It’s time to hang greenwashing out to dry: here’s how
It’s official. Greenwashing is formally part of the English language. In September 2022, Merriam-Webster pronounced that ‘greenwash’ has had sufficient and consistent usage to formally earn its place in its dictionary.
The dubious honour that greenwashing has been granted is not unexpected. The term greenwashing has been in use since 1986. Although sadly, the practice goes back even further and has not abated. In April 2022, a survey by Google revealed that 58 per cent of senior executives believe that their businesses are guilty of conveying a false impression that their company’s products or practices are more environmentally friendly than they are.
What is greenwashing?
In recent months, there has been no escaping claims of greenwashing in the headlines. Too frequently, companies (usually) are accused of over-emphasizing the sustainability credentials of their products and services.
Sometimes, there may be a deliberate intent to deceive or divert, but this is not always the case. Frequently, greenwashing is the result of good intentions poorly executed (also referred to as ‘greenwishing‘), and increasingly (and most frustratingly for sustainability experts), greenwash is caused by a failure to sufficiently understand the environmental, social and governance impacts associated with a business.
Increasingly, greenwash is caused by a failure to sufficiently understand the environmental, social and governance impacts associated with a business.
Is greenwashing easy to spot?
There is increasing awareness of what greenwashing looks like, whether it is deliberate or unintentional. A greenwash statement may be vague, such as a corporate emissions reduction target without definition or a baseline, or a ‘green’ investment product which provides only limited details of its investees. A statement may be isolated, such as a packaging claim that bears no relation to how consumers manage waste in real life. Or a communication could be disproportionate, such as a small ESG investment offer representing a tiny fraction of an otherwise non sustainably-invested portfolio.
At its worst, greenwashing is simply untrue: products and services that don’t deliver on their promises. However, it may also be a product or service that creates a new or aggravates an existing environmental or social problem. To avoid greenwashing, it is crucial that we think broadly and consider the potential unintended consequences of plans and actions.
Frameworks and regulations – supports or constraints?
It’s not just consumers and commentators that are becoming more sophisticated at spotting greenwashing. Regulators are beginning to “define and fine” companies that oversell or under define their products’ sustainability credentials.
Regulators are beginning to “define and fine” companies that oversell or under define their products’ sustainability credentials.
The Green Claims Code was introduced in the UK in 2021 and set out six key points for businesses to check that the environmental claims that companies promote to consumers are genuinely green. We are already seeing high-profile cases of companies being investigated by the Competition and Markets Authority (CMA), which can fine companies up to 10 per cent of their global turnover if they are found to have mistreated customers. Similarly, in March 2022, the European Commission published plans to prohibit generic terms such as “carbon neutral” unless they are substantiated. This move is designed to regulate the type of environmental information and claims companies (such as textile and apparel businesses) may communicate and advertise.
“People who want to ‘buy green’ should be able to do so confident that they aren’t being misled,” said CMA interim Chief Executive Sarah Cardell. “Eco-friendly and sustainable products can play a role in tackling climate change, but only if they are genuine.”
In Europe, the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy were created in part to help increase transparency around sustainability and ESG claims of businesses and financial firms. Introduced in 2021 (SFDR) and 2022 (Taxonomy), it is still early days in terms of defining the relationship between these two disclosure frameworks. However, what is clear is an emphasis on identifying and disclosing specific characteristics in a consistent and therefore comparable manner.
A drive for credible and comparable data to combat greenwashing also underpinned the UK Financial Conduct Authority (FCA)’s recent report. The study acknowledged a clear rationale for stricter regulation for ESG data and ratings providers.
The real problem of greenwashing
Aside from the reputational and economic risks that it can bring, the real problem of greenwashing is its potential to derail progress on climate change at a time when we need it most. To meet the imperative of net-zero by 2050 we need to collaborate and grow the body of knowledge on climate solutions and finance mechanisms like never before. Introducing the rigours of expert and intentional communications supports the information exchange need for future-focused alliances to thrive.
The real problem of greenwashing is its potential to derail progress on climate change at a time when we need it most.
There is a school of thought that the short-term impact of anti-greenwashing regulations may encourage businesses to avoid and reduce references to the sustainability relevance of their products, services and investment opportunities. Such an approach is short-sighted and does not help anyone. We need more energy focused on making sustainability statements clear, credible and comparable so that people can make fully informed decisions on how they spend their money and, in this act, indicate the future they choose.
Investors and consumers show no sign of reducing their desire for sustainability information. With the two forces of regulation and people’s hunger for knowledge, it is more important than ever that businesses ensure that they have the experience in their camp to present their ambitions and activities accurately and appropriately.
Want to share your sustainability successes and services and steer clear of the greenwash? Contact sian.wynn-jones@sancroft.com