What is greenwashing?

How does greenwashing work?

Greenwashing happens when a company makes an environmental claim about something it's doing that is intended to promote a sense of environmental impact that, at best is misleading, and at worst, doesn't exist.

The green claim is typically about some form of positive effect on the environment. It could have some elements of truth but fails to consider the total impact on the environment. For example, a car vendor could claim that a vehicle is eco-friendly because it's more fuel-efficient, while failing to mention or consider the larger industrial impact of vehicle manufacturing on the environment.

Previously existing products are generally greenwashed through a process of rebranding -- for example, by renaming them or changing their packaging. The rebranding is done to convey a message that the product is more environmentally friendly or natural. Advertisements might also be made to promote the rebranding.

Companies can also greenwash initiatives with vague claims that don't provide real data or scientific validation for the claims. Using terms such as sustainable, green or eco-friendly -- or just claiming to be "good for the planet" or "better for the environment" -- can help organizations appear to be greener. However, the reality of such nonspecific terms is that they can be -- and often are -- used without supporting evidence or facts that could be easily relayed to the consumer. As such, an organization is simply labeling or promoting a product or service as being green when, in fact, there's no undeniable, verifiable evidence that it's more environmentally sustainable.

From an ESG perspective, greenwashing also occurs when a company has stated corporate policies about being green that don't match what the company has publicly implemented.

Greenwashing can also include a company marketing a minor environmental improvement as having a major impact. Similarly, a company could promote a move meant to meet local minimum regulatory requirements as if it's making the move to improve the environment.

Examples of greenwashing

The following examples show several general greenwashing techniques that organizations use today to help make a product or service appear to be more sustainable for the environment than it might be.

• Less is more. This is perhaps the most common greenwashing example and is rooted in the genesis of the term greenwashing itself. When hotel chains advise guests that towels won't be washed daily to be greener, the idea is that less washing is better for the environment.
• Efficiency claims. Another common example is claiming to be more efficient with energy consumption. By being more energy-efficient, the idea is that less energy needs to be produced, leading to less environmental impact. Automobile manufacturer Volkswagen was caught greenwashing with its diesel emissions scandal in 2015. In that incident, the company fraudulently reported that its diesel engine vehicles were more fuel-efficient than they really were. The company's diesel fuel vehicles were marketed as being a more environmentally sustainable type of vehicle when, in fact, that wasn't the truth.
• "Recycle this" approach. Greenwashing also occurs when an organization claims that one approach is better for the environment than another by implying that the new approach is somehow recyclable. For example, McDonald's began to replace its single-use plastic straws in 2019 with paper straws that the company described as being eco-friendly. It turned out that the paper straws weren't recyclable and weren't necessarily better than the alternative.
• Green targets. Organizations and governments can come up with targets for sustainability that are publicly declared to make it appear as though they're doing the right thing for the environment. Targets on their own are nice goals to strive for, but they're little more than wishful thinking if they aren't achieved.
• Eco-shrinkflation. Similar to the less-is-more approach, this is when a company shrinks the size of its products while charging the same, if not more, for the same product. Some food and drink companies, like Gatorade for example, have shrunk the size of their product or packaging, claiming that the new packaging is more environmentally friendly.
• Carbon offsets. When an organization can't decrease the carbon impact of a product, they commonly turn to the idea of offsetting greenhouse gas emissions by buying into a carbon offset, like the planting of trees. Carbon offsets are a credit that an organization can buy into to decrease its carbon footprint. When the number of carbon offset credits obtained is equal to the organization's carbon footprint, that organization is said to be carbon-neutral. Many companies, however, have invested in carbon offsets that either have a lack of verification processes, participate in making fraudulent claims, or grow trees that might be cut down within a decade or could burn down in wildfires.

Effects of greenwashing

Greenwashing has numerous effects on consumers, companies, green industries and the planet.

Growing evidence shows that consumer sentiment is slanted toward being green and environmentally sustainable. Individuals want to do the right thing and help mitigate the continued effects of climate change. When a company, product or service is caught or discovered to be greenwashing, there's a general sense of distrust that occurs. Consumers no longer trust the brand or product in question and might also begin to question other claims, as it shows a lack of integrity.

For companies engaged in greenwashing, consumers will choose other organizations that are more ethical. Greenwashing can degrade customer satisfaction, erode brand loyalty and potentially affect repeat purchases. Consumers put their money into products and services that aren't attempting to deceive them with greenwashing. Companies also run the risk of fines from government and regulatory agencies around the world.

For green industries, the risk of greenwashing is a lack of trust from consumers. If there's a lot of greenwashing, then consumers simply won't trust green sustainability claims from anyone -- including legitimately green industries -- as they won't know who to trust.

The biggest effect of greenwashing is existential. Each act that an organization or individual doesn't take with real green initiatives has a negative effect on the planet. The planet is already suffering the effects of climate change, with The National Aeronautics and Space Administration referring to effects such as rising temperatures, melting glaciers, intense heat waves and severe weather events like droughts and wildfires. Greenwashing masks the inaction of not taking steps to reduce environmental impact. With the effects of climate change continuing to imperil humanity, there's no time to waste in taking steps to help improve sustainability practices and business models so that humanity and the Earth itself continue to survive.

How to avoid or prevent greenwashing

For organizations, there are several ways to avoid or prevent greenwashing that leadership can consider -- assuming, of course, that the organization has good intentions and isn't deliberately trying to mislead anyone about its environmental commitments.

• Be specific. Organizations shouldn't use generic terms that don't have a specific meaning. For example, saying a product is eco-friendly is generic and doesn't specifically identify how the product or service is green.
• Use data. When making specific claims, it's imperative that organizations use data. The data should support the claim and numerically detail the effects of the actions being taken.
• Avoid misleading images. Using pictures from nature to somehow evoke environmental friendliness can be a form of greenwashing when not backed by specific, data-driven claims.
• Be truthful. Fact-based statements that are truthful should be the standard for all types of marketing or claims about the environment. False statements will inevitably be discovered.
• Keep the long term in mind. Ensure that green efforts aren't made for just a short-term marketing strategy benefit, but instead have the potential for a long-lasting environmental benefit. There's little use investing in offsets for trees that already exist and weren't likely to be cut down in the first place.

Consumers should avoid greenwashing by following up and doing their own research into green claims. Consumers should also pay more attention to what they buy and avoid products that seem to make environmentally friendly claims without backing them up with any further evidence or facts. Consumers can also rally their local governments to be stricter on regulating environmental claims.

Regulating environmental claims

Some countries are starting to regulate environmental claims more closely, but these can still present challenges to stopping greenwashing. In the U.S., for example, the Federal Trade Commission (FTC) oversees unfair and deceptive environmental marketing claims. However, it's rare to see the FTC go after smaller cases of greenwashing claims; it has only taken action a few times before in extreme cases.

The U.S. does have some stronger environmental regulations, however. These are often enforced by agencies such as the Environmental Protection Agency and Securities and Exchange Commission, along with state and local initiatives.

Other global approaches to regulating environmental claims include the following:

• The European Union implemented a taxonomy system to publicly rank companies based on their sustainability. This system is meant to reduce any ambiguity for investors, consumers and policymakers.
• Australia's approach involves imposing heavy fines for companies that champion misleading environmental claims.
• Canada, by comparison, requires any environmental claims to be backed by readily available data.
• Thailand uses a Green Leaf Certification to assess the environmental efficiency of hotels to combat greenwashing claims in the hospitality field.

Although businesses and individuals alike need to help reduce their carbon footprints, businesses globally tend to be some of the leading producers of greenhouse gases. Learn more about how businesses can reduce their carbon footprint.