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What is Greenwashing in Business and How to Avoid it?

Updated: Apr 8


what is green washing explanation image

There’s a big gap between consumer intent and action. Most of us say that we want to live a sustainable life and buy products from companies that are committed to sustainability but, when push comes to shove, only 16% of us are actually changing what we do (Kantar).


Why? It’s down to a variety of things but, as a consumer, it boils down to being creatures of habit, short of time and being faced with too much unclear and confusing information.


So, if businesses know that their customers are crying out for a solution, what are they doing about it? We see different approaches depending on things like size, sector, location and even ownership.


Measuring, reporting and communicating environmental performance can be time-consuming, yet rewarding. It can set businesses apart in their industry, appeal to a new demographic, boost loyalty and increase orders. Some businesses, like those in construction and real estate, need to meet minimum standards to win projects. It’s more of a choice for others, like those in fashion and consumer goods.


But, still, things are murky. Greenwashing and greenhushing practices play big parts in the confusing landscape for consumers not knowing what to believe and trust


What is greenwashing?

Greenwashing is when businesses make false or misleading claims about their environmental performance without backing it up with any hard data. We see this happen when businesses plaster terms such as “green” or “eco-friendly” on packaging without explaining how.


Greenhushing - a term coined by Treehugger in 2008 - is when businesses shy away from sharing their environmental initiatives.


Businesses may do this to avoid being called out by customers, competitors or regulators. This is them basically making a judgement call between communicating pride in their environmental performance and potential damage to brand reputation.


Why is greenwashing bad?

Greenwashing is false advertising. It’s businesses being dishonest, or deliberately vague, about the product or service they’re offering; maybe not “what” it is but “how” it is made. Businesses may advertise a specific product or subsidiary as being positive for the environment, whilst their cash cow is damaging the environment. 


In its worst form, greenwashing is businesses profiteering from the climate crisis.


On the flip side, greenhushing has the potential to be just as damaging. 


If businesses can’t correlate positive environmental initiatives to positive commercial outcomes then it’s unlikely to last and drive real change. 


If businesses aren’t incentivised to embrace and communicate their initiatives it’s harmful. As Rutger Bregman perfectly puts it “My fear is that their cynicism can become a self-fulfilling prophecy - a nocebo that paralyses us with despair, while temperatures climb unabated.”


Ultimately, with both, the outcome is the same: minimal tangible action and the shift towards a more sustainable economy stalls.


Is greenwashing illegal?

Yes, greenwashing is illegal and is now enforced by many regulators around the world including the Competition & Markets Authority (CMA) and the Advertising Standards Authority (ASA) in the UK. The repercussions are typically fines and orders to remove said adverts and/or campaigns.


In the lead up to COP26, in 2021, HSBC was ordered by the ASA to remove two adverts over “misleading environmental claims”. More recently companies such as ASOS, Boohoo and George at Asda have been under scrutiny by the regulators. As a result, they have had to sign up to more formal commitments to ensure they bring more clarity when presenting green claims to their customers (gov.uk). 


Guidelines have been introduced to help businesses avoid greenwashing. The Green Claim Code in the UK and the Green Claims Directive in Europe effectively ban the use of vague environmental claims such as ‘environmentally friendly’, ‘natural’, ‘biodegradable’, ‘climate neutral’, or ‘eco’ unless these claims can be backed up by adequate evidence.


Switzerland have gone further and introduced labelling and disclosure rules specifically for the financial industry after it became a minefield for greenwashing. They said they would stop with future regulatory efforts if the industry proves it can behave itself.


Greenhushing - in terms of choosing not to communicate about environmental initiatives - is legal for now. This does still come down to the businesses own prerogative. However, a legislation known as the Corporate Sustainability Reporting DIrective (CSRD) is coming in to mandate certain businesses to regularly report on the social and environmental risks they face, and on how their activities impact people and the environment.


It will eventually span 50,000 businesses, starting with larger businesses and eventually SMEs too.


Why is it important to avoid greenwashing your business?


Startups through to global enterprises place emphasis on building loyalty, brand reputation and trust for sales growth, market share, talent acquisition and staff retention. 


Once lost, trust can be hard to regain and being found to be greenwashing is a quick way for businesses to lose that trust. Not to mention, the financial loss with resources wasted on adverts and campaigns that could be removed as well as fines  by the regulator.


It’s just as important to avoid greenhushing. Alarmingly, just one in four companies that have set science-based targets are publicising them [South Pole].


Let’s look at motivations which often, as the CIA defines in their famous MICE method, come down to: money, ideology, compromise and ego. Right now, those businesses that are greenhushing, are trading off between money (financial reward, risk of fines) and ego (potential damage to brand reputation) vs ideology (standing for change, leading the pack, carrying out an environmental initiative to combat the climate crisis).


This doesn’t have to be a trade-off and, in fact, we are starting to see a clear case for embedding sustainability into customer buying journeys. For example, through our partnership with Kindred and O2, we’ve seen a remarkable 51% increase in orders with brands that score three or higher out of five. These are businesses that are reasonably well advanced on their sustainability journeys with, at the minimum, science-based emissions reduction targets in place.


How to spot greenwashing

Look out for greenwashing red flags:businesses making vague environmental claims such as ‘environmentally friendly’, ‘natural’, ‘biodegradable’, ‘climate neutral’, or ‘eco’ with no further information attached.


Alarm bells should be ringing if a business’s marketing doesn’t match up with the product they actually offer. For example, shampoo claiming to be ‘biodegradable’ and ‘natural’ in a non-recyclable plastic bottle with artificial ingredients in.


A watch-out is around ‘climate neutral’ or ‘carbon neutral’ claims. Sometimes, businesses making these claims are just paying for carbon offsets to neutralise their operations while they carry on with business as usual.


 Unfortunately, huge multinational businesses operating in high-emitting sectors claiming to be ‘net zero’ happens more than it should. As with most things in life, if it sounds far too good to be true, it most likely is. Trust your instinct.


Examples of greenwashing

Businesses that are greenwashing may run an advertising campaign packed with vague terms such as ‘eco’, ‘green’ and ‘sustainable’ without going on to back it up.


They may target specific industry events to attend or sponsor, sometimes with ulterior motives. We saw this at COP28 in Dubai where the third biggest delegation was fossil fuel lobbyists (2,456 compared to 770 delegates from America). Coincidentally, plans to phase out fossil fuels were watered down.


Greenhushing is harder to spot, of course, but this will be more commonplace in businesses with environmental causes at their core, where it is interlinked with their business model (triple bottom line: social, environmental, financial) and there’s exec-level accountability rather than an ‘ESG initiative’ running in silo.


Businesses making strides with their environmental performance, but keeping it on the down low, may be those that are part of the circular economy, revolutionising their supply chain, committed to science-based emissions reduction targets and prioritising quality, standards and provenance over time and price.

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