Everywhere I look these days there’s greenwashing. Not necessarily actual greenwashing. I’m talking about the word itself.
It’s everywhere, from media missives to activist accusations to regulatory remedies on both sides of the Atlantic. There are academic papers, investor research reports, conference sessions and no small number of online rants in which the G-word is tossed around with abandon.
And whenever the word comes up, there seems to be general head nodding and handwringing: “Greenwashing? Of course! It’s a huge problem, and we need to do something about it!”
It would appear that greenwashing is one of the great ills of our day.
But is it? That’s an open question.
It would appear that greenwashing is one of the great ills of our day. But is it? That’s an open question.
Longtime readers know that I’ve been pondering this question for years. But the more I’ve written on the topic, the less clear I’ve become about how greenwashing should be defined, how that definition seems to be shifting and how much of a problem it really is.
My topline conclusion: There’s a whole lotta corporate hyperbole going on, but roughly an equal amount of reticence by companies to talk about their sustainability commitments, goals and achievements. Much of the hyperbole stems from companies’ genuine desire to be seen as a leader, or at least a player, in addressing sustainability challenges, without necessarily giving ample thought about how they communicate those messages.
I’m not alone in being confused. Just last week, Bloomberg reported in an article about the legal definition of greenwashing: “Nobody knows for sure, and that’s causing some big regulatory problems.” It quoted a financial analyst: “The battle to stamp out greenwashing continues to be foiled by the lack of a clear and common definition across jurisdictions.”
I couldn’t agree more.
Last week also saw publication of yet another breathless report, this one from the usually studious nonprofit Planet Tracker, proclaiming that greenwashing “has become a many-headed beast” and is “becoming increasingly sophisticated.” The authors expressed surprise “that it remains so prevalent despite being called out by NGOs, the media and, increasingly, regulators.” It sextupled down on the topic, suggesting that there are six “shades” of greenwash: “greencrowding”; “greenlighting”; “greenshifting,”; “greenlabeling”; “greenrinsing”; and the aforementioned “greenhushing.”
The Planet Tracker report — like so many others on the topic, however well-intended — is nearly as sloppy as the companies it criticizes. For one thing, it fails to adequately define greenwashing, assuming that readers will somehow know it when they see it. Plus, it conflates the marketing of consumer products with financial institutions making ESG and sustainability claims about their funds and investments. (To further the confusion, Planet Tracker suggested that “greenhushing” involves companies “under-reporting or hiding their sustainability credentials in order to evade investor scrutiny.”)
The rise of ESG-themed funds and other investment vehicles is absolutely worth scrutinizing. For starters, there’s a lack of transparency about what most of these funds actually claim to do. Most funds’ goal is to reduce investor risk by picking well-managed firms, as opposed to companies making a positive impact. As a result, many values-driven investors are being sold a lie, if only by omission.
Also, we’re talking about trillions of dollars in individuals’ savings and retirement funds, so being ethically pure is important, as it is with any investment marketing. That hasn’t always been the case, and scrutiny of these funds is both welcome and warranted.
Hype and glory
But what about more quotidian products and services — the consumer purchases most likely to be scrutinized by activists? How sinister are companies’ efforts to “green up” their image? That’s debatable, and the crux of that debate comes back to the question: How do you define greenwash?
The internet, unsurprisingly, is chockablock with definitions. Here are five examples, culled from sources I consider to be reasonably well-regarded:
- Encyclopedia Britannica: “a form of deceptive marketing in which a company, product or business practice is falsely or excessively promoted as being environmentally friendly”
- Investopedia: “the process of conveying a false impression or misleading information about how a company’s products are environmentally sound”
- Merriam-Webster: “the act or practice of making a product, policy, activity, etc. appear to be more environmentally friendly or less environmentally damaging than it really is”
- National Geographic: “a form of misinformation often used to entice an aspiring green consumer”
- Scientific American:“what happens when a hopeful public eager to behave responsibly about the environment is presented with ‘evidence’ that makes an industry or a politician seem friendly to the environment when, in fact, the industry or the politician is not as wholly amicable as it or he might be”
Note that most of these focus on a company’s products, specifically those aimed at consumers, although some definitions extend to business practices and even to politicians. None of them singles out investors.
But even these reasonably straightforward definitions are subject to broad interpretation. For example, Britannica refers to an environmental attribute being “falsely or excessively promoted.” Well, which is it? “False” implies lying, perhaps even fraud. “Excessive” suggests hyperbole or maybe wishful thinking, neither of which is illegal or, in most cases, immoral or unethical.
The lack of a definition is problematic for companies, to put it mildly.
Now, I can already hear my more activist readers chafing at that last sentence: “Isn’t it immoral to position yourself as an environmental leader when that’s not the case? After all, the future of humanity is at stake!”
Perhaps. But given the lack of definitions about what it means to be an environmental leader — after all the standards, rankings and frameworks, it’s still largely in the eye of the beholder — and what constitutes greenwash, I maintain that policing such claims will be difficult at best. Moreover, most such hyperbole isn’t qualitatively different from other marketing claims.
You already know the answers. And yes, there’s a false equivalency here — a cup of joe versus a livable planet. The question is to what standard should we hold companies when speaking about sustainability. Can a genuinely committed company boast about its efforts and commitments if it isn’t perfect from a sustainability perspective? What can companies reasonably say when — like nearly every company — they are only part way toward a long-term transformation to a more sustainable business model?
Which brings us back to that nagging question: What is greenwashing? Is it blatantly deceptive marketing? Is it limited to products? What about claims a company makes that aren’t in the form of marketing and don’t directly relate to its products or services? Net zero, for example.
The lack of a definition is problematic for companies, to put it mildly. Without adequate guardrails, companies have little guidance about what’s allowable and what’s not. And the rest of us — those seeking to understand which companies to work for, buy from, invest in, etc. — are left scratching our collective heads or ranting about companies whose claims just don’t feel like they should be true.
If we don’t know what greenwashing is, how can we avoid it or fight it?
Regulations could help, at least in Europe, where the French Climate and Resilience Law, which into effect this month, and the European Union’s proposed Unfair Commercial Practices Directive, slated for 2024-25, “paint a much clearer picture of the processes companies will have to adopt in order to make any environmental claim without risk of greenwashing,” as Sourcemap CEO Leo Bonanni pointed out recently.
In the United States, however, there are no such laws. The Securities and Exchange Commission has proposed rules governing climate risk disclosure, but that is aimed primarily at investors. (A final rule is expected this spring.) And the Federal Trade Commission last month requested public comment for “potential updates” to its longstanding Green Guides to include terms that didn’t exist when the guides were last revised, in 2012. But the Green Guides apply primarily to consumer products, and the FTC has been notoriously anemic in its efforts to take on purported greenwashers, except in the most egregious cases.
So, where does that leave us? To be sure, some environmental marketing claims need to be called out: a company’s efforts to reduce plastic packaging or use more plant-based plastics while simultaneously churning out billions more plastic containers every year; an oil company that touts its efforts to decarbonize its products and services but continues to invest in new exploration and extraction of oil and gas; any company whose net-zero claims are based entirely on the emissions from their own operations and don’t include the full life-cycle of their products and processes.
But simply to call “Greenwash!” on anything and everything is counterproductive. It’s a lazy and uninspired criticism that doesn’t really address the challenge: companies wanting to be seen as part of the solution in a world that views them as anything but.
Courtesy Greenbiz.com. By Joel Makower. Article available here.