The world is changing at an unprecedented pace. With sustainability rapidly becoming a primary concern for consumers across the globe, the way companies promote their products and services has transformed. According to a World Economic Forum survey (2021), over 65% of consumers prefer more sustainable products. As businesses adjust to the change in their customers’ values, they need to be cautious of overstating their environmental commitments (and subsequent performance), to ensure that their supply chain is truly sustainable. This is commonly known as greenwashing.
What is ‘Greenwashing’?
Greenwashing is providing misleading information (intentionally or unintentionally) to customers, a practice that comes with heavy penalties. It is essentially when an organisation overstates or entirely misrepresents their overall impact on the environment, which can improve the image of the company despite the information being false. This is not a novel tactic used by companies; it was coined by Jay Westerveld, an environmentalist, in 1986 after years of seeing misleading TV ads from major oil companies. This trend of misleading advertising could be seen as early as the 1960s, when ad agencies would pay doctors to promote the ‘health benefits’ of smoking.
What are the Consequences of Greenwashing?
The consequences of greenwashing include potentially having your advertisement or website banned by the ASA (Advertising Standards Authority), as well as the risk of damaging the brand and trust within the industry. If customers think they are being misled, they may view a company as untrustworthy which can lead to a loss in sales, and poor company reputation / brand image.
Financial consequences of providing misleading information on social media channels and company websites have ramped up following the introduction of the Digital Markets, Competition and Consumer bill. Rishi Sunak has made the passing of the bill a priority, which could see companies face substantial fines for breaches of consumer law.
Recently, the ASA has also announced its intention to crack down on greenwashing, promising to take action against companies that promote their ‘sustainability credentials’ without being able to provide sufficient evidence.
Who was been caught out?
Following these crackdowns, companies are increasingly being punished for greenwashing. Multinational corporations, particularly in the energy industry, are having advertisements banned for using slogans such as ‘cleaner energy’ or ‘progressive energy’. These companies can often use ad campaigns to highlight the ‘greener’ – but comparatively smaller – elements of their business, while steering attention away from their more damaging activities.
Fashion retailers and supermarket chains have also been scrutinized and punished in recent years for misleading environmental claims on a range of their products. Not considering the full life cycle of a company’s product and then claiming it to be ‘sustainable’, is also considered greenwashing.
Can Sustainability Reporting Stop Greenwashing?
Sustainability reporting is how companies can evaluate and communicate their impacts on a range of sustainability topics, allowing them to be more transparent about their performance and any potential risks.
A huge problem with sustainability reporting is that companies generally have discretion over what standard setting body to follow and what data to include in their sustainability reports. Although 90% of the world’s largest companies produce CSR reports, a minority of them are 3rd party validated and so can be misleading or incomplete, whereas financial reporting must comply with agreed-upon standards.
For greenwashing to be eradicated, there needs to be increased transparency surrounding companies’ sustainability data, particularly bringing it on par with financial reporting standards. A study by Deloitte showed that 3% of consumer companies admit to producing sustainability data that is as verifiable and accurate as their financial data.
What can we do?
Greenwashing is not a new issue, but it’s only been in recent years that the punishments have increased in severity. Being honest and transparent about your sustainability claims is essential to increasing customer confidence and trust and gaining a competitive advantage, while helping to contribute towards a more sustainable circular economy. Transparency is something that we take seriously at Brewster Brothers, and we ensure that our customers and the industry has access to accurate information about our business and our product’s impact on the environment.
Consumers and authorities will continue to call out organisations for providing misleading data until greenwashing is wiped out.