The practice of giving the wrong idea or providing deceptive information about how environmentally friendly a company’s products are is known as “greenwashing.” This involves making unsupported claims with the aim of leading consumers to believe that the products are more eco-friendly or have a more positive environmental impact than they truly do.
Furthermore, greenwashing can occur when a company highlights the sustainable aspects of a product in order to divert attention from its involvement in environmentally harmful practices. This manipulation is executed through the use of environmental imagery, deceptive labels, and concealing tradeoffs. The term “greenwashing” is derived from “whitewashing,” which refers to the deliberate use of false information to cover up wrongdoing, errors, or unfavorable situations, making them appear less severe than they actually are.
How Does Greenwashing Work?
Also known as “green sheen,” greenwashing is an effort to take advantage of the increasing demand for environmentally friendly products, whether they are perceived as more natural, healthier, chemical-free, recyclable, or less wasteful of natural resources.
The term originated in the 1960s when the hotel industry implemented one of the most blatant instances of greenwashing. They placed notices in hotel rooms encouraging guests to reuse their towels to contribute to environmental conservation, while the hotels benefited from reduced laundry costs.
In more recent times, major carbon-emitting entities, such as traditional energy companies, have sought to rebrand themselves as environmental champions. This involves greenwashing products through techniques like renaming, rebranding, or repackaging. Greenwashed products may give the impression that they are more natural, wholesome, or chemical-free compared to competing brands.
Businesses have been accused of greenwashing by highlighting their clean energy or pollution reduction efforts in press releases and commercials. It’s likely that the business isn’t really committing to green initiatives. Put simply, greenwashing refers to the practice of businesses making false claims about the environmental safety or green benefits of their products.
Genuinely eco-friendly products can gain advantages from green marketing, which emphasizes the environmental merits of both the product and the company producing it. Nevertheless, if a company’s green marketing practices are discovered to be deceptive or inaccurate, the company may face accusations of greenwashing. This could result in penalties, negative publicity, and damage to the company’s reputation.
Causes of Greenwashing
Greenwashing occurs when organizations engage in the following practices:
- Make broad claims about sustainability without providing evidence.
- In marketing materials, overstate their beneficial effects on the environment.
- Advertise products as environmentally friendly, yet use suppliers of raw materials that are not sustainable.
Legal teams should be consulted while marketing teams create sustainability campaigns to avoid any possible false advertising.
Examples of Greenwashing Allegations
Companies across various industries may encounter accusations of greenwashing.
Following are the prominent examples of greenwashing allegations.
Deutsche Bank’s DWS
Alleging greenwashing, a German consumer group filed a lawsuit against Deutsche Bank’s asset management division, DWS, in September 2022. The group claimed that DWS’s marketing materials contained deceptive information about its DWS Invest ESG Climate Tech fund, designed to invest in companies primarily dedicated to addressing climate change.
According to the consumer group, the fund’s promotional materials advertised a 0% investment in sectors like coal, while simultaneously indicating that the holdings might include companies generating revenue from the coal industry. This inconsistency, as per the group, has the potential to confuse consumers and amounts to greenwashing. DWS refuted the allegations, asserting that the marketing material adheres to legal requirements.
This lawsuit followed similar accusations made by DWS’s former sustainability officer, Desiree Fixler. Fixler alleged that the company exaggerated its use of sustainability criteria in its investment offerings. The U.S. Securities and Exchange Commission and BaFin, a German financial regulatory agency, both initiated investigations into DWS after Fixler’s public announcement in 2021.
Based on claims of greenwashing, German police and prosecutors raided the Deutsche Bank and DWS offices in Frankfurt in May 2022. While DWS claimed cooperation with the investigation and denied misleading investors, in February 2023, the company’s CEO informed analysts that potential fines resulting from the investigation cannot be ruled out.
This investigation serves as a cautionary tale for organizations in the asset management sector. Regulatory bodies worldwide are prepared to prosecute potential greenwashing practices.
Fast-fashion giant H&M came under scrutiny for greenwashing following a 2022 investigation by Quartz, which alleged that the brand misled consumers through its environmental scorecards.
H&M utilized the Higg Sustainability Profile, a fashion industry metric, to provide consumers with information about its Conscious Choice collection. This metric assesses the environmental impact of material manufacturing in terms of carbon emissions, water usage, and energy consumption compared to traditional materials. However, Quartz’s investigation revealed that over half of H&M’s scorecards exaggerated the environmental friendliness of their respective products.
For instance, a scorecard for a garment that required 20% more water to produce than the average claimed the garment needed 20% less water. H&M attributed this discrepancy to a technical error.
Following Quartz’s disclosure, a consumer filed a class-action lawsuit against H&M, alleging false advertising of the Conscious Choice collection.
Instances of misleading marketing, such as H&M’s case, erode customer trust in corporate sustainability initiatives. Organizations making false claims are increasingly vulnerable to greenwashing accusations from a skeptical customer base.
“Almost two-thirds of U.S. consumers consider companies to be responsible for protecting the environment, but only 28% of them trust companies when they say they will commit to reducing climate change,” noted Husson.
