Why Greenwashing is a Commercial Risk

We often hear the phrase “going green” or “going greener”? Social media and corporate websites are awash with false claims and marketers are risking their firms as a result. The limits of green fatigue are reached, and it’s possible that greenwashing is to blame. Money laundering is something that most people are familiar with, and they would not do business with a company that engaged in this practice, and so it is with any business which exaggerates its sustainability claims.

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Consumers are genuinely concerned about environmental issues, and they’re looking for ways to make environmentally friendly purchases. Yet they see that their efforts to purchase from companies that boast about making better environmental choices will not yield the desired results because sustainable product claims invariably lack the supporting evidence demanded by regulators.

They’re the victims of “greenwashing,” in other words, misleading information about the environment. Greenwashing is a shady advertising strategy that is becoming increasingly popular today, but what exactly does it mean? We’ll go over how to recognise and avoid the most common signs of greenwashing so that you can make more informed purchasing decisions in the future.

What is greenwashing?

Greenwashing is a misleading marketing method that involves making unsubstantiated claims about the environmental friendliness of a product or service’s features and characteristics. To put it another way, greenwashing is a marketing strategy used by businesses to deceive customers into believing that a company’s products, services, or mission have a greater environmental impact than in reality.

In a world where we all should do whatever we can to fight climate change, greenwashing (also known as “green sheen”) is a significant environmental issue that requires immediate attention. Environmentally conscious consumers are making environmentally friendly purchasing decisions by voting with their wallets and are avoiding toxic brands. In the long run, Greenwashing erodes consumer confidence in brands that are not truly eco-friendly and environmentally sustainable.

It was Jay Westerveld, the environmentalist and writer, who coined the phrase in an essay published in the 1980s. This essay criticised the “save your towel” movement in the hotel industry for preying on guests’ environmental sensibilities by encouraging them to save their towels. While this movement was marketed as a way for guests to assist hotels in conserving water and saving the environment, it essentially served only to reduce the hotel’s laundry labour costs and made a marginal difference in water usage.

Companies use greenwashing in this way to appeal to customers who are concerned about the environment without having to make significant changes to their operations. Most greenwashing companies spend far more time and money marketing the “eco-friendliness” of their products than they do on ensuring that their products are long-lasting and environmentally friendly.

What is it about greenwashing that is so popular today? It is effective, to put it simply. According to a 2015 Nielson poll, two-thirds of shoppers are willing to pay more for environmentally friendly products, and half consider a product’s long-term viability before deciding whether or not to purchase it. With the negative effects of landfill, fossil fuel, and carbon emissions, there’s no shortage of consumers willing to try to help stem the tide. However, if a corporate business model relies on the consumption of palm oil or plastic bottles, for example, then dressing up a brand’s credentials becomes harmful deception.

The Effects of Greenwashing

Greenwashing may appear to be a harmless practice, but the reality is far more serious. One issue is that it causes consumer confusion and detracts attention away from genuine eco-friendly initiatives.

Not all businesses engage in “greenwashing” with malicious intent. Frequently, this is just as much a misinterpretation on the part of marketers as it is on the part of customers. Still, unintentional greenwashing spreads false information about what it takes to be environmentally friendly and can lead well-meaning customers to make poor choices despite their best efforts.

Greenwashing has a multitude of challenges.

When done properly, sustainable efforts can benefit a company’s bottom line by bringing down water and electricity bills, as well as reducing the amount of material used and wasted (and therefore, bought). Greenwashing, on the other hand, is a significant business threat. It is possible for businesses to genuinely believe they are making a significant dent in their carbon footprint and to publicise these efforts to their employees, customers, and other stakeholders. However, the reality is that what they’re doing does not always produce the desired results, as they would hope.

  • Employee engagement can be seriously impacted as a result of greenwashing practices. When employees believe their employer is trying to mislead customers by greenwashing, they begin to lose confidence in their company. It results in decreased productivity and morale, as well as a high turnover rate in the workplace.
  • Stakeholder trust in a company is diminished when it engages in greenwashing, which diverts market share away from goods and services that have a genuine environmental impact.

Simply put, companies that engage in greenwashing ultimately suffer as a result.

A classic example is the Volkswagen scandal of 2015, which is colloquially referred to as “Dieselgate.” The German automobile manufacturer made false statements and promoted their diesel vehicles as being better for the environment for a long time. Volkswagen, on the other hand, purposefully installed software in 11 million cars to trick emissions tests into producing favourable results, allowing the company to operate vehicles with higher emissions than the law permitted. Volkswagen suffered a $30 billion loss as a result of the recalls and the resulting loss of consumer confidence.

Tips on how to recognise and avoid greenwashing

An entire industry has developed based on the concept of green marketing and spreading the word about a company’s commitment to environmental responsibility. However, “greenwashing” tactics, which are used to improve a company’s image, can have the unintended consequence of harming your business by causing consumers to lose trust in your brand, damaging true green credibility, and dismantling the positive effects of green marketing that have been achieved.

