A company's sustainability report states that its operations are carbon neutral. It has made no emissions reductions, and relies entirely on cheap offsets of poor quality. Which risk is most significant?
Answer and explanation
Correct answer: B. Reputation and legal risk from misleading claims
- Step 1: Think about whether the claim is supported by evidence.
- Step 2: A carbon neutral claim based on poor-quality offsets could mislead and attract regulatory action and reputational damage.
Answer
Reputation and legal risk from misleading claims.
Why not the others: Foreign exchange risk is not the issue in the scenario. Liquidity is not the problem; the problem is the accuracy of the claim. Carbon prices do not always fall, and inflation risk is not the point.
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