greenwashing

What is greenwashing?

Greenwashing is a term used to describe a false, misleading or untrue action or set of claims made by an organization about the positive impact that a company, product or service has on the environment.

The term greenwashing was first coined in 1986 by environmentalist Jay Westerveld in an article where he decried the common practice of hotels asking guests to reuse towels to help conserve energy. Westerveld claimed that those same hotels did little to help the environment and that the towel request was an act of greenwashing.

In an era where increasing numbers of consumers as well as governments are interested in taking environmentally responsible actions, there has been a growing emphasis on environmental, social and governance (ESG) initiatives in companies. The need to demonstrate ESG efforts has led to many organizations making environmental claims that have turned out to be greenwashing.

Greenwashing isn't always an overtly false claim; it can be a claim that isn't entirely accurate or is in some way deceptive or misleading. For example, the European Commission found in a 2020 study of 150 corporate environmental claims that 53% gave vague, misleading or unfounded information and 40% had no supporting evidence -- data it cited in proposing a new law on green claims by companies in March 2023. A survey of company executives in 16 countries, conducted by The Harris Poll for Google Cloud and released in April 2022, found a similar level of greenwashing: Fifty-eight percent of the 1,491 respondents said their organization had engaged in the practice.

How does greenwashing work?

Greenwashing happens when a company makes an environmental claim about something the organization is doing that is intended to promote a sense of environmental impact that doesn't exist.

The green claim is typically about some form of positive effect on the environment. It could have some elements of truth but fails to consider the total impact. For example, a car vendor claims that a vehicle is eco-friendly because it is more fuel-efficient, while failing to mention or consider the larger industrial impact of vehicle manufacturing on the environment.

Companies can also greenwash initiatives with vague claims that don't provide real data or scientific validation for the claims. Using terms such as sustainable, green or eco-friendly -- or just claiming to be "good for the planet" or "better for the environment" -- can help organizations appear to be greener. However, the reality of such nonspecific terms is that they can be -- and often are -- used without supporting evidence or facts that could be easily relayed to the consumer. As such, an organization is simply labeling or promoting a product or service as being green, when in fact there is no undeniable, verifiable evidence that it is more environmentally sustainable.

From an ESG perspective, greenwashing also occurs when a company has stated corporate policies about being green that don't match what the company has publicly implemented.

Examples of greenwashing

There are several general greenwashing techniques that organizations use today to help make a product or service appear to be more sustainable for the environment than it might be.

• Less is more. This is perhaps the most common greenwashing example and is rooted in the genesis of the term greenwashing itself. When hotel chains advise guests that towels will not be washed daily to be greener, the idea is that less washing is better for the environment.
• Efficiency claims. Another common example is claiming to be more efficient with energy consumption. By being more energy-efficient, the idea is that less energy needs to be produced, leading to less environmental impact. Automobile manufacturer Volkswagen was caught greenwashing with its diesel emissions scandal in 2015. In that incident, the company had fraudulently reported that its diesel engine vehicles were more fuel-efficient than they really were. The diesel-fuel vehicles were marketed as being a more environmentally sustainable type of vehicle when, in fact, that was not the truth.
• "Recycle this" approach. Greenwashing also occurs when an organization claims that one approach is better for the environment than another by implying that the new approach is somehow recyclable. For example, McDonald's began to replace its plastic straws in 2019 with paper straws that the company described as being eco-friendly. It turned out that the paper straws were not recyclable and were not necessarily better than the alternative.
• Green targets. Organizations and governments can come up with targets for sustainability that are publicly declared to make it appear as though they are doing the right thing for the environment. Targets on their own are nice goals to strive for, but they are little more than wishful thinking if they aren't achieved.

Effects of greenwashing

Greenwashing has numerous effects on consumers, companies, green industries and the planet itself.

For consumers, there is a growing body of evidence that shows consumer sentiment is slanted toward being green and environmentally sustainable. Individuals want to do the right thing and want to help mitigate the continued effects of climate change. When a company, product or service is caught or discovered to be greenwashing, there is a general sense of distrust that occurs. Consumers will no longer trust the brand or product in question and might also begin to question other claims.

For companies engaged in greenwashing, consumers will choose other organizations that are more ethical. Greenwashing can degrade customer satisfaction, erode brand loyalty and potentially affect repeat purchases. Consumers will put their money in products and services that are not attempting to deceive them with greenwashing. Companies also run the risk of fines from government and regulatory agencies around the world.

For green industries, the risk of greenwashing is a lack of trust from consumers. If there is a lot of greenwashing, then consumers will simply not trust green claims from anyone -- including legitimately green industries -- as they will not know who to trust.

The biggest effect of greenwashing is existential. Each act that an organization or individual doesn't take with real green initiatives has a potential negative effect on the planet. Greenwashing masks the inaction of not taking steps to reduce environmental impact. With the effects of climate change continuing to imperil humanity, there is no time to waste in taking steps to help improve sustainability so that humanity and Earth itself will continue to survive.

How to avoid or prevent greenwashing

For organizations, there are several ways to avoid or prevent greenwashing that leadership can consider -- assuming, of course, that the organization has good intentions and isn't deliberately trying to mislead anyone about its environmental commitments.

• Be specific. Organizations shouldn't use generic terms that don't have a specific meaning. For example, saying a product is eco-friendly is generic and doesn't specifically identify how the product or service is green.
• Use data. When making specific claims, it's imperative that organizations use data. The data should support the claim and numerically detail the effects of the actions being taken.
• Avoid misleading images. Using pictures from nature to somehow evoke environmental friendliness can be a form of greenwashing when not backed by specific, data-driven claims.
• Be truthful. Fact-based statements that are truthful should be the standard for all types of marketing or claims about the environment. False statements will inevitably be discovered.