The Risk Of Greenwashing: One Step Forward For The Cause, Two Steps Back For The Environment
The theme for Earth Day 2022 is “Invest In Our Planet.” In the leadup to the main event on April 22, it’s not unusual for scores of companies big and small and newcomers and household names in every industry to take to social media to highlight their efforts for investing in our planet. After all, that’s what happened on March 8 on International Women’s Day, when marketing dollars were hard at work with displays of how brands #BreakTheBias. That is, until a Twitter bot aptly named @PayGapApp began replying to corporate tweets using the hashtag #IWD2022 with data highlighting the gender pay disparities in the company — data that’s publicly available on a UK government website.
Don’t Wait For A Twitter Bot To Spot Incongruities
Whether we can expect similar action on Earth Day from @EcoBotNet, a Twitter bot dedicated to “exposing corporate greenwashing and climate change disinformation on social media during #COP26 and beyond,” or others remains to be seen. But we shouldn’t dedicate only one day for calling out “greenwashing,” a term used to describe a company that spends more time and money on marketing themselves as environmentally conscious than minimizing its environmental impact. In fact, identifying the incongruities between firms’ market messages and public policies and practices (even if incongruities are unintentional or accidental) should be something we call out more regularly. Here are three industries where greenwashing is the norm.
Three Industries Notorious For Greenwashing
1. Green Investments
The number of green investment funds is skyrocketing. What’s not to like? These investment vehicles promote socially and environmentally conscious policies and are highly profitable. What’s not to love? According to a report by a London-based climate change think tank, of the 593 equity funds that market themselves as environmental funds, 71% are actually misaligned with the goals of the Paris Agreement. In addition, many of the “climate-themed” funds were found to contain holdings in fossil fuel production companies. Interestingly, one of the biggest sustainable investments firms, whose CEO regularly extols of the virtues and financial benefits of green investments, has only recently divested from two fossil fuel companies that spent years lobbying to prevent policy-based climate action.
2. Sustainable Finance
Environmental, social, and governance (ESG) investment is valued at approximately $35 trillion and makes up approximately 33% of total assets under management in the US, which provides 35 million reasons why companies would want to tout their ESG efforts. But confusion among the investing public as to what ESG means for a particular company, fund, or investor creates conditions for touting to morph into greenwashing. Evaluating a company’s ESG disclosures has become a key tool used by many investors in making investment decisions. The lack of oversight and verification of disclosure statements by government agencies such as the SEC leaves the door open for some to treat ESG disclosures as wish lists rather than an accurate representation of current practices and investments. As recently as January 2022, the SEC began investigating the SEC ESG disclosures of companies doing business with Texas state government entities.
3. Fast Fashion
Fast fashion is out, and sustainable fashion is in, right? As fashion brands become more sustainable, nuances in nomenclature and creative marketing have been known to blur the lines and create just enough confusion to successfully greenwash the truth. Today, 80% of discarded textiles globally end up in landfills or incinerated, with just 20% being reused or recycled. A 2021 report highlighted that nearly 60% of sustainable fashion claims by European and UK fashion brands are intentionally misleading. Fashion’s hijinks include tagging “eco-friendly” or “recyclable” packaging for fast fashion garments, highlighting the use of LED lighting in their stores to create the illusion of energy efficiency, and labeling “responsible” products without a definition of what “responsible” means. These are just some of the greenwashing techniques used by fashion brands at the low end all the way through to high-end fashion houses.
Brand Reputation Risk
Our desire to make environmentally friendly choices creates a greenfield opportunity for brands to attract us with buzzwords such as “eco-friendly” and “ethically sourced.” But the lack of time to validate claims or investigate nuances in carefully crafted marketing language makes us easily susceptible to greenwashing. A recent UK study found that 40% of Brits would stop using a brand if they were found to be greenwashing; major PR firms have faced boycotts after it was revealed that they knowingly aided global fossil fuel companies in “spinning” climate misinformation; and McKinsey’s work with some of the planet’s biggest polluters sparked ire among 1,100 employees who signed an open letter to partners urging them to change course. While not all cases of greenwashing are purposely malicious, they can nevertheless pose a significant risk to the brand. Companies can count on customers or watchdogs such as @EcoBotNet to notice the gap between their words and actions.
Marketers, read the latest blogs by my colleagues Thomas Husson and Ryan Skinner about sustainability communications accounting to create messages with integrity.
Risk pros wanting to identify and respond to greenwashing brand risk, schedule an inquiry with me.
(written with Isabelle Raposo, research associate at Forrester)
This blog post is part of Forrester’s Earth Day 2022 series. For more Forrester insights on sustainability, see the full set of Forrester’s climate action blogs.