Greenwashing: The Eco-Friendly Lie

 What is Greenwashing and why is it done?

Greenwashing or green sheen is the process of conveying a false impression or misleading information about how a company’s products are environmentally sound. Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do. It is done in an attempt to capitalize on the growing demand for environmentally sound products.

Some Other faces of sustainability deception

Greenhushing occurs when a company withholds ESG information, fearing negative reactions from stakeholders or investors who doubt its sustainability efforts. While not explicitly dishonest, it restricts public access to vital data, making it harder to assess climate goals, share decarbonization strategies, and calculate Scope 3 emissions, which rely on widespread reporting.

Greenwishing or unintentional greenwashing, occurs when companies, driven by the desire to establish ambitious sustainability goals, commit to targets they cannot realistically achieve due to financial, technological, or organizational limitations. Failing to meet these goals erodes trust in both these companies and the broader system.

Instances of Greenwashing

·       An area rug claims to have "50% more recycled content than before," yet the actual increase is from 2% to 3%, creating a misleading impression of significant recycling.

·       A trash bag is labeled as "recyclable," but in reality, it's unlikely to be separated and reused, making the environmental benefit claim deceptive.

How the UN and FTC are tackling greenwashing

In response to the increase in greenwashing within net-zero commitments, the Secretary-General formed a High-Level Expert Group to establish stronger and clearer standards for such pledges by companies, financial institutions, cities, and regions. Their goal is to accelerate the implementation of these commitments. In their report "Integrity Matters," the Expert Group outlined ten recommendations for credible net-zero pledges and provided detailed guidance for each stage in achieving net-zero goals to address the climate crisis.

Additionally, the U.S. Federal Trade Commission (FTC) offers guidelines to distinguish genuine green products from greenwashed ones, including:

·       Ensure product packaging and advertising use clear, easily readable language when making green claims.

·       Clearly specify whether environmental claims pertain to the product, its packaging, or only a part of the product or package.

·       Avoid exaggerating environmental attributes or benefits in marketing claims.

·       Substantiate any competitive claims about a product's benefits compared to others on the market.

How to avoid inadvertent greenwashing

·       Make your claims clear and easy to understand.

·       Back up your sustainability claims with data.

·       Make sure images on ads and packaging are not misleading

·       Be honest about your brand’s sustainability practices and plans.

 

A close-up on the fashion industry

Due to raw material extraction, long supply chains and energy-intensive production, the fashion industry is responsible for 2 to 8 per cent of global carbon emissions.Even with significant efforts underway to reduce pollution, greenwashing remains a challenge for this industry. A recent report found that 60 per cent of sustainability claims by European fashion giants are “unsubstantiated” and “misleading.” This has resulted in confusion for consumers and growing mistrust of what is and is not sustainable. The Sustainable Fashion Communication Playbook is a guide for fashion communicators – marketers, brand managers, imagemakers, media, influencers and beyond – to help counter greenwashing and advance progress towards the Paris Agreement and Sustainable Development Goals.

The bottom line

ESG criteria has become important consideration for some investors. This has led many businesses to focus on becoming more eco-friendly by reducing waste, cutting emissions, recycling, and using renewable energy, among other efforts. However, some companies can instead cut corners and claim that they are doing these things to gain favor when, in reality, they are not. Greenwashing is an unethical practice that can mislead investors and the general public.

 

To explore further on greenwashing, refer the following links:

https://info.kpmg.us/news-perspectives/advancing-the-profession/greenwashing-esg-traps-2023.html

https://www.investopedia.com/terms/g/greenwashing.asp

https://www.businessnewsdaily.com/10946-greenwashing.html

https://www.un.org/en/climatechange/science/climate-issues/greenwashing