Greenwashing

By Shuvam Tripathy and Chendra Haasa, PGDRM Jan’22-23

Greenwashing is the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly.

Image source: EcoWatch

For example, companies involved in greenwashing behavior might make a claim that their products are from recycled materials or have energy-saving benefits. Although some of the environmental claims might be partly true, companies engaged in greenwashing typically exaggerate their claims or the benefits in an attempt to mislead consumers.

1. Environmental Imageries
Using symbols/visuals of leaves, animals, green packaging, etc are all ways of classic greenwashing. In reality, eco-friendly products generally use simpler images and plain packaging.

2. Misleading labels
Various products are labeled as “Certified”, “100% organic”, etc. without any supportive evidence to prove the same. There is a good chance that these labels are self-made and self-declared.

3. Hidden trade-offs
Corporations can put up an act of being environmentally friendly and sustainable but have a very non-environmental friendly trade-off. An example is when apparel companies use “natural” or “recycled” materials while the clothing is actually developed through exploitative conditions. Genuine companies would definitely provide more information about their energy, water conditions, greenhouse gas emissions, etc while manufacturing the product.

4. Irrelevant Claims
Often, we might come across labels that say they are free of certain chemicals. The substance might actually be banned by the law and is not required to advertise as going green. In addition, we might have also come across labels that say, “not tested on animals”. This becomes irrelevant in places like China where testing on animals is required by law.

5. Lesser of two evils
When the company’s claim is true within the product category, but a greater risk of environmental damage. An example is a company selling organic cigarettes. Make sure when your own company or startup is planning on green initiatives, it has to be certified and backed up with all the necessary details. You definitely do not want to risk your company’s reputation.

Importance Of Addressing Greenwashing

Although greenwashing has been for many years, the process has increased at an alarming rate in recent years. This is due to the growing customer demand for green products.

Being a consumer in search of quality products, you should be careful about the “Green Lies” that are sold in the name of “Green Goods”. The cost for a natural or organic labeled product is higher than those without such labels hoping that the companies are truthful.

Critics agree that greenwashing is, in fact, dangerous to public health as well as the environment. In 2008, the Malaysia Palm Oil Council had a TV commercial that claimed itself as quite eco-friendly. However, critics soon identified that palm oil plantations are closely linked to rainforest species extinction, habitat loss, pollution, and other effects. The ad was then identified as a violation of advertising standards.

And with the buzz about greenwashing so common, corporates have to be careful of presenting baseless claims of being environmentally sound. It only takes one complaint to the Advertising Standard Authority (ASA) to conduct an investigation against your company’s claims.

Hence, Greenwashing thus takes a toll on everyone who is involved. Customers are induced into buying products that they believe are environmentally friendly but are actually not. Once exposed, the offending businesses suffer from lower consumer interest.

Companies accused of greenwashing

Beyond Petroleum

Image Source: Wikipedia

Fossil fuel giant British Petroleum changed its name to Beyond Petroleum and publicly added solar panels on its gas stations. In December 2019, an environmental group called Client Earth lodged a complaint against BPfor misleading the public with its advertisements which focused on BP’s low-carbon energy products, where almost 96% of its annual spend is on oil and natural gas extractions.

Coca Cola

Image Source: Flickr

In the annual report by Break Free From Plastic, Coca-Cola was ranked as the world’s number 1 plastic polluter, for the second consecutive year at the top. In 2020, the company was under controversy when it announced that it would not abandon plastic bottles, saying that they were popular with customers. Despite this, the company is adamant that it is making progress in tackling packaging waste. At the time, a spokesperson said, “Globally, we have a commitment to get every bottle back by 2030, so that none of it ends up as litter or in the oceans, and the plastic can be recycled into new bottles. Bottles with 100% recycled plastic are now available in 18 markets around the world, and this is continually growing.”Then, in June 2021, the environmental organization Earth Island Institute filed a lawsuit against the beverage giant for its misleading advertisement that it is sustainable and eco-friendly despite being the largest plastic polluter in the world.

Fast Fashion Brands

H&M, Zara, and Uniqlo are among the companies that were accused of greenwashing over the years. These fashion brands contribute to the massive amounts of textile waste caused by the clothing industry. According to the fashion nonprofit rename, 80% of discarded textiles globally are incinerated or landfill-bound, with just 20% being reused or recycled.

Fast fashion brands also have a habit of advertising their green initiatives widely, despite it being a tiny part of their operations. For example, in 2019, H&M launched its own line of “green” clothing titled “Conscious.” The company claims to use “organic” cotton and recycled polyester. However, in reality, it is nothing but a marketing tactic used to make themselves appear more eco-friendly. When looking at H&M’s “Conscious” line, its mission states: “Shop our selection of sustainable fashion pieces that make you both look and feel good.” However, there is no single legal definition for marketing-friendly words such as “sustainable,” “green,” or “environmentally-friendly.” H&M was then criticised by the Norweigian Customer Authority for “misleading” marketing of their Conscious Collection because “the information given regarding sustainability was not sufficient, especially given that the Conscious Collection is advertised as a collection with environmental benefits.”