Increased scrutiny has been imposed on the explosion of green claims, and a pushback has prevailed. Companies like big oil, automobile manufacturing, and the manufacturers of so-called “green” cleaning products have received some of the harshest criticism from the corporate watchdog group CorpWatch, which has waged a sustained campaign against the epidemic of “greenwashing,” which it defines as “disinformation disseminated by an organization in order to present an environmentally responsible public image.”

Examples of greenwashing practices

Since the 1980s, greenwashing has developed, and it is becoming increasingly difficult to detect with the untrained eye. Here are some of the indicators to look out for when determining whether a company is engaging in greenwashing activities.

  • Selective Disclosure: Companies frequently emphasise positive environmental facts about their products while avoiding any mention of negative environmental facts about their products. This is known as selective disclosure. For example, an automobile manufacturer may extol the virtues of a vehicle’s fuel efficiency while completely ignoring the environmentally destructive mining practices used in the manufacture of the vehicle’s lithium battery.
  • Symbolic Actions: It is standard practice for brands to draw attention to a minor positive action that has little impact on the brand’s overall environmental footprint in order to raise awareness of the action. One example is the donation of Dawn dish soap by oil companies to clean infected animals after their own product spills in the ocean.
  • Hidden Trade-Offs: Companies may promote a new change as environmentally friendly while ignoring its negative consequences. Starbucks, for example, introduced straw-free lids in an effort to reduce waste, but these new lids actually used more plastic than the old ones.
  • Lack of Evidence: The company may make claims about its eco-friendliness (“made with organic materials!”) without providing certifications or other evidence to support those claims. Lack of Evidence:
  • Confusion: Brands can greenwash by making broad statements about their sustainability that are overflowing with buzzwords and are therefore meaningless. ‘New and improved,’ ‘non-toxic,’ and ‘made with biodegradable materials’ are all examples of terms that can be used. Alternatively, the package around a plastic toy may be labelled “recyclable” without making it clear whether the label is referring to the package, the toy, or minor components of either of these items.
  • Irrelevance: Companies greenwash their products by making claims that are technically correct but have no bearing on the environmental impact of the products in question. For example, a paper company that advertises that its products contain “all-natural materials” (which most paper does) or an aerosol spray that is advertised as “CFC-free” are both examples of false advertising (CFCs have been illegal in the US since 1978). Similarly, trash bags marked “recyclable” can fall into this category because the entire purpose of these bags is for them to end up in the trash. The label implies an environmental benefit, which would only be realized if users emptied their trash bags, rinsed them out, and then placed them in the recycling bin after use, as instructed on the label.
  • Real meaning of Labels: Many companies conceal their products behind meaningless “greenspeak,” which may sound impressive but does not carry any official weight. Examples include the use of phrases such as “made with natural ingredients” in place of USDA organic certification or the use of the phrase “vegan approved” in place of showing that the product is PETA-certified vegetarian.
  • Using Overblown Phrases: Greenwashing companies may use phrases that are technically correct, but give the consumer a distorted perception of the products they are purchasing. An apparel company, for example, may claim that its shirts are now “made with 50 percent more recycled fibres” after increasing the amount of recycled fibres used from 2 percent to 3 percent of the total garment. True, but it has been exaggerated as a benefit.
  • Suggestive Imagery: Sometimes all it takes to pass off a product as environmentally friendly is to package it in a visually appealing manner. A tissue company might use green leaves to decorate the box of its product to imply that the paper was harvested in a sustainable manner without disclosing this fact on the packaging. Even small images that appear to be official logos for environmental certifications, but are actually meaningless, are used by some companies to promote their products and services.

Greenwashing Guidelines

The following guidelines can assist you in promoting your company as environmentally friendly in a safe and authentic manner:

  • Prove your credibility with facts: If you have something to brag about, such as the ingredients you use or certifications you’ve received, tell the world about it.
  • Educate: Share stories that demonstrate your genuine environmental efforts.
  • Tell us your story: Do you prefer to deliver your goods by bicycle rather than by truck? On your website, you should feature the people who deliver bicycles. To put it another way, don’t just preach about being environmentally conscious; demonstrate it.
  • Encourage consumers to use the point of sale: Some of the most effective and persuasive messages can be delivered right in the store, at the exact moment when the consumer decides to reach out and purchase your product.
  • Break the mould: Look for ways to turn traditional business practices on their heads. For example, retailers who sell shopping bags made from recycled materials have embraced green marketing in a creative way with their products.
  • Make the appropriate connections: Do business with other environmentally conscious organizations, and encourage your customers to do the same. Form alliances with other environmentally conscious businesses to spread the philosophy and business practices of going green.

The difference between green marketing and “greenwashing”?

In light of the numerous research articles of greenwashing corporations, it’s easy to conclude that every organisation that claims to be committed to environmental protection is concealing the truth. While this is not always the case, many businesses are making efforts to make environmentally conscious decisions, as evidenced by their advertising campaigns. This is referred to as “green marketing.”

