How Greenwashing Distorts The Economic Push Toward Sustainability

Domestic government action and international diplomacies are both the biggest levers and the most difficult levers to enacting robust climate action policies. Governments and multinational institutions have the most power to make a change but reaching the consensus needed to sway change-makers in the same direction often proves difficult, especially with issues as politically charged as the climate crisis.

For decades, as the scientific consensus on climate change strengthened, the business community still chafed at the idea of sacrificing short-term profits in the name of sustainability. As economic parameters (such as energy prices) change and the perceived urgency of the crisis grows, that mindset is shifting. Companies now increasingly see climate change as an opportunity to do good—both for the planet and for their shareholders.

However, some companies are trying to exploit this corporate sustainability shift by talking the talk without walking the walk. They recognize the perceived benefits of being sustainable—namely a brand image boost and the benefits deriving from that, sometimes including share price growth - but misrepresent the nature of their sustainability efforts to the public. In essence, they want to have their cake and eat it too. They want public relations to boost from appearing to be sustainable without actually being sustainable.

As such, a discrepancy arises between how companies claim they are performing environmentally and how they are actually performing. This is called greenwashing, and as the business community steps up to the plate of climate action, it warrants a closer look.

Effect On Consumer Behavior

When consumers perceive so-called green advertising as credible, they develop a more positive image of the brand. In fact, consumers are more willing to pay higher prices for items they believe to be more sustainable.

According to GreenPrint’s 2021 Business of Sustainability Index, 73% of Americans use a product’s environmental friendliness as a factor in their purchasing decision. 57% of Baby Boomer consumers, 64% of Gen X consumers, and 75% of millennials will spend more on a product if it comes from a sustainable brand. They see this as a worthy sacrifice to help the planet.

But GreenPrint also found that consumers struggle to identify truly green products, and they are suspicious of corporate greenwashing claims. Put simply; consumers do not like being deceived. A growing body of research indicates that consumers resent companies who greenwash.

There are plenty of greenwashing examples—famous and less famous—that demonstrate why customers are wary of environmental marketing claims. Companies can learn from those bad examples as well as good examples of companies doing right by their consumers. Below, we give some of those examples and dive deeper into greenwashing—how to spot it and how to avoid it.

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Examples Of Corporate Greenwashing

One of the most insidious examples of greenwashing is the fossil fuel industry’s efforts to deceive the public about its intentions. For decades, Big Oil has publicly supported carbon taxes as a means of moderating global fossil fuel consumption. But they’ve done so specifically because they know carbon taxes are unlikely to be enacted on the scale needed to materially affect their business.

Speaking of the auto industry, the Volkswagen diesel scandal became one of the most prominent examples of corporate greenwashing. Volkswagen touted the sustainability aspects of many of its diesel-powered vehicles in an effort to appeal to planet-conscious consumers. But to meet stringent emissions standards, the auto giant fitted test vehicles with defeat devices that altered performance and reduced emissions in testing conditions. But that doesn’t always correlate to real-world driving conditions, where some vehicles emit up to 40 times the legal limit for nitrous oxide emissions. The company’s stock price sank, and it has yet to fully restore its reputation.

More recently, a Dutch environmental group sued KLM, a major airliner based in the Netherlands, for allegedly making false claims about the sustainability of its flights. The plaintiff contends that the idea of sustainable aviation is an oxymoron, which would imply that KLM’s “Fly Responsibly” ad campaign is misleading since it claims KLM is pioneering a sustainable future for aviation and for the planet.

Reuters reported that this is the first-ever lawsuit alleging greenwashing in the aviation industry. Given the expected growth of aviation and the difficulty of decarbonizing long-distance airline travel, this lawsuit could have major implications as airliners look to grow while advancing towards more sustainable business models. It also reflects what Reuters calls a “rising tide of climate litigation,” which may complement forceful action from governments and businesses as the climate crisis becomes more urgent.

KLM probably could have avoided this lawsuit had they worded their advertisements differently or made more specific claims about how they are making both aviation and the planet more sustainable. Below, we describe in more detail how greenwashing looks in practice and what businesses can do to avoid it.

How To Avoid Greenwashing As A Business

For many businesses, the way your customers perceive you can limit your potential. Companies that specifically market themselves as environmentally friendly have an extra burden of proof since environmentally conscious consumers have seen repeated instances of businesses betraying their trust and since the stakes of being sustainable have real-world implications beyond brand reputation.

Fortunately, there are simple ways for businesses to inoculate themselves from the risks of greenwashing that largely mirror the aforementioned six sins of greenwashing.

Perhaps the most important is also the most universal: make your claims clear and easy to understand. If you market a product made with organic material, enumerate the specific percentage of the product that is made with the organic material. And if you have verifiable, third-party certifications that customers will either know or easily recognize, add them.

When you make a claim, back it up with data, you can again leverage third-party certifications to convey that your claims are numerically sound. Publicly disseminated data is ideal since it’s usually easier to understand and more trustworthy. If your target audience can’t understand the numbers you’re using to sell them on your sustainable wares, you risk losing their business regardless of whether or not you’re even greenwashing.

When you compare your product to a competitor’s, make apples-to-apples comparisons. If the products are not in a similar product category, you’re deceiving your customers.

If you market your products as sustainable, your company should walk the walk too. From manufacturing to waste to disposal to spatial footprint, do what you can to do right by the planet. It’s more authentic, and you can tell your customers that you care about sustainability in all aspects of your business, not just the ones that make it into your marketing material.

Try to shy away from vague images or videos that don’t specifically express a particular facet of sustainability in a product or products. Putting some trees or waterfalls in your marketing doesn’t help your customers understand how your offering helps the environment.

Last but certainly not least, be honest and upfront with your customers. You should feel confident enough in your sustainability merits to talk about them with all of the people who support your business. Talk about sustainability from both an individual product perspective and a bigger-picture company perspective. Mention specific targets and shortcomings to give your stakeholders - customers included - some insights into your business and to help them feel included.

In short, empower your customers, and they will reward you with their business. Authenticity and trust will help you differentiate yourself as a sustainable business.

Federal Trade Commission Trade Guides

The Federal Trade Commission (FTC) enforces consumer protection in the United States and, as such, includes greenwashing in its regulatory purview. Since 1992, it has maintained a series of publicly available so-called Green Guides designed to help marketers avoid making environmental claims that mislead customers. As the FTC states on its website, the Green Guides include guidance for the following three purposes: “1) general principles that apply to all environmental marketing claims; 2) how consumers are likely to interpret particular claims and how marketers can substantiate these claims, and 3) how marketers can qualify their claims to avoid deceiving consumers.”

Independent of how much your business operates in the United States, these guides can help your business avoid legal and regulatory issues associated with greenwashing while also improving your brand reputation with your valued customers.