What is Greenwashing and how to avoid it?

Blog by Lavanya Pawar
Published on August 10, 2022

As consumers, we often come across marketing and branding campaigns that claim that a particular product or a service is capable of something, while it actually is not. Similarly, making false claims regarding the ‘environment-friendliness’ of a product, activity or policy is called greenwashing. Greenwashing deceives people into believing that a business or an organization has adopted sustainable business practices, when in reality it may be causing more harm to the environment than good. This usually can be understood through inconsistencies in publicly available data, or discrepancies in reported data and claims made by employees or activists. Environmentalist Jay Westerveld coined the term “greenwashing” in 1986, in a critical essay inspired by the irony of the “save the towel” movement in hotels that had little impact beyond saving hotels money in laundry costs. The idea emerged in a period when most consumers received their news primarily from television, radio, and print media, so they couldn’t fact-check the way they could today.

Why do companies adopt greenwashing-based approach towards sustainability?

In a highly competitive and consumer-driven market economy with dwindling profit margins, greenwashing seems like the lowest hanging fruit to make business gains. The harsh reality is that even when consumers want to buy environmentally friendly products, the premium prices of such products keep them away from making such purchase decisions. When consumption trends indicate that products with ‘green’ labels sell well, companies, with the intent of capturing a larger market share, brand their products as being sustainable while still keeping the cost and the price low. In doing so, they end up repacking the same product as ‘green-looking’ with mis-leading messaging. It is not necessarily true that sustainable products are always pricey and brands cannot work towards optimizing for both price and sustainability. But it is difficult to do so. Such efforts don’t just require capital investments but also demand an organization wide shift in policies and values.
In some cases, companies resort to greenwashing to avoid regulatory and compliance measures. One of the most quoted examples of this is an automobile giant which fitted its vehicles with a ‘defeat’ device that helped it falsify the emission levels. In yet other ways, companies, most commonly oil & gas majors have been accused of greenwashing by allocating a tiny percentage of capital expenditure to wind and solar projects and claiming to be acting against climate change while never reducing their fossil-fuel outputs.

Can companies run into greenwashing risks involuntarily?

Not all companies intend to do greenwashing. Consumers and the larger civil society are getting increasingly aware about fact-checking claims made by companies and also going a step beyond to check for the accuracy of the data that companies disclose in their annual sustainability reports. For example, in the case of the total GHG emissions of a company, in order for such reports to be accurate and complete, companies need to run exhaustive data campaigns to reach all the stakeholders in their value chains and collect what is called supplier-specific data from them. While in some cases, greenwashing is intentional, a certain number of times companies are unable to fully collect and make sense of such large volumes of data. This leads to estimation based inaccurate reporting and companies run the risk of being called out for greenwashing.

How can companies win stakeholder trust when it comes to Greenwashing?

1. Sourcing supplier-specific information

One way to build trust with GHG emissions data is to source accurate and verified data from your supply chain partners such as raw material suppliers. To enable such capabilities, companies can use solutions such as Carboledger that gathers data directly from suppliers via an end-to-end encrypted technology and calculates GHG emissions resulting from purchase. Once an enterprise is ready to share their own verified product-specific data, they can provide access to their own customers. With Carboledger, companies can identify opportunities to calculate their own emissions accurately and avoid greenwashing.

2. Avoid use of vague language

Companies often have qualitative approach when it comes to sustainability, where use of fluffy language to describe the initiatives of the company with not actual clarity on exact nuances. Popular buzzwords such as ‘green’, ‘natural’ and ‘environementally-friendly’ describe little about the company’s product or service.
It has also been adviced to avoid usage of terms such as ‘compostable’, ‘biodegradable’ or ‘plastic-free’ without proper data to back it up since they have regulatory liabilities.

3. Collecting information in auditable format

Over 80% of sustainability related data collected today lies in spreadsheets with no trace to it’s origin. This makes data prone to manipulation and hence lose stakeholder trust at the time of disclosures or even assurance-based exercises. Thinking about auditability from Day 0 helps companies stay accurate and reduce risks to potential lawsuits because of inaccurate information.