What is Greenwashing and How to Avoid It

Greenwashing has emerged as a key risk for every business, and it is critical corporate affairs and communications teams as well as the C-Suite and boards understand what it is and how to mitigate the risk of being caught out.

Greenwashing has emerged as a key risk for every business, and it is critical corporate affairs and communications teams as well as the C-Suite and boards understand what it is and how to mitigate the risk of being caught out.  

The risks posed to organisations found to be greenwashing are massive and growing, ranging from reputational capital loss with key stakeholders through to measures proposed by the ACCC including, legal proceedings, administrative resolution and infringement notices.  

In simple terms, Greenwashing is a form of marketing, publicity or advertising in which an organisation’s products, aims and policies are portrayed as falsely or misleadingly environmentally friendly.

Companies that intentionally take up greenwashing communication strategies often do so to distance themselves from their own environmental lapses or those of their suppliers.  

Greenwashing can also be defined as a practice in which businesses claim to be more eco-friendly or sustainable than they actually are.  

At times, businesses may engage in greenwashing unintentionally due to an inadequate understanding of their own supply chains, a lack of thorough investigation before making environmental claims, or substandard reporting methods.

However, there are also instances where companies deliberately exaggerate or fabricate environmental merits. This is often done to take advantage of growing consumer demand for sustainable goods and services, without the company making any meaningful commitment to sustainable practices.

What is the reality of greenwashing in Australia?

The Australian Competition and Consumer Commission (ACCC) defines greenwashing to be where a 'significant proportion of environmental and sustainability claims made by businesses may be false, misleading, or have no reasonable bias'.

In March 2023, The ACCC released the 'Greenwashing by businesses in Australia' report, exploring their findings of an internet 'sweep' conducted in October 2022, with the goal to focus on consumer perspectives and interpretations of environmental and sustainability claims made by industries that frequently use them. They identified areas where consumers could potentially be misled and where additional guidance for businesses and consumers is required.

The ACCC 'sweep' discovered that 57% of the businesses held concerning claims, with the most significant proportion being in the cosmetic and personal care, textiles, garments and shoes, and food and beverages sectors. The most common issue discovered was the use of vague and unqualified claims.

How do you identify and avoid potential greenwashing?

The ACCC identifies environmental and sustainability claims in three forms:

  1. Product specific claims
  2. Company-wide claims
  3. Claims using logos and symbols (including certification trademarks)

According to the ACCC draft guidelines released in July 2023, there are seven key issues most commonly found among industries that could lead to misleading claims These are:

1. Vague and unsupported claims

'Responsible, 'green', and 'eco-friendly' are a few examples of common phrases found used to describe consumer products. The lack of information surrounding the use of green terms results in unqualified claims and potential misinterpretation of what they mean.

Any technical terms involving consumer responsibility, such as 'biodegradable' or 'recyclable', will assume specific actions must be taken. However, without an explanation of the implicit details, it can lead consumers to act unsustainably.

Additionally, varying terms around emissions, such as 'offsets' and 'carbon neutrality' was common and differentiating them can be difficult. Industries also failed to explain how they assessed their offset emissions, what initiatives they had and what actions they were taking to reduce their carbon footprint.

2. Lack of evidence

Even with an explanation of how that claim came to qualify, sufficient evidence is needed to verify that claim.

The ACCC explain how businesses that did provide sufficient evidence used easy click-through links near the relevant claim, which redirected to clear, qualified and easy-to-understand evidence.

3. Absolute claims

Consider the strong impression that absolute claims make on a consumer. There is concern that some of the businesses' claims are false due to bold and absolute claims, from sourcing to disposal of a product. In this instance, evidence is paramount for claims to be credible.

For example, strong claims were made, such as products being from '100% recycled materials'. The ACCC state that these claims will be investigated further.

4. Comparing products

The ACCC identifies three common instances of useless comparison claims.

  1. Using comparison terms such as 'less' or 'fewer' need to be followed by what they are specifically less or fewer than.
  2. Many products focused on waste minimisation but had no statistical evidence to support their claim.

In most instances, the environmental impact of certain materials over other materials had no supporting evidence of their claim and what the environmental impacts were.

5. Exaggeration

Many concerns have been raised about the possibility for overrepresentation of the benefits to omit the relevant negative attributes, hence manipulating consumer choice. Some identified common examples include:

  1. Sourcing - 'A business promoting its investments in renewable energy projects, but still sourcing most of its products from fossil-fuel based industries.'
  2. Offsetting – 'A business claiming that offsetting its carbon emissions has a 'positive' impact on the environment. However, the business has not taken steps to reduce its overall emissions.'
  3. Lifecycle – 'products generating zero emissions'.

6. Not explaining how aspirational claims will be achieved

The most common sustainability and environmental goals aspirational claims included:

  • Reducing packaging quantities
  • Renewable energy sources
  • Reducing landfill waste
  • Improving tracking of the supply chain
  • Net Zero targets

The ACCC recommend having extensive plans on how to achieve these goals with evidence of monitored progress. Ensure targets are marked, specifying practical changes and updating new progress; unclear and outdated general progress monitoring was common.

7. Use of third-party certifications

Without explaining how Certification Trademarks (CTMs) relate to a product or business, they have the potential to mislead consumers. CTMs should be used in specific applications to what it is related to rather than as a stamp of certification that could be misinterpreted for the whole business and its products, which is not always true.

The number of CTMs is increasing, and it can become complicated to understand what each one stands for and how credible it is. For example, the ACCC’s sweep picked up on at least seven different carbon neutral certification or offsetting schemes, amongst others.

The growing number of CTMs also raises concerns about them eventually losing meaning and their ability to assist consumers to differentiate between items and inform their purchasing decisions.

8. Perceived trust marks

The ACCC determined that the powerful use of logos and symbols has become challenging because they can contribute to the perception of being affiliated with a certification scheme when they are not. Again, consumer perception can be misled by believing it is associated with a legitimate CTM.

What action is the ACCC taking?

The ACCC stated it would take economy-wide, sector-specific, and business-specific measures to address the identified high-level concerns. This could include further analysis, compliance, enforcement and education activities, and developing guidance material and targeted assessments.

It may even involve further serious measures such as legal proceedings, administrative resolution and issuing an infringement notice.

What action can individuals and businesses take?

The ACCC encourages consumers and businesses to report any potentially misleading environmental and sustainability claims. You can make them through their website or Infocentre on 1300 302 502. Information provided also helps their compliance and education activities, industry engagement, advocacy and research.

To understand and discover more greenwashing examples, read the ACCC document here.

Greenwashing has emerged as a key risk for every business, and it is critical corporate affairs and communications teams as well as the C-Suite and boards understand what it is and how to mitigate the risk of being caught out.

The first step for every organisation is to understand the regulatory environment before making any environmental claim, and ensuring communication and sustainability strategies go hand in hand to mitigate the risk of being caught up in allegations of greenwashing.

For further assistance understanding the regulatory environment, Wilkinson Butler has a team of sustainability and communications consultants specialising in risk and opportunity advisory.

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