New rules bring new risks – whistleblowing is a golden thread for ESG

07 September 2022

Tags: Speak Up, Supportive Environment

Read our latest guest blog by Elizabeth Gardiner, Chief Executive of Protect.

Environmental, Social and Governance (ESG) credentials are key to business reputation and success. Investors, staff, clients and consumers all have an interest in how well an organisation is run, how it treats both its staff and people in its supply chain, and the impact it has on the planet. A wealth of new measurements and disclosure requirements mean businesses need to set appropriate ESG targets and report against those standards. But new rules bring new risks – whether failure to tackle toxic cultures or “greenwashing” of climate claims. Whistleblowing arrangements can support risk management and promote compliance across all three areas.

G: Whistleblowing supports good governance
Taking the G element first, it is hard to imagine how an organisation could claim to have good governance without effective whistleblowing arrangements. The Corporate Governance Code 2018 includes Principle E: "The Board should ensure that workforce policies and practices are consistent with the company's values and support its long-term sustainable success. The workforce should be able to raise any matters of concern.” Yet outside of a few regulated sectors, there are no requirements for most organisations to have whistleblowing policies in place. 

Whistleblowers are the first line of defence against wrongdoing and are better than internal audit at identifying risks of fraud and corruption (42% of fraud is uncovered via tips, and over half of those are from employees, compared with 16% of fraud uncovered by internal audit). Effective whistleblowing arrangements support corporate accountability, can prevent small risks from becoming large ones, deter others from wrongdoing and protect against financial loss and reputational damage. 

S: Transparency on social issues is supported by Speak Up 
On the social side, investors and regulators as well as staff are increasingly interested in workplace cultures. At a time when competition for talent is fierce, organisations with strong and supportive workplace cultures are likely to be best placed to recruit and retain staff. A good “Speak Up” culture, combined with active listening up, supports psychological safety fostering an open and transparent environment, where employees feel comfortable raising concerns. 

Over half of workers say their employers’ transparency on societal issues – including health and safety and diversity - is very important to them. Since the #MeToo and Black Lives Matters movements, at Protect we’ve seen an increase in the number of workers wanting to raise concerns about toxic workplace cultures, whether bullying or discrimination, via whistleblowing channels. Whistleblowing arrangements can help an organisation identify wider cultural problems, including equality concerns that individual grievances may not. 

Whistleblowers can also ensure accountability on other aspects of an organisation’s reporting requirements, whether gender pay gaps or modern slavery. Staff may be the first to identify discriminatory pay practices, but it may be those you contract with who point out poor factory conditions in your supply chain. Organisations may want to widen their whistleblowing policies and encourage all those who work with or for the organisation - including suppliers - to use them. 

E: Environmental whistleblowing – a new era
The biggest public interest concern of all – the climate emergency – is a matter for all of us. All good organisations want to promote their “green” credentials and address the “E” of ESG through environmental policies. Customers want to know that they are purchasing sustainable and eco-friendly products, and government and regulators are insisting that certain businesses disclose climate change-related risks (for example through the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022). Shareholders too want to ensure that company directors are complying with their environmental duties under the Companies Act 2006 (see, for example, ClientEarth’s ground-breaking claim on behalf of Shell shareholders against Shell’s directors).

The rush to be “greenest” or “most sustainable” needs to be cautious. The Chief Executive of the Competition and Markets Authority introducing a new Green Claims Code noted “We’re concerned that too many businesses are falsely taking credit for being green, while genuinely eco-friendly firms don’t get the recognition they deserve.” The Chair of the Environment Agency has spoken of widespread “greenwashing” and warned that businesses are embedding liability and storing up risk for their investors by giving the false impression they are addressing the climate crisis. 

Overstating environmental credentials or greenwashing in marketing can also bring an organisation into conflict with regulators (see, for example, the ASA ruling on Innocent Drinks’ misleading claims). This is a new area of risk for many organisations. Once again it will be those working inside the organisation who may be best placed to identify whether claims are genuine, well-founded and accurate. 

While there are currently few reported tribunal cases of whistleblowing on environmental damage, we anticipate this will be a growth area. In 1998 our predecessor organisation – Public Concern at Work – helped draft the law on whistleblowing in the aftermath of the Piper Alpha oil platform disaster. They included raising concerns about “damage to the environment” as a separate category of concern. Today, this category of wrongdoing may allow whistleblowers to raise concerns about climate change, even where there is no misstatement or other breach of the law. For example, staff may want to raise concerns about damage from petrol rather than electric company vehicles, failures to recycle, investment in fossil fuels and so on. It will be interesting to see how widely public interest environment concerns can be drawn.

Getting it right – what you need to do
It seems likely that ESG is going to increase in importance for employers. ESG credentials can enhance the reputation of an organisation, boosting profit, and improving retention and recruitment. Yet it also brings risks of climate activism, strategic litigation, regulatory intervention and reputational damage. Whistleblowing arrangements are the golden thread that can minimize risks across all three areas.

An important aspect of mitigation is engagement – understand what your staff, consumers and suppliers want to see in terms of ESG standards and engage them in the process of setting and monitoring goals.

Employers should set standards that are ambitious, but realistic. There must be follow-through to ensure that targets are met, and honesty when they are not. Reports should be transparent and publicly available.

Listen to whistleblowers who may be raising concerns about environmental damage, or compliance with environmental and other laws, to ensure honest reporting of ESG credentials. 

Review your arrangements to make sure you can capture and address ESG concerns raised by all those who work with or for the organisation, including suppliers. Best practice might be to actively encourage whistleblowing about climate change with a Net Zero clause in your policy – see, for example, Sasha's clause from the Chancery Lane project.

Protect is running a masterclass on whistleblowing and ESG on 19 October: come and find out more or share your good practice here: Training-and-consultancy - Protect - Speak up stop harm.


Elizabeth Gardiner
Elizabeth Gardiner

Chief Executive, Protect

Elizabeth Gardiner has been Chief Executive of Protect, the UK’s whistleblowing charity since March 2020. Prior to becoming an employment solicitor, she had many years of experience in policy and Parliamentary roles.  She joined the charity as Legal Officer in 2018. She has experience providing advice to whistleblowers on the charity’s free legal Advice Line and training employers in best practice whistleblowing arrangements.