Here are some of the obvious signs of an environmentally friendly product:

  • Products are produced in a sustainable manner.
  • Items are delivered with the bare minimum of packaging.
  • Free of dangerous materials
  • Having the ability to be recycled or being made of recycled materials
  • The product is made from biodegradable materials
  • It is intended to be repaired or repurposed.
  • An end-of-life program is available for the products manufactured by the company (i.e., a recycling program)

How to Spot greenwashing

As a customer, it can be difficult to determine whether you are dealing with a product or service that is truly sustainable or whether you are dealing with greenwashing.

As a consumer who is concerned about the environment, one of the simplest and most secure things you can do is look for official environmental certifications. When shopping in the Nordic countries, for example, it is a good idea to look for the Nordic Ecolabel, which is the official eco-label in the region. Who is eligible to receive this type of labelling must meet stringent criteria.

Another suggestion is to inquire as to whether the company has documentation that demonstrates that the product or services are long-term in their nature. Their ESG report should be requested.

What is a Green Product?

With the help of the United Nations Sustainable Development Goals, the EU has developed a taxonomy for sustainability that provides a clear classification system as well as an overview of what can be considered “sustainably” produced. ‍

Consumers will find it easier to make environmentally friendly choices if they use the EU taxonomy, which is intended to accomplish a number of objectives. Consider the EU’s definition of what is sustainable as a starting point: the product or service must contribute to one or more of the EU’s environmental objectives. These are the ones to look out for:

  • ‍Climate change has a limited lifetime.
  • Taking action to reduce or prevent pollution
  • Adaptation to climate change is essential.
  • Marine and water resources should be protected and used in a sustainable manner.
  • Environment and biological diversity are being protected.
  • The shift to a circular economy is underway.

In the United Nations’ Sustainable Development Goals, it is also stated that sustainable production is about making the most of as few resources as possible. Use of sustainable materials, environmental protection, and the use of as few natural resources as possible are all important aspects of this approach.

What is the Opposite of Greenwashing?

The majority of us do not want to support environmentally friendly cleaning companies. Companies that can demonstrate carefully documented environmental benefits and certifications are the opposite of greenwashing.

If you are interested in selecting products and services that are as environmentally friendly as possible, it may be worthwhile to take a closer look at the company’s website to learn more about their environmental policies (or other available sources of information).

  • Look for businesses that are actively working to reduce their own carbon footprint and that have taken concrete steps to become more environmentally friendly and sustainable. The following are some of the characteristics you should look for:
  • Look for packaging that explains a product’s positive environmental impact in plain language, rather than using buzzwords or jargon that may confuse consumers.
  • Whether the marketing claims refer to the packaging, the product itself, or a portion of either should be clearly stated in the marketing materials.
  • Neither the marketing language nor the implied environmental benefit overstates or implies a greater environmental benefit than the product is capable of delivering.
  • Whenever a product makes a comparison between itself and another brand, it provides evidence to support the claim.
  • Look for products that have third-party certifications that you can trust, such as USDA certified organic, Forest Stewardship Council (FSC), and Carbon Trust Standard certifications (for verified CO2 emissions).
  • To make a long-term difference, consider advocating for clearer marketing regulations that would prohibit common greenwashing practices by requiring companies to provide more evidence to back up any environmentally friendly claims they make. Additionally, it will increase transparency between brands while also making it possible for them to compete by reducing their environmental footprint.

Trust and Your Investors

When developing your organisation’s environmental, social, and governance (ESG) marketing strategy, don’t forget to consider the importance of developing a mission statement that will guide your sustainable endeavours. Consistent data and reporting should be used to support your company’s values, goals, and vision, which should be communicated through intentional word choices. Organisations can build trust with investors, external and internal stakeholders, and ultimately ensure the long-term viability and success of their businesses by implementing standardised, transparent reporting and consistent communication.

Your supply chain must be evaluated, and any ‘green products’ questioned. In Europe, these buzzwords are often the root of litigation, and they carry the potential to damage a corporation’s reputation quite suddenly. A false environmental claim, such as that by Volkswagen, was not only a breach of their corporate social responsibility but a de-facto harm to the degree of air pollution which affects the entire planet.

Summary of Greenwashing

“Going green” can make be especially lucrative. Several businesses are capitalising on the environmental movement by promoting their products as having as many ecological benefits as possible, even when these claims are stretched beyond the point of creditability. Do your part to hold corporations accountable by calling out greenwashing when you see it and by supporting brands which have honest environmental practices.

We can keep companies responsible and make sure that those who are doing the correct thing for the environment stand out for their choices if we understand greenwashing and learn to recognise its signs. This will raise the overall standard of the marketplace, allowing us all to make better purchasing decisions in the future.

author avatar
Humperdinck Jackman
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.


Matt Whiteman

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