Let’s start by defining what greenwashing is – greenwashing is when companies make themselves appear more environmentally friendly than they really are. It has become increasingly more common as the climate movement grows and everyone wants to get on board. Greenwashing strategies are causing increasing concern as they become more sophisticated. Greenwashing can include focusing on a single green activity while the rest of the company engages in highly polluting activities, to doing the bare minimum but advertising it differently. While greenwashing is highly misleading, it is not always illegal as loopholes are often exploited. However, despite companies repeatedly being called out, greenwashing is still prevalent and misleading many consumers and investors.
Greenwashing occurs for several reasons, the primary reason often being the incentive to make their products more appealing to consumers, in turn, increasing sales. Furthermore, recent studies have demonstrated that employees look for green credentials in an employer, therefore, by appearing “green” more people want to work for them. Investment is another strong incentive, those with strong ESG credentials can attract a higher valuation premium and potentially more investors, resulting in fewer shares required to raise funds. Therefore, unless you are caught, there are many upsides to engaging in greenwashing. In an attempt to prevent greenwashing, PlanetTracker has identified “six shades of greenwashing”.
The first is greencrowding, which is based on the idea that you can blend into a crowd and avoid being discovered. This may involve adopting sustainability policies or ESG criteria but at a much slower rate in comparison to the competition. Greencrowding is adopted by a variety of groups including environmental alliances to governments. It is very easy to rely on safety in numbers, but you will eventually get called out.
Greenlighting takes place when a company spotlights a green action, product, or initiative, regardless of the size, to draw attention away from environmentally damaging activities taking place elsewhere. For example, HSBC made claims regarding how environmentally beneficial their work is when they fund numerous carbon-intensive activities globally, particularly oil and gas extraction.
Greenshifting occurs when companies shift the blame onto the consumer and imply that they are at fault. One of the largest examples is Shell asking the public what they are prepared to do to help reduce global carbon emissions, meanwhile, they have been very much aware of the damage their operations are causing for decades.
One of arguably the most common forms of greenwashing is greenlabelling where a company markets a product as green or sustainable, however, a closer look exposes that this is incorrect. Green labelling is easy to fall victim to, as without thorough research and/or a proper understanding, you may not understand the extent of the claims. As consumers, we do our best to be as environmentally friendly as possible, so we can easily pick a greenlabelled product thinking we are doing good but in reality, it is no different from its competitors.
Greenrinsing involves a company frequently changing its ESG targets before to being achieved. This form of greenwashing has been identified in large companies such as PepsiCo who adjusted their recycling targets before the target date. During the past five years alone, PepsiCo has pushed forward its recycling target date three times. This form of greenwashing demonstrates how it has become increasingly sophisticated. Companies set ambitious targets which look great to the public but behind the scenes fail to achieve them and keep changing them.
The final form is greenhusing, referring to companies hiding their climate targets and sustainability credentials to evade investor scrutiny. While it may appear harmless, it is a further example of a sophisticated greenwashing strategy. By suggesting that a company’s sustainability performance is stronger than it externally appears, investors may not feel the need to investigate claims further, therefore, the company evades scrutiny.
We hope this blog gives you a good background to identifying different forms of greenwashing, however, we must highlight that it is not just up to us as the consumer to do our research. Companies must be transparent in their claims, and there needs to be stricter enforcement in ensuring that the general public is not being misled while companies benefit financially.
If you have any questions about greenwashing and how it can affect your company, please feel free to reach out at: info@climate-wise.com