Greenwashing is a growing concern in today's business world. Companies today strive to present themselves as environmentally responsible and sustainable in the face of increasing consumer demand for environmentally friendly products and services. While many make genuine efforts to reduce their environmental impact, others use misleading or false environmental claims to "greenwash" their image and appeal to environmentally conscious consumers.
At Control Risks we understand the importance of honesty and transparency in environmental claims, and we are committed to helping companies avoid greenwashing. We promote sustainable business practices that benefit both the environment and your organisation’s reputation. Here we explore the problem of greenwashing, its potential consequences for companies and consumers, and the steps that companies can take to avoid it.
What is greenwashing?
Greenwashing is the process of conveying a false impression, making unsubstantiated claims, or publishing misleading information about how a company’s products are environmentally sound or how the company will achieve its environmental objectives, such as net zero.
Greenwashing is done with the intention to deceive consumers, investors, or the public into believing that a company is environmentally friendly or has a greater positive environmental impact than they do.
Another form of greenwashing is when a company attempts to emphasise the sustainable aspects of a product or initiative to overshadow the company’s involvement in environmentally damaging practices.
Examples of greenwashing:
- Misleading labelling: A company claiming a product is "eco-friendly" or "natural" without providing any evidence or certification to support the claim. This can lead to confusion and mistrust among consumers.
- Hidden trade-offs: A company promoting a product as environmentally responsible, while ignoring other aspects of its production that have a significant environmental impact, such as emissions or waste. This can lead to a false sense of environmental responsibility and undermine the company's sustainability efforts.
- Incomplete life cycle analysis: A company promoting a product as environmentally friendly based on one aspect of its life cycle, such as packaging, while ignoring other parts of its life cycle that may have a negative impact on the environment, such as emissions from agriculture. This can lead to an incomplete picture of the product's environmental impact.
- Green sheen: A company associating itself with environmental causes or issues, without taking meaningful action to address them. This can create a gap between consumers' expectations and the company's actual environmental impact, leading to criticism and backlash.
Why do companies engage in greenwashing?
There are a few reasons why greenwashing exists:
- Market demand: Greenwashing helps companies appeal to this growing market of environmentally conscious consumers, even if their actual environmental practices are lacking.
- Lack of regulation: There is currently a lack of standardisation and regulation in environmental claims, which makes it easier for companies to make misleading or false claims. This lack of regulation means companies can greenwash their image without consequences.
- Competition: In a crowded market, companies may feel pressure to make environmental claims to stand out from their competitors, even if their environmental practices are not up to par.
- Financial gain: Greenwashing can potentially charge a premium for their "green" products and services.
The consequences of greenwashing
Allegations of greenwashing can seriously damage the credibility and reputation of companies and their brands.
Nestlé was accused of greenwashing in 2018 after launching its "eco-friendly" packaging, as it was found that the company was using more plastic packaging than ever before. Similarly, Coca-Cola was accused of greenwashing in 2015 for its "PlantBottle" campaign, which exaggerated its claims without providing much proof. BP was accused of greenwashing in 2000 for its "Beyond Petroleum" ad campaign, which presented the company as environmentally responsible while ignoring its significant contributions to climate change. McDonald's "Green Energy" campaign presented the company as environmentally responsible but ignored the significant environmental impact of its products and waste.
Deceptive or misleading claims can have significant consequences that not only erode confidence in sustainability activities overall, but also undermine commitments and understate the work required to protect the environment. Furthermore, it is deceitful and unethical because it misleads investors and consumers that are genuinely seeking environmentally friendly companies or products.
Companies face the following consequences:
- Reputational damage: - When consumers realise that a company's environmental claims are misleading or false, it can lead to a loss of trust and credibility in the company and its products. This can damage the company's reputation and make it more difficult to appeal to environmentally conscious consumers in the future.
- Negative media attention: - Greenwashing can attract negative media attention, which can further damage the company's reputation and lead to public criticism and ridicule.
- Legal consequences: - In some cases, greenwashing can lead to legal consequences, as false environmental claims can violate consumer protection laws and regulations.
- Financial impact: - Greenwashing can lead to decreased sales and a loss of revenue. In addition, companies that are caught greenwashing may have to pay fines and legal fees, which can further impact their bottom line.
These same risks also apply when a supply chain company is caught greenwashing, so businesses should be aware of the risks throughout their chain as with any other ESG concern.
How can companies avoid greenwashing?
We have developed five principles that help companies minimise the risk of greenwashing. In addition, a number of guidelines have been recently released that can help companies identify areas that need to be reviewed and addressed. To help consumers and investors distinguish sincere and effective measures from greenwashing, the UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities have set out to develop a roadmap to prevent net zero from being undermined by false claims, ambiguity and “greenwash”.
Five principles to minimise your greenwashing risk:
- Be transparent. Share relevant information, such as: impacts, plans and progress.
- Be specific. Be clear and specific about your environmental claims. Don't use vague language or make overly broad statements.
- Demonstrate integrity. Align commitments with actions and investments.
- Practice what you preach. Make sure your internal practices and policies align with your environmental claims.
- Stay current. Stay up to date with the latest sustainability best practices and be prepared to adjust your claims as necessary.
How can Control Risks help?
Our services include:
- Assessing sustainability practices and policies
- Reviewing their environmental claims and communications against standards and guidelines as well as through a detailed due diligence process
- Assessing how processes are followed on the ground
- Providing recommendations for improvement and best practices for sustainable disclosure and reporting
- Assisting with third-party verification processes
By working with companies to promote transparency, accuracy, and authenticity in their environmental claims, we can help them build trust with consumers and promote a more sustainable future for all.