Greenwashing

With growing awareness of the wider impact of our consumption and investment decisions, there is a strong incentive for companies to attract customers by marketing their positive contribution to environmental or social issues. However, the complexity of these topics means that the risk of misinforming consumers can be high, and whether intentional or mis-intentional, ‘greenwashing’ is prevalent.

”Greenwashing is an attempt to make people believe that your company is doing more to protect the environment than it is. ”

It's not easy being green...
A ‘sustainable’ product is a product that causes little or no damage to the environment. There are very few products that can credibly make this claim, but there is a lot that can be done to move towards a more sustainable future and the credible brands are those that are transparent about those challenges and set the right goals to achieve sustainability

Greenwashing is a communication or marketing technique pursued by companies that propose their activities as environmentally sustainable, enhancing the positive effects of some initiatives and at the same time trying to hide the negative environmental impact of others or of the company as a whole.

Greenwashing refers to communications around the environmental performance of a product or company, however ‘sustainability’ encompasses a much greater spectrum of both the impact on the environment and the social impact on society as a whole.

The complexity starts with how you assess the sustainability of a product: for example, does one focus on the product itself or the way that the product is produced? Seemingly ‘sustainable’ products can have unsustainable elements to their production or supply chain. And ‘unsustainable’ products, can outperform their industry making them ‘sustainable’ solutions in an unsustainable space!

The value of the right label

Many products carry labels claiming they are ‘green’, ‘sustainable’ or ‘eco friendly’. In reality, there is often little transparency as to what these labels actually mean.

Many labels are created by the seller and only tell a part of the story, claiming to be ‘organic’ or ‘recycled’ without clearly communicating the details of these claims. They also say nothing for the wider practises and materials used in the value chain.

Alternatively, labels provided by third party certifiers are awarded if the product meets the criteria set by that certifier. Such independent third-party certification provides credibility and trust, but consumers need to be able to distinguish between the two and understand what they stand for.

The most common forms of greenwashing are:

1. Focusing on one ‘green’ characteristic of a product, whilst ignoring negative environmental impact elsewhere in the value chain.
2. Making misleading claims, which do not paint a complete picture; for example, claiming that a product is made out of recycled materials when the actual percentage of recycled materials makes up only a small percentage of the inputs.

3 important steps for companies to avoid Greenwashing:

1. Understand the footprint across the sustainably spectrum. If companies do not understand their footprint, they cannot credibly celebrate where they are performing well.

2. Be honest about where they are performing well and where they face challenges. Admitting to the complexity gives credibility to your claims.

3. Set long term goals to address these challenges and be transparent about where they are in terms of meeting those goals.

Why is greenwashing so damaging?

Greenwashing fosters scepticism and discourages consumers to make the right decisions. Faced with misinformation it is hard for consumers to assess the impact of their choices and this is hugely damaging for the sustainability movement.

Greenwashing in the Financial Sector

In the financial sector, there is a vast range of investment opportunities across the ‘ESG’ ‘Impact’ or ‘sustainability' spectrum. Historically a lack of standards and implementable frameworks has led to a lack of understanding of where investments sit on this spectrum and potentially a false understanding as to whether there is an incremental benefit to the environment or to society from making an investment. In the EU, the EU taxonomy, which defines what constitutes an “environmentally sustainable economic activity" and the SFDR regulation, which sets out rules for what is required to be classified as an 'ESG' or an 'impact fund', seek to provide more clarification and transparency for investors.

How can companies avoid greenwashing?

Greenwashing can be said to be a communications topic, but in reality it goes much deeper. It is an important signal about an organisation’s commitment to the future and how seriously they consider the impact that they have on society as a whole.

Sustainable actions can be driven by passion and values, by business opportunity, or by rules and regulation: but whatever the driver, implementing credible sustainably strategies and aligning communication to a company’s sustainability performance is key to avoid greenwashing.

We BELIEVE. that sustainability must be fully embedded into an organisation’s long term business strategy and goals, and that in the future, the only viable business model will be a sustainable one.

DISCLAIMER: The information contained in this article is provided for information and marketing purposes only and has no contractual value. BELIEVE. does not warrant or make any representation as to the accuracy or completeness of any information expressed . Copyright BELIEVE. Partners AG 2022

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