In today’s world, where Environmental, Social & Governance (ESG) Performance of the businesses and its reporting is gaining attention, the investors and stakeholders are increasingly scrutinizing the companies’ social responsibility. There are various organizations that are genuinely working towards achieving environmental stewardship, but along with them lies a deceptive practice known as “Greenwashing”. Through this blog post, we will try to explore the subtlety of Greenwashing, its impact on the goodwill of the organization and how we can identify the actual environmental stewardship.
WHAT IS GREENWASHING?
Greenwashing, also referred to as “Green Sheen” is the act of making false or misleading claims by the organization or business regarding the environmental benefits of their products or services. The term was actually first coined in 1986 in an essay by an environmentalist. Greenwashing is basically an advertising or marketing strategy to persuade the environmentally concerned consumers that the organizations’ products, goals or policies are environmentally friendly. These claims often aim to capitalize on the consumers’ growing concerns of the environment and its well-being. The organizations’ refrain from investing into green practices or making substantive changes in their processes, rather use “Greenwashing” to improve the public perception of their brand.
Greenwashing occurs when an organization spends significantly on advertising themselves as being “green” than on investing in environmentally sound practices. Some examples of Greenwashing are:
- Publishing a vague statement
- Misleading the consumers by changing the name or label of the product to evoke the natural environment
- Spending multi million dollars on campaigns that portray highly polluting industries as eco-friendly.
These activities make it difficult for consumers’ to distinguish between genuine sustainability efforts and mere publications ploys.
IMPACT OF GREENWASHING:
Consequences of Greenwashing goes beyond mere deception:
- Loss of trust from customers: When companies pretend to be environmentally friendly, and later it turns out that they are not, their reputation gets tarnished significantly. Consumers lose their trust in the brand, leading to a significant drop in their sales. Customers may switch to the competitors or boycott the brand altogether. Negative word of mouth spreads quickly, tarnishing the company’s reputation.
- Legal Liability Issues: Greenwashing can expose businesses to legal or regulatory risks. Many countries have laws and regulations to prevent deceptive advertising practices including environmental claims. Companies involved in greenwashing can face heavy fines and legal actions. Regulatory authorities are increasingly scrutinizing green claims and the companies guilty of greenwashing may face severe penalties.
- Financial Consequences: Greenwashing can lead to financial losses for the organization as the funds are diverted towards false green initiatives such as advertising, changing brand logo, etc instead of genuine sustainability efforts. Also, there is a cost incurred in defending against legal actions. Rebranding and Rebuilding the trust again acts as cherry on top. In contrast, companies that genuinely embrace sustainability can make money through improved resource efficiency, waste to wealth initiatives, increased customer loyalty resulting in higher sales, etc.
- Negative Environmental Impact: Greenwashing can distract consumers from supporting eco-friendly practices. By distracting the consumers with false claims, companies can hinder the progress towards sustainability.
IDENTIFYING GREENWASHING:
To identify greenwashing, it is important to develop critical eyes and look beyond which is visible publicly. Some of the key indicators to combat greenwashing are:
- Vague or Generic Language: Be cautious of the terms like “eco-friendly” or “green”, which lack specific details about environmental impacts or certifications.
- Lack of Transparency: Genuine sustainability reporting is backed by data to support the results published in the report. If the company fails to provide concrete evidence of the environmental practices or the backup data, then it’s a red flag.
- Green Imagery Without Substance: Beware of visuals like green images or logos, nature inspired backdrops, eco-friendly symbols, etc. These may be used to evoke environmental friendliness.
COMBATTING GREENWASHING:
As customers, we should use our power to make companies accountable for their environment disclosure and assist them in driving genuine change towards sustainability. Below are some ways to combat greenwashing:
- Educate yourself: Stay informed about various tactics that the companies are adopting for greenwashing. Learn how to distinguish between genuine sustainability efforts and deceptive marketing.
- Transparency: Demand from companies for transparent sustainability reporting. The companies should provide measurable goals, progress reports and independent audits data for each environmental parameter that is being disclosed on a public forum.
- Support Certified Products: Opt for reputable eco-friendly products with labels such as ENERGY STAR, Fair-Trade, USDA Organics, Ecomark, Blue Angel Logo, Carboncare Logo, etc. which indicate genuine environmental commitments.
- Advocate for Regulations: Support policies and regulations that mandate the accurate and transparent reporting of environmental parameters. The policies that ensure companies adhere to legal compliances related to waste disposal, water treatment, etc. should be supported.
CASE STUDIES:
- Volkswagen clean Diesel Deception:
In 2015, Volkswagen (VW) landed itself in a controversy where it revealed that the company has installed a software in its diesel vehicles designed to cheat emission tests. Volkwagen marked these vehicles “Clean Diesel Vehicles”, claiming that these vehicles were environment friendly and met strict emission standards. Later it was found out that the software enables the vehicles to detect when they are being tested. During testing, software enables the vehicle to temporarily reduce the emissions to pass the test, while emitting large amounts of pollutants during regular driving.
IMPACT: The scandal severely tarnished Volkswagen’s (VW) reputation and the company incurred huge loss of its sale. Also, the scam led to spending of billions of dollars in fines, settlements and vehicle recall. This incident also raises questions on the effectiveness of emission testing and regulations standards in the automotive industry.
- BP’s Beyond Petroleum Campaign:
In the early 2000s, BP launched a high profile campaign “Beyond Petroleum” wherein BP pretended to be a leader in renewable energy and environment sustainability. The campaign features large posters of Wind Turbines and Solar Panels suggesting that BP is transitioning away from Fossil Fuel Energy to Green Energy. However, the critics argued that the campaign was misleading and upon investing it was concluded that BP continued to invest the majority of its capital expenditure in Coal and Oil exploration and production, while investment in Renewable Energy was relatively low. Additionally, Deepwater Horizon Oil Spill in 2010 raised further concerns on the sincerity of BP’s Campaign.
IMPACT: The “Beyond Petroleum” faced backlash across the global population. The Campaign ultimately failed to convince stakeholders of BP’s genuine sustainability efforts and many critics stated the campaign as the biggest example of “Greenwashing”.
CONCLUSION:
Greenwashing poses a significant threat to the credibility and effectiveness of sustainability initiatives. From the above mentioned case studies, it is clear that the companies involved in greenwashing not only distract the customers from their path of environmental sustainability but also impact the financial outcomes of the companies involved in Greenwashing. It tarnishes the identity of the organization thereby resulting in sales loss. By understanding the tactics of greenwashing, remaining vigilant, and advocating for transparency, we can collectively combat greenwashing and foster the culture of genuine environment sustainability.
Our goal at Safety Circle is to offer complete ESG services all around the world. We assist organizations in avoiding the traps of greenwashing through our dedication to authenticity and openness in sustainability strategies. Businesses may build their credibility, safeguard their brand, and accomplish true environmental sustainability by collaborating with Safety Circle. With mutual trust and sincere dedication to environmental stewardship, we can construct a sustainable future together.
