Greenwashing
Definition, Types & How To Avoid It
What is Greenwashing?
Greenwashing is the practice of conveying a false or misleading impression about the environmental and sustainability efforts of an organisation, product or service. It involves presenting something as more eco-friendly, socially responsible, or sustainable than it actually is, with the aim of appealing to environmentally conscious consumers and improving the company's image. Essentially, it's a form of deceptive marketing.
Types of
Greenwashing
Greenwashing can take many forms including:
Misleading labels:
​Using labels, colours, logos, or certifications that appear to demonstrate a product or company is eco-friendly when, in fact, it does not adhere to rigorous environmental standards.
Exaggerated claims:
Making grandiose or unsubstantiated assertions about the environmental benefits of a product or service without providing concrete evidence.
Cherry-picking data:
Selectively highlighting positive environmental aspects while ignoring or downplaying negative impacts or practices.
Diverting attention:
Shifting the focus away from significant environmental issues by emphasising minor or irrelevant green initiatives.
Tokenism:
Promoting a small, insignificant green effort as if it represents the entire company's commitment to sustainability.
Vague or ambiguous language:
Using terms like "natural," "eco-friendly," or "green" without clear definitions or standards to back them up.
Negative effects of Greenwashing
Misleading customers and losing trust
Greenwashing is problematic because it can mislead consumers who genuinely want to support environmentally responsible companies and products. It undermines the credibility of authentic sustainability efforts and makes it difficult for consumers to make informed choices. With consumers becoming more aware of greenwashing, an inevitable consequence is that they lose trust in businesses that are guilty of it.
Environmental damage
When products or services are not as eco-friendly as they claim to be, damage is done to the environment via the non-sustainable practices used to produce them. These practices will continue to have a negative impact on biodiversity, climate change, the community and the environment as a whole.
Scandal and negative media attention
When consumers, activists, or journalists discover that an organisation’s eco-friendly claims are not substantiated or are intentionally misleading, it can lead to outrage and backlash. Once it becomes public that a company has engaged in greenwashing, its reputation can suffer significantly.
Losing investor confidence
As a result of losses in consumer loyalty and negative media attention associated with greenwashing, companies can expect to lose investor confidence too. Investors are increasingly sustainability and ESG conscious. They base their investment decisions on ESG performance as well as financial performance. Today, it’s becoming more common for organisations with poor ESG performance to be negatively screened out of investment portfolios.
Greenwashing examples: 3 case studies
Volkswagen
In 2015, it was revealed that Volkswagen (VW) had installed software in millions of its diesel-engine cars, which manipulated emissions tests. This software could detect when a vehicle was undergoing emissions testing and reduce emissions during those tests. The software made the cars appear to be much cleaner in terms of nitrogen oxide (NOx) emissions than they were in real-world driving conditions.
Volkswagen had marketed these diesel vehicles, including their TDI models, as "clean diesel" cars that were environmentally friendly, fuel-efficient and compliant with stringent emissions standards. This was a classic case of greenwashing, as VW had misled consumers into believing their diesel vehicles were eco-friendly when, in reality, they were emitting harmful pollutants at levels far above legal limits during normal driving.
There was widespread public outrage and a significant loss of trust in the company. Volkswagen had to recall millions of vehicles worldwide and faced legal consequences on multiple fronts. The scandal also led to significant management changes, including the resignation of the CEO, Martin Winterkorn. The company also implemented various reforms to address the issue and rebuild its tarnished reputation.
The “Dieselgate” scandal had ripple effects across the automotive industry. It prompted increased scrutiny of emissions testing and a greater focus on enforcing emissions standards. It also led to a shift in consumer preferences toward electric and hybrid vehicles.
Nestlè
Nestlé has been accused of greenwashing in relation to its bottled water brands. While presenting these brands as environmentally friendly, the company was also neglecting the environmental impacts of the plastic bottles and the extraction of water from sensitive areas. The company used labels like "Pure Life" to suggest purity and environmental responsibility.