Ikea embarked on a sustainability initiative ahead of many competitors, including initiatives to phase out single-use plastics in 2020 and a commitment to eliminate plastic from consumer packaging by 2028. Despite these efforts, the furniture retailer faced allegations of greenwashing following an investigation by the nonprofit organization Earthsight into its supply chain. In a 2021 report, Earthsight suggested that Ikea sold wood sourced illegally from Russia.
Similar to numerous organizations, Ikea relies on the Forest Stewardship Council (FSC) certification for its wood sourcing. The FSC is a voluntary certification system designed to assist organizations in finding wood that adheres to strict environmental and social sustainability criteria. However, the wood Ikea was accused of selling, allegedly from illegal sources, carried FSC certification, as indicated in the report.
Earthsight largely attributed Ikea’s alleged involvement in the scandal to shortcomings in the FSC. In response to the greenwashing claims, Ikea stated that it severed ties with the implicated suppliers.
This case underscores the complexities of achieving supply chain sustainability, even for companies at the forefront of Environmental, Social, and Governance (ESG) initiatives.
“Some pretty well-known sustainable brands … have been caught in greenwashing because it’s difficult to master the entire value chain,” commented Husson. “This is why we’re starting to see some organizations going into auditing processes … to ensure that their supply chains are clean.”
In 2015, the U.S. Environmental Protection Agency (EPA) uncovered a case of deceit by the German motor vehicle manufacturer, Volkswagen. The EPA revealed that Volkswagen had engaged in deceptive practices during federal emissions tests to portray its vehicles as less environmentally harmful than they truly were.
Volkswagen had equipped many of its diesel vehicles with software capable of detecting emissions testing conditions, according to the EPA. This software manipulated engine emissions during federal tests to evade regulatory standards. However, under normal driving conditions, the engines emitted nitrogen oxides up to 40 times more than the EPA permitted.
Volkswagen admitted to the cheating scheme, leading to the resignation of the company’s CEO shortly after the scandal came to light.
The global sports organization, FIFA, faced public criticism when it declared that its 2022 Qatar FIFA World Cup would achieve complete carbon neutrality, indicating the organizers would acquire carbon offsets to offset all the tournament’s carbon dioxide emissions. In the lead-up to the event, FIFA issued a report outlining its sustainability strategy, but climate experts and activist non-profit organizations identified flaws in it.
Carbon Market Watch, a climate advocacy group, published a report suggesting that FIFA significantly underestimated the tournament’s emission levels. While FIFA has refuted claims of greenwashing, asserting its commitment to reducing its environmental impact, the organization’s public image has suffered since the tournament.
This case underscores the importance of organizations refraining from using terms like “carbon-neutral” without careful consideration.
“There’s lots of very vague definitions about what it means to be carbon neutral, net-zero and carbon negative, which can cause confusion,” commented Thomas Husson, Vice President and Principal Analyst at Forrester Research. Consequently, regulatory bodies such as the UK’s Advertising Standards Authority and the French government now require advertisers to furnish compelling evidence supporting sustainability claims.
What are some other forms of greenwashing?
Another prevalent type of greenwashing involves using misleading labels or concealing environmentally unsound practices in the fine print. This deceptive strategy often includes the use of terms like “eco-friendly” or “sustainable,” which are vague and lack verifiable evidence.
Additionally, featuring imagery of nature or wildlife can create an impression of environmental friendliness, even when the product does not align with green standards. Companies might selectively present data from research to emphasize eco-friendly practices while downplaying harmful aspects. In some cases, this information may stem from biased research funded or conducted by the company itself.
How can you identify greenwashing?
When greenwashing occurs, the claims made by a company often lack substantiating evidence. While verification can be challenging, looking to third-party research, analyst reports, and examining the product’s ingredient list can provide insights. Legitimate green products are often certified by an official vetting organization, clearly indicated on the label.
Why is greenwashing problematic?
Greenwashing is deceptive and unethical as it deceives investors and consumers genuinely seeking environmentally friendly companies or products. Often, green-labeled products are sold at a premium, leading consumers to pay more. If greenwashing is exposed, it can severely harm a company’s reputation and brand.
How Can Greenwashing Be Prevented?
To avoid greenwashing, organizations can take strategic steps and exercise caution in their marketing of Environmental, Social, and Governance (ESG) efforts. The fear of greenwashing claims is prevalent, with 76% of chief marketing officers expressing concerns. Marketers should be cautious when promoting sustainability initiatives that only marginally impact their organization’s environmental footprint, especially if they are a large energy company heavily invested in fossil fuels.
To mitigate the risk of greenwashing accusations, organizations should address the comprehensive scope of their environmental impact. This includes considering various types of greenhouse gas emissions:
- Scope 1 emissions: Direct emissions from organizational operations, such as those from company vehicles.
- Scope 2 emissions: Accounting for emissions associated with purchased electricity, heating, and cooling.
- Scope 3 emissions: Indirect emissions come from suppliers and customers.
Marketers may be inclined to highlight broad ESG initiatives as customers increasingly prioritize environmental sustainability. However, it is crucial to exercise caution. Many instances of greenwashing are unintentional and result from careless marketing campaigns. By actively working to reduce the full spectrum of emissions, organizations can confidently promote their sustainability efforts.