Brownspinning is the focus of Simon Rosenqvist’s work. As a researcher with the Financial Ethics Group at Gothenburg University and an affiliate of the Sustainable Finance Lab (SFL), his research challenges how we interpret corporate sustainability, and whether current metrics are helping the climate or simply reshaping how responsibility is reported.
“The climate does not care about who owns the world’s coal-fired power plants,” Rosenqvist notes. “It only cares whether they exist and how they operate.”
The Dilemma of Divesting
Under current reporting standards, companies are primarily evaluated based on the emissions they directly produce or are linked to through their value chains. This creates a wrong incentive: rather than undergoing the difficult job of safely closing its carbon-intensive operations, firms can improve their sustainability profile simply by divesting them to the highest bidder.
This raises a troubling moral question. If responsible companies exit these sectors, who takes over?
The risk is that assets often move from transparent, public companies to private firms or state-owned enterprises with less oversight. The irony is that “we are essentially saying that the most environmentally dangerous assets out there should be owned by the companies and investors that care the least about their climate reputations,” Rosenqvist explains.
“Decision Emissions”
To bridge this gap, Rosenqvist introduces the concept of “decision emissions”. This framework looks beyond standard emission accounting to capture the broader climate consequences of corporate choices.
Grounded in his philosophical background in consequentialism, which regards the morality of an action as determined by its outcome, Rosenqvist argues that the company’s “label” as sustainable or not matters far less than how their actions affect global emissions.
If a divestment leads to a plant running longer or dirtier under new management, the “decision” was a failure, regardless of what the company’s ESG score says. By focusing strictly on real world outcomes, consequentialist reasoning emphasizes that companies cannot escape moral responsibility by simply moving polluting assets off their books.
A gap between understanding and judgment
Jointly with colleagues Oscar Bauer and Arvid Erlandsson at Linköping University, Rosenqvist examined how people perceive fossil fuel divestments. The study, asking 1,000 participants to evaluate different combinations of corporate strategies, such as selling or shutting down fossil fuel assets, found a psychological paradox. Preliminary results suggest that while people in general logically understand that selling a coal plant doesn’t delete its emissions from the atmosphere, they still struggle to judge the sellers harshly.
“We were surprised to learn that people didn’t see much of a difference when comparing sales and shutdowns in company evaluations,” Rosenqvist says.
When asked to evaluate the company, respondents were swayed by the “cleaner” image of selling the assets. When asked to judge the decision, they preferred a shutdown. This suggests that current sustainability communication “tricks” our moral intuition.
Rethinking how we measure impact
For Rosenqvist, the takeaway is not that sustainability reporting is unimportant, but that it needs to evolve from “accountancy” to “impact measurement”.
Looking ahead, his research explores alternative ways of measuring corporate climate impact, including approaches inspired by “avoided emissions” or so-called Scope 4 metrics. Rosenqvist suggests moving beyond accounting frameworks that track responsibility within firms, toward retrospective reporting that requires companies to report on emissions of sold assets for a set period post-sale.
This is not an easy task, Rosenqvist acknowledges. “Could we find a way to measure how a company’s activities actually change global GHG levels? What are the theoretical, practical and ethical problems that face such measurements?”
Ultimately, his work invites a fundamental rethink of what it means to be a “sustainable” company. If current metrics incentivize appearances over outcomes, then improving those metrics may be just as important as changing corporate behavior itself.
If you want to engage further with this question, Rosenqvist leaves us with two reading recommendations: one for those looking to get a feel for the problem of brownspinning and one for those looking for a more in-depth reading:
- “Who buys the dirty energy assets public companies no longer want?” in The Economist (Feb 12th 2022).
- “Private companies: the missing link on the path to net zero” by Gözlügöl and Ringe, published 2022 in the Journal of Corporate Law Studies.