Volkswagen

Image Source: Audi MediaCenter

Volkswagen launched an ad campaign to debunk the fact that diesel was bad and that it used a technology where it emits fewer pollutants. Later, the truth was revealed that Volkswagen rigged 11 million diesel cars with “defeat devices,” or technology designed to cheat emissions tests, and that the vehicles emitted pollutants at levels up to 40 times the U.S. limit. The federal agencies made the company pay $14.7 billion to settle the allegations of cheating emissions tests and deceptive advertising.

Nestlé

Image Source: Circle Radius

In 2018, Nestle released a statement that it had “ambitions” for its packaging to be 100% recyclable or reusable by 2025. However, environmental groups and other critics pointed out that the company hadn’t released clear targets, a timeline to accompany its ambitions, or additional efforts to help facilitate recycling by consumers. Greenpeace reacted to this by releasing its own statement, in which it said, “Nestlé’s statement on plastic packaging includes more of the same greenwashing baby steps to tackle a crisis it helped to create. It will not actually move the needle toward the reduction of single-use plastics in a meaningful way, and sets an incredibly low standard as the largest food and beverage company in the world.” In Break Free from plastic’s2020 annual report, Nestlé, along with Coca-Cola and PepsiCo, was named the world’s top plastic polluters for the third year in a row.

Greenwashing or measurable results?

The issue of greenwashing has not been adequately addressed by the existing regulatory framework. There are no specific globally applicable standards for preventing and curbing greenwashing practices. In the absence of any such regulations, the practice of greenwashing is growing exponentially and this trend if continued will gradually undermine the trust of consumers and cause them to become distrustful and suspicious about any green advertisement broadcasted by companies.

Credibility and trust in sustainability reporting

With the significance of sustainability issues at the global level, companies in India are also getting ready to embrace reporting on sustainability to enhance competitiveness. The reporting scenario in India is still in the nascent stage with nearly 47 companies disclosing their sustainability performance. Out of 8,691 reports, only a handful of 122 reports are published by Indian companies. TATA(Automotive) is a pioneer in sustainability reporting in India. It started reporting its sustainability performance in the year 2001 based on GRI guidelines. Since then, reporting in India has been done primarily on a voluntary basis. The companies with GRI-based sustainability reports in India have benefited to a great extent.

LG India has excelled in making electronic gadgets that are eco-friendly. Recently, it has launched aLED E60 and E90 series monitor for the Indian market. Its USP is that it consumes 40% less energy than conventional LED monitors. Also, they hardly used halogen or mercury, trying to keep down the use of hazardous materials in their products.

Drivers of Sustainability Reporting

There are various drivers behind the increase in dialogue, discussion, and publication of sustainability reports. Some of them are-
• Stakeholders exert pressure on SR because of their organization’s participation in the global supply chain.
• Brand and reputation of the corporate sector in India and at the international level is another significant driver behind SR by corporates.
• Role of Governments/Regulators in pushing SR to make corporates more responsible.
• Facing competition worldwide is also the reason to accept the SR.

Sustainability Reporting -Benefits

The benefits of sustainability reporting include:

• Improved financial performance
• Improved customer relationships
• Improved risk management
• Improved investor relationships
• Identification of new markets and/or business opportunities

Sustainability Reporting –A Voluntary Exercise

In most parts of the world, SR remains a voluntary practice. So far, France is the only country to enact specific legislation requiring publicly listed companies to produce non-financial reports covering economic, social as well as environmental dimensions. Some large organizations in some countries are subject to specific regulation that requires them to report some kind of sustainability information –for example, certain public-sector organizations in the United Kingdom. Various other countries mandate detailed reporting for specific industry sectors. Additionally, some stock exchanges like the South African Stock Exchange now make SR a requirement for listed companies. (K. C. Chakrabarty, Deputy Governor, RBI www.rbi.org,). In India too it is not mandatory but voluntary to report on Sustainability. Hence, The Securities and Exchange Board of India (SEBI) stipulates that the disclosure must be made through a new format, namely the Business Responsibility and Sustainability Report (BRSR). BRSR reporting has been made voluntary for FY 2021-22 but will be mandatory from FY 2022-23.

Conclusion

The progress of sustainability reporting in India is slow, but a significant and sound start has been made. As far as benefits and progress through SR are concerned there are many areas that are supported through it and initiatives taken by Companies. Need is that The future of sustainability reporting should not just be about traditional row and column reports, it’s about new ways of communicating information to make sustainability information more transparent.

Get the full research here: Greenwashing

Disclaimer

This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.