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Ethical Investor: This week’s grilling shows that social media is a game changer for ESG reputation

Heory
Ethical Investor: This week’s grilling shows that social media is a game changer for ESG reputation

  • Last week it was Macquarie, now Australian supermarkets are in the news for all the wrong reasons
  • Coles and Woolworths have fallen out with the ACCC over alleged misleading prices
  • It has been proven once again that social media is essential to managing a company’s reputation

What a week it has been for ethical investors, with scandals appearing left and right.

First it was Macquarie Bank (ASX:MQG)which found itself last Friday after agreeing to pay the U.S. Securities and Exchange Commission nearly $80 million to settle allegations that it inflated the value of thousands of investments.

Macquarie’s US branch was accused by the SEC of misrepresenting the performance of approximately 4,900 mortgage-backed securities between 2017 and 2021 by inflating their values ​​without adequate justification.

The company allegedly dumped these securities on some of its U.S. clients, including a mutual fund, leaving those clients to deal with the losses.

There were more surprises this week when Australia’s competition regulator, the ACCC, announced it was taking legal action against the company Cola (ASX:COL) AND Woolworths (ASX:WOW)accusing them of misleading customers with false claims about discounts.

The problem was brought to light by consumers who shared their experiences on social media including X, Reddit and TikTok, prompting a wave of complaints about pricing practices that many considered unfair.

For example, one Reddit user noticed Woolworths pricing patterns for Pepsi Max cans.

They claimed the cans were marked down from a promotional price of $24 to $35 for about two weeks before dropping back to $26.

This user pointed out that although the supermarket claimed that significant discounts had been granted, the actual price had increased compared to the original price:

Woolworths raises and then lowers prices
byu/SirCorseHock in Australia

Consumers have noticed other similar problems, such as with Sakata rice crackers, where prices were allegedly raised before being “lowered” again.

Otherwise said user X Coles took consumers for a ride:

The ACCC said it followed consumer reports and social media discussions over several months as part of its investigation.

After a thorough investigation, the ACCC found that such pricing tactics were deceptive and discounts were essentially non-existent.

Coles and Woolworths will now appear in the Federal Court to answer these allegations, which will cover more than 250 products.

The ACCC has praised social media sleuths for highlighting alleged misleading practices.

“We monitored social media and saw on X, Reddit and TikTok that hundreds of consumers were reporting prices they did not feel were authentic; we then used our own in-depth investigation powers,” said ACCC chairwoman Cass-Gottlieb.

Social media has changed the ESG game

Reputation has become a key aspect of any business, especially in today’s world where social media can quickly amplify both negative and positive messages.

For ethical investors Social media is indeed a powerful tool for companies to showcase their ESG initiatives.

A recent study by Innovation in the UK found that social media influences shareholder responses to ESG risk.

Analyzing 114 million tweets from S&P 100 companies from 2016 to 2022 on Twitter (now

A recent separate study by a Melbourne researcher also revealed the significant impact of social media on the share prices of ASX-listed companies.

Maria Prokofiewa, senior lecturer in accounting and finance at ul University of Victoriaanalyzed over 3,500 ASX announcements and found that companies that effectively engage with social media tend to see a positive impact on their share prices.

However, Prokofieva also warns that social media can be a double-edged sword.

Companies that don’t engage on social media risk being overshadowed by criticism, which could lead to declines in their stock prices.

She pointed to cases such as David Jones and Whitehaven Coal, which saw significant declines following negative social media campaigns in 2012 and 2013.

In response to these challenges, the ASX has now made it mandatory for all listed companies to monitor social media for credible rumors and potential leaks about their businesses.

Prokofieva concludes that maintaining an active social media presence is no longer optional for companies; this is necessary to secure their market position.

The crux of Prokofieva’s findings highlights a key point: retail investors often lack the time and resources to follow each company and its announcements.

That’s why companies that proactively contact investors via social media (or even specialized platforms such as Stockhead) can attract more attention and increase their market value.

ASX warning for businesses

Meanwhile, in July this year, the ASX published guidance for listed mining companies, stating that social media should NOT be used as a platform for disclosing market-sensitive information.

The ASX has clarified that any such information must first be announced through official market channels.

Posting on social media, the ASX said mining companies must ensure they comply with all ASX and JORC Code requirements, as they would with any public report.

This means avoiding sharing sensitive information, including search results or financial data, until it is properly disclosed via the official market announcement platform.

If a company does indeed need to share information based on visual estimates or observations, it must comply with all regulatory requirements and clearly communicate the necessary disclaimers, the ASX said.

This is to ensure that investors are not misled by incomplete or unofficial information.

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