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By Alex Scott | May 21, 2025

When Green Goals Create Grey Areas: ESG’s Hidden Governance Risk

As sustainability performance becomes ever-more central to a company’s balance sheet, many organisations are racing to implement smart building technologies, energy monitoring tools and carbon tracking systems. The goal is clear: demonstrate real environmental impact and meet ESG targets.

But there’s a growing blind spot — and it’s not about emissions. It’s about governance.

The Governance Blind Spot in ESG Reporting

In some cases, the Environmental (E) aspect of ESG is prioritised while Governance (G) is overlooked. But the two are deeply interconnected. When data forms the backbone of a net zero strategy — especially tenant-level energy consumption data — the way that data is accessed, handled and protected becomes crucial. Without proper consent, strong privacy safeguards and trustworthy partners who meet market standards, even the most well-intentioned environmental initiatives can pose significant governance risks.

When Environmental Good Intentions Become Governance Failures

One of the most high-profile examples of an environmental initiative becoming a governance issue is the long-standing controversy surrounding carbon credits. Over the past few years, several companies — including major household names — have come under fire for purchasing carbon offsets that were later revealed to be either overstated in impact or entirely ineffective.

These credits, often generated by projects like forest preservation or renewable energy investments in developing countries, are intended to compensate for an organisation’s carbon footprint. On paper, they allow companies to claim they are “carbon neutral.” But investigations by journalists and NGOs uncovered that many of these projects lacked proper verification, failed to deliver the promised emissions reductions, or were based on hypothetical scenarios — such as forests that were never in real danger of being cut down.

The fallout has been significant. Some companies were accused of greenwashing, investor confidence took a hit, and regulators began looking more closely at ESG claims in financial reporting. What began as an earnest environmental effort turned into a governance crisis — all due to insufficient oversight, poor data integrity, and a lack of transparency in how environmental claims were substantiated.

The lesson is clear: without rigorous governance and accountability, even the most well-intentioned sustainability efforts can erode trust and invite risk.

Data Governance: A Core ESG Pillar

At arbnco, we believe that ESG success isn’t just about driving carbon reductions — it’s about doing so ethically, securely, and transparently. Data governance isn’t an afterthought. It’s a core pillar of our energy and decarbonisation software solutions.

We work to ensure that every data point we access on behalf of our customers is only done so in line with energy market data access rules, protecting our customers, ourselves and the energy end user. That’s why so many clients trust us not just to deliver environmental insights, but to do it in a way that reduces organisational risk.

Build Competitive-Sustainability on Solid Ground

In a fast-moving and increasingly scrutinised sustainability landscape, cutting corners on compliance isn’t just risky — it’s self-defeating. A strong Environmental strategy must stand on a solid Governance foundation.