The Reality of Greenwashing

In the article “Fuzzy reporting as a way for a company to greenwash: perspectives from the Colombian reality” by Contreras-Pacheco and Claasen (2017), five further firm–level greenwashing strategies were identified. Compared to the previous six bullet points and the sins of greenwashing, these are more commonly used further up the corporate chain.

1. Dirty business: working with a clearly unsustainable business model or industry but promoting sustainable practices or products that are not representative either of the business or the society.
2. Ad bluster: using aggressive advertising to redirect attention away from sustainability issues, and exaggerate achievements or alternative programmes that are not connected to solving the underlying issues
3. Political spin: using the influence of large corporations to sway governments or politicians to obtain benefits that will harm the environment. Typically, you see reduced reporting requirements, large subsidies or lower regulatory pressure to reduce pollution.
4. It’s the law, stupid: proclaiming sustainability accomplishments or commitments that are already required by existing laws or regulations. Examples here are recycling requirements, waste reduction and emission reductions.
5. Fuzzy reporting: taking advantage of sustainability reports and their one-way communication channels; to twist the truth or project a positive image of CSR corporate practices. In contrast to regular annual reports, CSR reports have lower regulatory requirements and guidelines so that it is easier for corporations to employ this greenwashing strategy.

We’ve talked at length about how companies can deliberately use greenwashing strategies. However, it’s also common for companies to use greenwashing unknowingly. The next section will explore this problem, combining findings from asset management with known corporate problems.

requirements, the risk of being accused of greenwashing rises when they cannot provide sufficient support for claims around the ESG attributes of their funds. 

However, not only asset managers can fall into the trap of accidental greenwashing. Especially startups and small /and medium/sized enterprises (SME) struggle with avoiding greenwashing while still being truthful and about their sustainable practices. Depending on the industry, up to 98% of the ecological footprint comes from the supply chain instead of the initial production of the product. If a supplier engages in greenwashing, knowingly or unknowingly, this has a domino effect that jeopardises the ESG goals of all subsequent companies in the supply chain. So how can startups and SMEs mitigate the risk of accidental greenwashing?

It all starts with the right data to ensure transparent supply chain management. A well-founded database ensures that ESG communications withstand due diligence and that sustainability communication does not become a danger. It also guarantees compliance with regulations and the transparency gained allows companies to further improve on the reduction of emissions and the efficiency of their supply chain.  The first step is product compliance and a reliable system for collecting product data. This can serve as a basis for due diligence to gain more in-depth insight into the supply chain. The future for more transparent supply chains is looking good, with innovative blockchain and Web 3.0 technologies making the overall processes more traceable and transparent. But until then, companies must rely on primary data sources and critically observe the ESG scores of their suppliers. Frameworks like the Lifecycle Assessment can help companies to holistically track and analyse their products and services.

In addition to this graphic, we will some further tactics that you can use to avoid greenwashing, be more critical of corporate sustainability claims and not fall into the trap of false advertisement.

1. Look for well-known certifications.
   A company can put “natural and organic” on their labels, but if it doesn’t have a certification label, it is most likely NOT organic. Still, we all know that certifications aren’t perfect, but they can act as a step towards more responsible consumption.
2. Look out for “aesthetic” green packaging
   A prominent example of a company that utilises greenwashing techniques is Fiji Water – their commercials and product design features a natural landscape and makes claims like “Fiji Water is nature’s gift to us,” “bottled at the source,” and “untouched by man.”  They cannot substantiate these claims.
3. Beware of the most typical greenwashing words
   We already listed some of them above, but pay attention when companies use the words like eco-friendly, green, all-natural, earth-friendly, non-toxic, plant-based, plant-derived, pure, raw, healthy, or organic without stating numbers or certifications to support these claims.
4. The lesser of two evils
   A company might claim to be “greener” than its competitors, but if the whole industry itself is unsustainable, does this make a difference? (i.e., plastic bags and most single-use items).
5. Buy less
   May seem simple, but the biggest impact we as consumers can have is by buying less stuff. In reality, reducing the amount you consume and reusing what you already have is the best way to ensure that you are being more sustainable.