment, Social, and Governance, or commonly known as “ESG”, is a framework to analyze a company’s sustainability, risk management, and long-term financial performance. Investors, regulators and other stakeholders are currently recognizing the ESG factors as an important aspect to consider in their business or policy-making process. This is because ESG implementation is expected to help organizations achieve sustainability and improve its performance by also tackling environmental issues, social issues, and enhancing corporate governance. Additionally, a study from Gong et al. also argues that because of today’s fierce business competition, it forces companies to implement ESG practices to differentiate their business with competitors.
However, stakeholders are increasingly concerned because multiple greenwashing cases have been identified, in which companies engage in deceptive practices to impress stakeholders and appear as a “green and sustainable business” to enhance their company reputation. Over the past four years, more than 2,000 companies worldwide have been involved in greenwashing incidents, as investigations into unverified sustainability claims have increased. For example, in 2024 the Amsterdam District Court found that several environmental statements or claims made by KLM airlines (a Dutch-based airline company) were misleading, particularly in relation to the CO2 emissions impact compensation and the sustainable aviation fuels (SAF) usage. Other than that, recently in 2025, Deutsche Bank-owned asset manager DWS was fined 27 million USD by German prosecutor for overstating its ESG credentials and misleading the investors. These cases demonstrate the importance of transparently and accurately stating a company’s ESG performance or goals to avoid misleading claims and enhance stakeholder’s trust.
