Greenwashing: What it is and how to avoid it

The demand for ‘eco-friendly’ products and services is booming. According to one recent survey by WWF, online searches for ‘sustainable’ goods have increased by 71 per cent since 2016. This has translated into growing pressure throughout supply chains for organisations to demonstrate ‘green’ credentials. Many companies are now actively reporting their ‘environmental impact’ and committing to long-term goals like ‘carbon neutrality’.

Notice all the terms in apostrophes. Today’s environmental agenda is filled with these buzzwords, many of which have no universally agreed definition. In fact, all of the terms highlighted above can be used in varying, and sometimes misleading, ways.

Greenwashing

Misleading customers or stakeholders into believing a company, product or service is doing more for the environment than it is in reality is called greenwashing.

Unfortunately, greenwash is not uncommon. Sometimes it’s rather obvious, like a fossil fuel company advertising that it is leading the way to cleaner energy, when in reality such activities only make up a tiny proportion of its business. Sometimes it’s less obvious, and may even occur despite good intentions. For example, a business that chooses to purchase carbon offsets and promote itself as ‘carbon neutral’, without making any change in reality to its own operations, could easily be accused of greenwashing.

Research shows that an alarming 40 per cent of ‘green’ claims being made by businesses online could be considered misleading, often due to:

• Vague and unclear terms such as ‘eco’ or ‘sustainable’ without adequate explanation or evidence
• Own brand ‘eco’ logos and labels not associated with any recognised body or certification
• Hiding or omitting certain information to make products or services appear more environmentally friendly than they actually are.

The proliferation of greenwashing is causing rising scepticism amongst stakeholders. A recent YouGov poll found that two thirds of people are now wary of environmental and social claims made by brands. Separate research found that around 60 per cent of institutional investors believe greenwashing is blocking them from delivering on their sustainable investment goals, while the vast majority of individual investors say they find it hard to trust business’ claims at face value.

There is even a growing backlash against corporate net zero emissions goals, some of which offer little accountability or any genuine action on the ground.

How to steer clear of trouble

This cynicism is good news in the fight against greenwashing, but it also poses a risk for companies who are trying to do the right thing. Even if you are taking genuine action to improve the impact of your products, services and/or operations, you could get caught up in accusations of greenwashing if you communicate your action poorly.

To ensure businesses don’t fall foul of a stakeholder backlash – or break the law – the UK’s Competition and Markets Authority (CMA) has recently proposed new consumer protection law guidance for environmental claims. Once set into consumer protection law, failing to comply with them could leave businesses facing legal action from consumers or trading standards bodies.

The proposed guidance sets out six principles all businesses should follow:

1. Be truthful and accurate

Businesses must live up to all environmental claims they make. You cannot say something that is factually incorrect, nor overstate or exaggerate the sustainability or environmental impact of your products, services, brand or activities.

In other words, buzzwords like ‘green’ and ‘eco-friendly’ must not be used without proof of positive environmental impact. You also cannot claim that you are environmentally friendly if you are simply complying with legal requirements or an expected minimum standard. Honesty is the best policy – admitting that you aren’t the finished article, but that you are making progress, is likely to be welcomed by stakeholders.

2. Be clear and unambiguous

An environmental claim must be transparent and properly defined. Vague or general terms with multiple meanings should be clearly explained. Claims about future goals or ambitions must only be used if you have a clear, measurable and verifiable strategy to deliver on those goals. The more these goals are embedded in the fabric of your overall business strategy, the better.

3. Do not omit or hide important information

Avoid giving stakeholders the impression that a product, service or business has a positive environmental impact by leaving out the negatives. For example, you cannot state that a product is recyclable if only certain parts of it are. Similarly, you cannot say your business is ‘sustainable’ because of improvements made to your building, if they mask negative impacts in your supply chain.

4. Make fair and meaningful comparisons

If making a comparison between your product and another, it should be like-for-like – the products should be intended for the same purpose and the comparison should be relevant, verifiable and measured using the same metrics.

5. Consider the full lifecycle

Be mindful of the total impact of your business or your products and services when making claims. For example, claiming that an entire product is ‘eco-friendly’ because of the material it is made with could be considered misleading if the benefit is outweighed by negative environmental impacts elsewhere in its lifecycle.

Complying with this rule can also be a useful exercise in helping you to identify and prioritise action where it is most effective – the largest part of your environmental impact is not necessarily the most obvious, or the most visible.

6. Substantiate any claims made

Make sure you can back up any claims you make with robust, credible and up-to-date evidence. Wherever possible, this information should be publicly available.

This requirement can sometimes be satisfied through a respected third-party environmental standard or certification.

An introduction to environmental standards

These six principles are designed for any business making an environmental claim that is ultimately aimed at the end consumer. But even if that doesn’t apply to you directly, they are good principles to follow for building trust and legitimacy when communicating with your stakeholders and potential customers.

We can help

If you’re unsure about the environmental aspects of your operations or products, want to do more to minimise your impact or need support to give you confidence that your claims are accurate, our Resource Efficiency service can help. Get in touch today to speak to an advisor.