Nestlé has also faced legal battles in various countries over its bottled water operations. For example, in the United States, the company faced lawsuits over its marketing and labelling practices, including allegations of misleading consumers about the true source of the water and its environmental impact.
Activists, environmental organisations and concerned citizens called for boycotts and protested Nestlé's bottled water operations, putting pressure on the company to address environmental and ethical concerns.
Golden Agri-Resources
Golden Agri-Resources (GAR) is a palm oil and agribusiness company headquartered in Singapore. It has faced criticism and allegations of greenwashing relating to its palm oil production practices and environmental impact.
Environmental organisations and activists have accused GAR of greenwashing by portraying its palm oil operations as environmentally responsible while allegedly contributing to deforestation and other environmental harms. GAR had made sustainability commitments and claims, but critics argued that these were not being adequately implemented.
GAR was a member of the Roundtable on Sustainable Palm Oil (RSPO), so the company faced criticism for its membership. This led some environmental groups to question the effectiveness of the RSPO in ensuring genuinely sustainable palm oil production.
In response, GAR took steps to address some of the sustainability concerns. The company committed to zero-deforestation and established a Forest Conservation Policy (FCP) in 2011. GAR also committed to traceability and responsible sourcing of palm oil.
How to avoid Greenwashing
Businesses can avoid greenwashing by taking genuine and credible steps toward sustainability and ensuring that their environmental and social claims are accurate and transparent.
1. Set clear sustainability goals
This is the first step in creating a meaningful sustainability strategy. Clearly define and communicate your company's sustainability goals and objectives. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Having concrete targets will help you stay accountable.
2. Adopt transparency in disclosure
Be transparent about your sustainability practices, including the challenges and progress you've made. Share data and information about your environmental and CSR initiatives openly with stakeholders, such as customers, investors, and employees. Don't cherry-pick positive aspects of your sustainability efforts while ignoring negative impacts or practices. Present a balanced picture of your environmental and social performance.
3. Seek third-party verification
Seek third-party certification or verification for your sustainability claims. Certifications from reputable organisations can lend credibility to your efforts and provide assurance to consumers that your claims are legitimate. Learn more: What is a BCorp?
4. Avoid exaggeration
Don’t make exaggerated or vague claims about your environmental or social impact. Use accurate and specific language in your marketing materials and avoid terms like "green," "eco-friendly," or "sustainable" unless you can substantiate them.
5. Provide evidence
Back up your sustainability claims with verifiable evidence. This may include data on reduced carbon emissions, water conservation, waste reduction, or certifications from recognised organisations.
6. Invest in genuine change
Allocate resources and invest in meaningful sustainability initiatives that go beyond marketing. This may involve adopting sustainable production practices, reducing resource consumption, or supporting community and environmental projects.
7. Engage and educate stakeholders
Involve stakeholders, such as customers, employees, and local communities, in your sustainability efforts. Seek their input, listen to their concerns, and incorporate their feedback into your sustainability strategy. Ensure that your employees understand your sustainability goals and the importance of accurate representation. Training and awareness programs can help prevent greenwashing within the organisation.
8. Follow ESG reporting guidelines
Publish regular sustainability reports that detail your progress, challenges, and future plans. Reporting should follow recognised standards, such as the Global Reporting Initiative (GRI), to ensure consistency and transparency.
By adopting these strategies and genuinely committing to sustainability, businesses can build trust with consumers and stakeholders while avoiding the negative consequences of greenwashing. Sustainability should be a core value and practice that permeates all aspects of the organisation, rather than just a marketing tactic.
60-second takeaways
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Greenwashing is the misrepresentation of the environmental and sustainability efforts of an organisation, product or service.
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It can include things like misleading labels, one-sided data, exaggerated claims, and false advertising.
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As well as environmental damage, greenwashing can lead to loss of consumer loyalty, investor confidence, scandals and legal consequences.
Volkswagen “Dieselgate”, Nestlé bottled water operations, and Golden Agri-Resources palm oil greenwashing are good examples of what not to do.
Organisations can avoid greenwashing by investing in real change, setting measurable sustainability goals, reporting transparently according to ESG reporting standards, and avoiding unsubstantiated claims.