What is greenwashing?
Greenwashing is when an organisation conveys false or misleading information – or omits negative information – to make it appear more environmentally friendly, sustainable or ethical than it is in reality. It can relate to the organisation’s products, services, aims, policies, financial products or investment strategies.
Greenwashing may be intentional or unintentional. Organisations intentionally engaging in this strategy may be attempting to repair reputation damage after their own environmental lapses, or they may simply be aiming to boost sales and grow their business.
However, organisations may unintentionally engage in this practice if they do not understand their supply chain well enough. They may also unintentionally greenwash if they do not conduct proper research before making environmental claims or if their reporting methods are substandard.
Beyond the reputation damage and loss of customer trust, greenwashing could also result in financial penalties for your organisation. The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have the power to investigate and fine companies found to be engaging in the practice. So, it is well worth investing the time and effort in learning about how to avoid greenwashing.
How to identify greenwashing
Being aware of the various ways in which organisations engage in greenwashing, either intentionally or unintentionally, can help you to know how to avoid it. The ACCC has uncovered 8 key greenwashing issues for Australian businesses. Here is an overview of these issues.
1. Vague and unsupported claims
The ACCC found that making vague or unqualified claims regarding eco-friendliness or sustainability is the most common issue for businesses. Many businesses describe their products using terms that can be interpreted in a variety of ways. This can be as ‘eco-friendly’, ‘green’ or ‘sustainable’. These claims may not allow consumers to make informed purchasing decisions when they are not supported by evidence.
2. A lack of supporting evidence
Failing to back up environmental and sustainability claims with evidence makes it difficult for consumers and regulators to verify that these claims are accurate. The ACCC found that some businesses did include links to substantiating information, but these links were often either broken or led to inadequate information that included further unsupported claims, didn’t provide enough detail or was outdated.
3. Using absolute claims
Many businesses make absolute claims about their products or services. For example, they may say that their products are ‘100% recyclable’, ‘100% plastic-free’ or ‘zero emissions’. These claims may be considered misleading if they do not live up to the high expectations they create. For example, if a product that is supposed to be ‘100% plastic-free’ contains even a small amount of plastic, the claim is likely to be considered false or misleading.
4. Using comparisons
Another way in which businesses provide consumers with information that is not useful and potentially misleading is by using comparisons.
Greenwashing can result from product comparisons in the following ways:
- using comparative terms like ‘less’ and ‘fewer’ to describe product features or benefits, but not specifying what it is in comparison to
- not giving details about how figures for a comparison were calculated
- making vague comparisons not backed up with evidence.
5. Exaggeration
Businesses commonly overstate the sustainability benefits of their products without mentioning the negative aspects that may be relevant to the customer’s purchasing decision. An example of this is a business that sources most of its products from fossil-fuel based industries highlighting its investments in renewable energy projects, while not mentioning its connections with the fossil fuels industry.
Many businesses also make claims that do not relate to the whole lifecycle of a product. For example, claims about products generating zero emissions may only consider the emissions resulting from the use of the product and not the production, transport or disposal.
6. Using aspirational claims
Businesses frequently promote their environmental and sustainability goals. These can include, for example, goals for reducing the use of packaging or sourcing energy from renewables, such as net-zero targets. However, many businesses do not outline how they plan to achieve these goals.
7. Using third-party certifications
Product certifications can denote credibility, but many businesses use certification schemes or certification trademarks (CTMs) in a potentially confusing or misleading way. For example, businesses are sometimes not transparent about the nature of the certification scheme or how it applies to their products or business. This may lead to consumers being confused about whether a certification applies to the company as a whole, the entire product range or only to specific products or components of a product.
8. Using images that look like trust marks
Businesses sometimes mislead consumers with the use of logos or symbols on their websites and packaging that look like the trust marks of a certification scheme. These symbols often use the colour green or common environmental imagery, such as leaves or the planet, to make it look like the product is certified, even though it is not.
How to avoid greenwashing
When it comes to avoiding greenwashing as a business, here are some tips for you to consider.
Follow the ACCC’s principles
As a form of guidance for Australian businesses, the ACCC has developed 8 ‘principles for trustworthy environmental claims’. Considering these principles when making environmental claims can help you to ensure your organisation is compliant with the law. Here are the 8 principles.
- Make accurate and truthful claims.
- Have evidence to back up your claims.
- Don’t hide important information.
- Explain any conditions on claims.
- Avoid broad and unqualified claims.
- Use clear and easy to understand language.
- Visual elements shouldn’t give the wrong impression.
- Be direct and open about sustainability transition.
Avoid misrepresentation
One of the keys to learning about how to avoid greenwashing is to understand how you can avoid misrepresenting the environmental and sustainability aspects of your organisation. Here are some ways you can do that.
Accurately representing your current green credentials
You want to paint your business in the best possible light, but a key risk when it comes to promoting your current environmental credentials is overreaching. Here are some key questions about your claims for you to consider.
- Do my green claims create an accurate impression?
- Do I have a reasonable justification for asserting these claims?
- Can I back up these claims with evidence?
Consider making your claims targeted and specific. For example, rather than simply stating that a product is environmentally friendly, you could specify the types of sustainable materials used in the product.
Accurately representing your future green targets or goals
It has become a trend for companies to publicise their sustainability commitments, such as net-zero, carbon-neutral or low carbon targets, as a way of promoting their business. To avoid greenwashing, it is important to show that you have both the intention and ability to achieve these targets. Here’s how you can do this.
- Develop a detailed plan, which clearly explains your target, how and when you plan to achieve it and how you plan to monitor your progress.
- Continually measure your progress towards achieving your target and consider changing your target if circumstances change.
- Ensure that you have the resources required to achieve your target, you can realistically achieve it, and it is informed by the appropriate standards and guidelines.
Accurately representing your investment screens
Investments screens are another potential greenwashing risk for organisations. Companies apply investment screens to avoid investing in portfolios with poor environmental, social and governance (ESG) records. An example is a superannuation fund screening its investments to ensure that it does not invest in companies with poor environmental credentials and poor corporate governance. Here are some ways that you can ensure your investment screens are accurate.
- Conduct regular reviews and updates of all your publicly available information about your investment products and services. Check that this information accurately reflects the relevant ESG investment screens.
- If a third party is responsible for applying the investment screens, work closely with them to ensure the screening process continues to be effective and aligned with your investment goals.
- Assess whether your teams responsible for ESG, external communications and legal and compliance are working together seamlessly to ensure that your ESG promotional activities are as robust and effective as possible.
Final thoughts
The desire to greenwash can be strong due to the high demand for environmentally friendly and sustainable products and services. But given the potentially serious legal and reputation consequences, it is worth focusing attention on ensuring that your organisation’s environmental and sustainability claims are sound. Ultimately, avoiding greenwashing is about having a strong understanding of all the ESG aspects of your organisation and ensuring that your ESG claims accurately reflect the reality of your organisation.
