The term ‘greenwashing’ was coined in the 1980s to describe the way some companies were deceiving the public about the environmental impact of their products and business practices. As a form of disinformation, corporate greenwashing undermines environmental efforts, compromises corporate social responsibility strategies, and moves society further away from achieving the Sustainable Development Goals. Jako Volschenk considers how greenwashing affects all stakeholders and suggests remedies for companies.
What is greenwashing and what are some of the reasons companies – and non-profit organisations (NPOs) – engage in it?
Demand has led to a rise in more environmentally friendly products and services, and consumers are often willing to pay a premium for this. For example, organic cotton is more expensive, because of the lower yield per hectare. Companies often mislead consumers with labels and marketing campaigns to justify charging
more for their products, claiming their products are good for the environment.
Companies rely on two factors: legitimacy (their licence to operate) and credibility (whether they can deliver on their promises). Companies in danger of losing their legitimacy may use greenwashing to divert attention from any environmental damage they do, either by making unproven claims about sustainability or by channelling funds into ‘green’ initiatives to improve their reputation. Greenwashing allows companies to charge customers more without having to change their underlying business practices. While companies can spend money to ‘buy their way back’ from poor environmental performance, it is ultimately not about how you spend your money, but rather about how you make it in the first place.
Please provide some examples of greenwashing and indicate why they
In 2021, non-profit organisation Changing Markets Foundation found that up to 59% of all green claims by European and UK fashion brands were misleading and could be considered greenwashing. Many fashion
brands have a ‘fast fashion’ business model and claims about sustainable actions can be questionable – for example, H&M and Adidas, among others, were found to have dumped around 39 000 tons of clothing in Chile’s Atacama Desert in 2021. By contrast, Patagonia – a brand actively supporting environmental non-profits – actively discouraged consumers from buying new clothing items with its 2011 ‘Don’t buy this jacket’ campaign, urging them to repair clothing rather than buying new items. The result was an increase in sales as shoppers view Patagonia products as more durable.
Some companies may run socially laudable campaigns, like the Dove Campaign for Real Beauty, which set out to build self-confidence in women and young children, but Unilever is one of the largest users of palm oil in the world, the production of which leads to widespread deforestation. NPOs like Greenpeace, as well as the media,
can help to hold companies to account and educate consumers. For example, General Motors has been called ‘Greenwashing Motors’ for selling environmentally questionable ‘green’ Hummers and fuelinefficient E85 vehicles. Locally, the Life After Coal/Impilo Ngaphandle Kwamalahle campaign has tackled the myth of ‘clean’ or ‘green’ coal, a narrative being cultivated by resource companies seeking to legitimise the industry.
What are some of the consequences of greenwashing and how can organisations guard against it?
Reputation is closely linked to legitimacy and credibility – you need to perform consistently to maintain your reputation as customers may punish you for one misdeed, and your share price could drop. Genuinely responsible companies should help consumers to distinguish between true and false claims, and help to create industry
standards that can hold all companies to account. This year’s best practice often becomes next year’s standard practice. Interestingly, research conducted by one of my master’s students indicates that consumers would penalise companies for greenwashing, but are prepared to pay a premium for genuinely environmentally
friendly products. I would advise companies to be honest about their impact rather than trying to disguise it – and companies should be careful not to spend money on superficial reputation management.
In a global survey sponsored by Google Cloud nearly three out of five executives (58%) admitted that their companies engage in greenwashing.
However, many executives have also indicated they would like to see
better accountability and action on sustainability. What can be done to
ensure improved outcomes?
Many of us do what we think our companies expect of us, so it’s important that management is clear about what it expects from employees, and that it empowers them to ‘do the right thing’ independently of directions. People must also be held accountable – ultimately, environmental responsibility is demonstrated by one person who decided to do the right thing.
A lot of companies argue that their business should exist, because it creates jobs, even as it harms the environment. This recalls the parable of the broken window – should we break windows because it will create jobs for those replacing broken windows? Companies should reflect on their underlying values and whether they’re making the world a better place. I’m all for companies making a profit from making the
world a better place.
DR JAKO VOLSCHENK
Senior lecturer in strategy and sustainability at Stellenbosch Business School