Greenwashing vs. Sustainable Marketing

25th July 2024

In 2023, the IPCC released a report forecasting planetary disaster within the next 10 years without a significant reduction in global greenhouse gas (GHG) emissions and overall land use. Simultaneously, articles have shown that the global green technology and sustainability market is expected to be worth $417 billion by 2030 – meaning it is the perfect opportunity for companies to increase profits by moving towards a more sustainable business model. Unfortunately, this fast-paced change has led to a subsequent increase in greenwashing. A 2023 report from an ESG data and research firm, RepRisk, noted that ‘54% percent of companies in Asia, Europe and North America greenwashed their records on greenhouse gas emissions, global pollution and other climate change-related issues.’

This blog aims to delve into the complex topic of greenwashing – explaining what it is, what is being done by governments to detract from it, as well as including some tips on how it can be avoided.

 

What is greenwashing?

Greenwashing – also known as ‘green sheen’ or ‘social washing’ – is a form of conveying false or misleading information on the environmental impact of an organisation’s products, services, or operations – whether intentional or accidental.

A common form of greenwashing is when a company uses marketing materials to persuade consumers to purchase their products based on vague environmental goals, policies, or materials used – essentially overstating the sustainability credentials of their good or service.

 

Examples of greenwashing

  • False or vague language (use of buzzwords) – the use of generic labels such as ‘green’ or ‘eco-friendly’ without specific details or information on how this is achieved.
  • Environmental claims – this may come in many forms. For example: overstating the positive environmental impact of a new product or claiming sustainable progress without demonstrating results or action plans.
  • Withheld information – highlighting a specific environmental win whilst ignoring other negative impacts or promoting a certain sustainable branch of company practices without providing information on any of the other branches.
  • Images of nature – strategic placement of nature and earth branding when the company’s offering has no ties to the environment.
  • Carbon offsetting – promoting carbon offsetting while doing nothing to reduce operational emissions through renewable energy or scope 3 reduction.

 

How greenwashing is being tackled in the European Union (EU)

With the increasing complexity around greenwashing, as well as growing emphasis on corporate accountability and environmental stewardship, the EU has designed CSRD and the EU Taxonomy – both powerful tools to promote transparency and equip organisations by safeguarding them against greenwashing.

 

Corporate Sustainability Reporting Directive (CSRD):

Introduced in January 2023, the CSRD strengthens the rules concerning the social and environmental information that companies are required to report. This directive mandates that a broader selection of large companies and listed SMEs will now be required to report on sustainability. Non-EU companies will also be required to report if they generate over €150M on the EU market.

The implementation of the CSRD will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment, granting an opportunity for risks and opportunities arising from climate change and other sustainability issues to be better understood.

 

EU Taxonomy:

The EU Taxonomy was put in place with the aim of scaling up investments in projects and activities that are necessary to reach the objectives of the European Green Deal.

It is a classification system that allows stakeholders to identify “environmentally sustainable” economic activities and to make more informed decisions. To be considered ‘environmentally sustainable’ under the EU Taxonomy, an activity must make a substantial contribution to at least one of the EU’s environmental goals, whilst not having a detrimental effect on any of the others.

 

How to avoid greenwashing in sustainable marketing?

  • Ensure your claims are specific and detailed – when making a claim, be sure to have enough of an explanation and supporting evidence behind it to avoid doubt or confusion. For example, instead of saying ‘green investments’, say ‘we have invested in 43% green capital in the past year’.
  • Get verified – seek third-party auditing where possible and apply for recognised certifications (e.g. B Corp)
  • Be transparent – Let your customers and other key stakeholders know about your sustainability practices and goals. Provide your customers and other key stakeholders with honest and detailed information about your current practices and your plans, and then update them on your progress regularly. Everyone has to start somewhere so do not be afraid of sharing your starting point.
  • Ensure branding images are not misleading as mentioned earlier, avoid using environmental images if they are not related to you.
  • Mind your language – avoid using ‘buzzwords’ without having the proper evidence or means to back them up.

 

Conclusion

Greenwashing requires caution and an eyes wide open approach but should not put companies or individuals off starting and progressing with their sustainability journeys. There are pitfalls including reputational risk, but these are outweighed by the importance of acting now and getting on the right track to meet the Net Zero targets within the deadline. New regulations will also help to identify and subsequently reduce the presence of greenwashing practices to protect the planet and to allow consumers of goods and services to make well informed choices.

RepRisk’s 2023 report recognised that, behind the oil and gas industry, the financial sector is responsible for the second-largest share of greenwashing incidents. At Mediatree, as part of our efforts to use our business as a force for good, we are determined to address this in the Investor Relations industry. Our GreenerRoadshows offering helps our clients transparently report on their investor facing activities by calculating the emissions of their transactions and providing them with plans on how they can reduce their impact in future events.