With keener public awareness and growing scrutiny of brand sustainability claims, greenwashing hasn’t gone away but become a ‘many-headed beast.’ Experts weigh in on the best way forward for brands.
It was inevitable that brands would find it increasingly harder to greenwash. As awareness of environmental and social issues grows among consumers, companies have been getting creative about how they enhance or fabricate their sustainability performance; according to the latest analysis by Planet Tracker, greenwashing has become increasingly sophisticated. The think tank points to the regulatory loopholes being abused by brands: “Greenwashing is misleading but not always illegal.”
Image credit: Planet Tracker
The report highlights six types of greenwashing being used — from ‘greencrowding’ (relying on safety in numbers and the fact the crowd will move at the speed of the slowest) and ‘greenlabeling’ (marketing something as sustainable, but closer examination reveals the claim is misleading) to ‘greenlighting’ (spotlighting something green — however small — to draw attention away from unsustainable practices, operations or products).
Some companies are practicing ‘greenshifting’ (blaming the consumer), ‘greenrinsing’ (regularly changing ESG targets before they are met) or ‘greenhushing’ (under-reporting or hiding sustainability credentials to evade scrutiny from investors). For the latter, Planet Tracker highlights the likes of Blackrock and HSBC — which recently downgraded a number of Article 9 funds to Article 8 classification, “ostensibly to comply with the stricter regulations” under the Sustainable Finance Disclosure Regulation (SFDR — under SFDR, Article 9 funds must follow a sustainable investment strategy, while Article 8 funds should consider environmental or social factors but do not need to target a sustainable outcome). “But the action was potentially undertaken to avoid the scrutiny associated with the Article 9 standard,” it says.
New avenues in brand transparency
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“What’s surprising is that [greenwashing] remains so prevalent despite being called out by NGOs, activists, the media — and, increasingly, regulators. Investors should remain vigilant — after all, they are being misled,” the report adds.
A legislative crackdown
Globally, regulators are slowly waking up to implement laws to combat greenwashing. In Europe, draft EU legislation proposes penalizing companies that make unsubstantiated sustainability claims about their products. The European Commission is keen to deal with the 40 percent of environmental claims, such as ‘green,’ ‘eco’ or ‘environmentally friendly’ it says are unsubstantiated. To ensure green claims can be backed up, the Commission wants countries to establish a verification system. Companies that fall foul of the criteria will be fined in a way that is “effective, proportionate and dissuasive.”
In the UK, the government’s competition watchdog is targeting environmental claims made by brands in the food, drink and toiletries sector in particular. The Competition and Markets Authority (CMA) says it has been collecting evidence that shows a significant majority of household products are being marketed as ‘green’ or ‘eco-friendly;’ around 90 percent of dishwasher products sold in the UK — and nearly all toilet products — feature at least one claim about sustainability on packaging; yet there is no solid way to understand what’s real and what’s not. As CMA Chief Executive Sarah Cardell has said, many shoppers could be being misled — and potentially paying a premium for products that aren’t what they seem.
If the CMA finds evidence of unfounded green claims, it will take enforcement action or open an investigation into specific companies. It will assess claims using its Green Claims Code — a set of 13 guidelines for brands to help them ensure accuracy and clarity. The body has the power to take brands to court or make sure they draw up plans to change how they communicate.
In the US, the Securities and Exchange Commission’s proposed rule changes designed to prevent misleading or deceptive ESG claims by funds, announced last summer, will take time to bed in and have the desired impact.
It’s a similar story in Australia, where the government has recently enforced laws on greenwashing after the country’s securities regulator issued an information sheet on how to avoid greenwashing when offering or promoting sustainability-related products. The paper points to distortions of relevant information that a current or prospective investor might require to make informed investment decisions — something that could erode investor confidence in the market for sustainability-related products.
The European legislation is some way off and the draft directive has been described as a “moving target” that might well be diluted before it becomes full regulation. The so-called Green Claims Directive was supposed to be published in 2022 but has been delayed multiple times because policymakers have struggled to find a consensus as to which methodology could be used to verify environmental claims.
Being as good as your word
In the meantime, brands are treading a fine line between proudly communicating their sustainability credentials and over-blowing their actual achievements. As GlobeScan’s latest Healthy & Sustainable Living Global Consumer Insights study shows, shoppers are highly receptive to information about the ESG credentials of brands and products. In fact, the majority of people that have been exposed to information about the supposed sustainability of brands — regardless of categories — trust what they are being told. The risk of breaking that trust is huge.
Referencing the Planet Tracker report, Gill Wilson — a professor of sustainability marketing and lead trainer for the Creatives for Climate Academy — told Sustainable Brands® it’s time for a more robust and clear definition of what actually constitutes ‘greenwashing.’ She said that communications and marketing are in danger of creating more confusion. “Greenwashing is becoming more sophisticated, and there is a layer of confusion. A clear definition would help with that.”
Lucy von Sturmer disagrees. As Initiator and Chairwoman of the nonprofit Creatives for Climate, she works with hundreds of creatives — using their platform and creativity to amplify awareness of the climate crisis. “As human beings, we need to learn to hold two truths at a time,” she says. “Life is beautiful; life is scary; the climate apocalypse is real, even though I may not be experiencing it right now. And I think it’s the same with greenwashing.
“Change is happening within business. [But] companies aren’t perfect and sometimes their education about their impact is so low that they misinform consumers. If we expect definitions or regulation to be perfect, we’ll never get anywhere because we need to empower marketers to better understand the elements that are misinforming us.”
What the two can agree on is that there is a growing and significant risk to brands for failing to get their story straight when it comes to talking about issues including climate action and human rights. Von Sturmer says that more companies are choosing to carry out sustainability programs and not talk about them “until they’ve got all their ducks in a row” — an approach she describes as a “double-edged sword.” “If people aren’t willing to talk about anything, then things won’t change. But brands must be moderate and caring.”
Her point also reminds us that efforts to tackle sustainability are nuanced and complex. You only have to look at the latest developments in carbon offsetting to understand just how tricky it can be for corporates to always get it right. As Sandeep Roy Choudhury — co-founder of Indian social enterprise VNV Advisory Services, points out — firms might well be applauded for stepping out of voluntary offsetting, “but it could be the difference between doing something about your emissions (not perfect but good) and not doing anything at all (which greenwashing allegations encourage).”
While avoiding greenwashing might be tricky, there is a simple solution, Wilson says. “Start with the proof points. Don’t start with the communications message. Our brains are trained to start with what the consumer wants. But we need to start with the problem.
“That’s a really tough mindset to adopt. But it’s got to be about looking at your strategy, and finding out what can be credibly said that you’re doing now — not promising to do in 2030.”
And the most sustainable brands are the ones that do not use the word ‘sustainable,’ she adds. Instead, they show the ‘s’ word in the context of people’s lives. “We’re currently using lots of words that consumers just don’t understand — and we’re blindsiding them.”
The Planet Tracker analysis offers a useful marker in the sand for brands unsure of common pitfalls, and the likely consequences for those charged with greenwashing now and in the future. But forget ‘greenhushing,’ Von Sturmer says; brands need to stop ‘green cowardice.’
“There just needs to be more ballsy-ness from communications and marketing teams to internally champion something. But those that are prepared to fight the fight often get burned out. Nobody gets paid extra for being an activist, right?”