The demand for sustainable products and services has grown significantly in recent years, with companies increasingly meeting these needs. Moreover, this has occurred across the spectrum of organisations from multinational corporations implementing more sustainable business practices, suppliers procuring greener products, and startups specifically designed to tackle climate-related issues.
Unfortunately, the increased focus on environmental issues has also led to a rise in “greenwashing” – when companies exaggerate or falsely claim the environmental benefits of their products or practices. Greenwashing is a broad term that encompasses everything from unverified claims to outright lies. Yet, regardless of the level of deception, greenwashing has been shown to undermine genuine sustainability efforts and erode consumer trust. For companies looking to expand their environmentally friendly initiatives, avoiding greenwashing is essential for maintaining credibility and ensuring long-term success.
In this blog, we will explore why greenwashing is a risky endeavour and how to avoid it during scaling.
The Risks of Greenwashing
One of the most significant risks associated with greenwashing is the erosion of consumer trust. While this has often been touted at the macro level, it can quickly negatively impact individual companies, especially if it is a central part of their business. With consumers becoming increasingly savvy and sceptical of sustainability claims the risk of reputational damage is substantial.
Another risk factor concerns how regulatory bodies, particularly in Europe, are cracking down on misleading environmental claims. Companies found guilty of greenwashing can face fines, legal action, and mandatory changes to their marketing practices, which can be both costly and time-consuming.
Finally, investors and stakeholders are placing greater emphasis on genuine sustainability. Greenwashing can lead to a loss of investor confidence and potential divestment, affecting the financial stability and growth prospects of the business.
Avoiding Greenwashing When Scaling
To avoid greenwashing, companies must prioritise transparency and honesty in their communications. This involves clearly articulating sustainability goals, achievements, and areas for improvement. Vague terms like “eco-friendly” should be avoided unless backed by concrete evidence. Providing detailed information on how products or practices are sustainable is essential for building trust. Third-party certifications can also play a crucial role in verifying sustainability claims.
Another important strategy is to conduct thorough life cycle assessments of products to understand and communicate their environmental impact. This involves analysing the product’s journey from raw material extraction to disposal, highlighting areas where improvements can be made. Engaging stakeholders, including employees, customers, and investors, in the sustainability journey is also vital. Regularly updating them on progress and inviting feedback ensures transparency and accountability.
Educating and training employees about sustainability commitments and practices is equally important. Employees are the front line in communicating these values to customers and stakeholders. Therefore, ensuring they are well-informed and aligned with the company’s sustainability goals is crucial. Finally, companies should commit to continuous improvement by setting measurable goals, tracking progress, and being open about the challenges and setbacks encountered.
References
TerraChoice. (2010). The Sins of Greenwashing: Home and Family Edition. Retrieved from https://sinsofgreenwashing.com
Greenbiz. (2019). How to Avoid Greenwashing. Retrieved from https://www.greenbiz.com/article/how-avoid-greenwashing
Nielsen. (2015). The Sustainability Imperative: New Insights on Consumer Expectations. Retrieved from https://www.nielsen.com/us/en/insights/report/2015/the-sustainability-imperative/
Gatti, L., Seele, P., & Rademacher, L. (2019). Grey zone in – greenwash out. A review of greenwashing research and implications for the voluntary-mandatory transition of CSR. International Journal of Corporate Social Responsibility, 4(6). doi:10.1186/s40991-019-0044-9