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Greenwashing and Corporate Governance

I. Introduction
Greenwashing is the act of making false or misleading statements about the environmental
benefits of a product or practice. It is harmful and deceitful way of advertising that a
company is more sustainable than it actually is. Companies that make false claims should be
held accountable.
The term was actually coined back in 1986 in an essay by environmentalist and then student
Jay Westerveld. While visiting a hotel in Fiji, Westerveld noticed that it asked guests to reuse
towels for the planet’s sake—a request that would also conveniently save the hotel money.
Meanwhile, the hotel, located near sensitive island ecosystems, was in the middle of an
expansion.
In the decades since, a number of high-profile greenwashing examples have made front-page
news. In the 1980s, Chevron launched its infamous People Do campaign, touting its work
protecting wildlife, even while the company continued to spill oil in sensitive ecosystems and
drive climate change. And in the early 2000s, fossil fuel company BP coined the term “carbon
footprint” when it launched a calculator for individuals to assess their personal emissions,
avoiding the fact that its own emissions were among the highest on the planet.
But as environmentalism has gone mainstream—meaning more consumers are willing to pay
for sustainable products, and the financial sector has turned its attention to environmental risk
—greenwashing has gotten more sophisticated.

II. What are some examples of how greenwashing shows up?

Greenwashing can still look like an overt, and potentially even illegal, lie. But most
greenwashing is subtler and includes more insidious forms of manipulation, like these
common strategies:
1.Nature-based imagery—such as trees, leaves, or animals—on product packaging and in
advertisements can imply sustainability, even if the company or product either actively harms
the environment or takes no real steps to protect it. Just scan the aisle of bottled water brands
and you’ll notice a trend: packaging featuring scenic naturescapes and pristine rivers, lakes,
and springs. In reality, the companies that manufacture bottled water are some of the world’s
biggest contributors of plastic waste, and they often drain ecologically essential water
resources in the process of sourcing. For example, Plastic Bottle Companies- Like Evian,
Poland Spring and Deer Park, all have nature on their labels. Ironic considering plastic
bottles are designed to be for single use and contributes to massive Plastic waste crisis
around the world.
2.Environmental buzzwords that have no legal weight—like “natural” or “eco-friendly”—
and tell you little about a company’s specific sustainability practices are also everywhere.
This language is intentionally vague enough to remain subjective and unregulated while still
attempting to convince customers of a product’s benefits. You should be especially skeptical
of greenwashing tied to sectors known for their environmentally harmful practices—such as
logging and the various industries it feeds. For Example, IKEA – Illegal logging in
Ukraine.
Described as an org. that greenwashes timber industry.
Fast Fashion Brands – H&M and Zara – top companies caught greenwashing over the
years. Contribute to massive amounts of textile waste caused by the clothing industry.
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“Conscious” collection of H&M-Marketed as organic clothing (green and environment

friendly). However the information regarding their sustainability was not sufficient.
3.Products that lean on official-looking labels - Companies that produce plastic products
often try to assuage consumer guilt by prominently featuring the ubiquitous recycling symbol
or language like “please recycle” on the packaging. The logo may make someone feel like the
choice is greener even if that type or mix of plastic is difficult to recycle in practice. It also
puts no real onus on the manufacturer to actually reduce waste in its supply chain or to
recycle, for that matter.
4.Companies that tout their latest (and even legitimate) sustainability initiative but that
do so to draw attention away from the harmful activities making up the majority of their
business practices.
5.Ambitious climate pledges that sound great on paper but offer few specific or
quantifiable changes that actually reduce greenhouse gas emissions in the near term. You’ve
probably noticed that thousands of companies have publicly rolled out net-zero pledges,
including fossil fuel companies like ExxonMobile and BP that have no intention of stopping
further pollution-producing development.
For example, Nestle – 2018- Statement made that it had ambitions to be 100% recyclable or
reusable by 2025. However environmental groups and other critics pointed out that the
company hadn’t released clear targets to help facilitate recycling by consumers. In 2020,
Break Free From Plastic’s annual Report Nestle along with Coca-Cola and Pepsico were
named the world’s top plastic polluters for third time in a row.

III. Why do companies greenwash?

Because going green sells. In 2021, 85 percent of global consumers said they considered the
environment more when shopping than they did just five years prior, and at least a third said
they are willing to spend more money for green products. This is particularly true for a new
generation of socially conscious consumers. One recent study found that Gen Z considers
climate change the single-greatest issue we face. “Purpose and impact are more in the minds
of young people today,” says Andreas Rasche, greenwashing expert and professor at the
Copenhagen Business School. Young people are both less willing to work for companies they
perceive as misaligned with their values—and less willing to support them as consumers.
But, Racshe explains, it’s not just “the bad apples or the straightforward, rogue people trying
to deceive others.” In his work, he often sees well-intentioned sustainability practices not
living up to their promise because of mismanagement, poor internal communication, and a
lack of sustainability expertise on staff.

IV. Effects of greenwashing

Greenwashing has numerous effects on consumers, companies, green industries and the
planet itself.
For consumers, there is a growing body of evidence that shows consumer sentiment is
slanted toward being green and environmentally sustainable. Individuals want to do the
right thing and want to help mitigate the continued effects of climate change. When a
company, product or service is caught or discovered to be greenwashing, there is a general
sense of distrust that occurs. Consumers will no longer trust the brand or product in
question and might also begin to question other claims.
For companies engaged in greenwashing, consumers will choose other organizations
that are more ethical. Greenwashing can degrade customer satisfaction, erode brand loyalty
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and potentially affect repeat purchases. Consumers will put their money in products and
services that are not 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
is a lot of greenwashing, then consumers will simply not trust green claims from anyone --
including legitimately green industries -- as they will not 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 potential negative effect on the planet.
Greenwashing masks the inaction of not taking steps to reduce environmental impact. With
the effects of climate change continuing to imperil humanity, there is no time to waste in
taking steps to help improve sustainability so that humanity and Earth itself will continue to
survive.

V. Examples of greenwashing
There are 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.
1.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 will not
be washed daily to be greener, the idea is that less washing is better for the environment.
2.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
had fraudulently reported that its diesel engine vehicles were more fuel-efficient than they
really were. The diesel-fuel vehicles were marketed as being a more environmentally
sustainable type of vehicle when, in fact, that was not the truth.
3."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 plastic straws in 2019
with paper straws that the company described as being eco-friendly. It turned out that the
paper straws were not recyclable and were not necessarily better than the alternative.
4.Green targets. Organizations and governments can come up with targets for
sustainability that are publicly declared to make it appear as though they are doing the right
thing for the environment. Targets on their own are nice goals to strive for, but they are little
more than wishful thinking if they aren't achieved.
In an era where increasing numbers of consumers as well as governments are interested in
taking environmentally responsible actions, there has been a growing emphasis on
environmental, social and governance (ESG) initiatives in companies. The need to
demonstrate ESG efforts has led to many organizations making environmental claims that
have turned out to be greenwashing.
Greenwashing isn't always an overtly false claim; it can be a claim that isn't entirely accurate
or is in some way deceptive or misleading. For example, the European Commission found in
a 2020 study of 150 corporate environmental claims that 53% gave vague, misleading or
unfounded information and 40% had no supporting evidence -- data it cited in proposing a
new law on green claims by companies in March 2023. A survey of company executives in
16 countries, conducted by The Harris Poll for Google Cloud and released in April 2022,
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found a similar level of greenwashing: Fifty-eight percent of the 1,491 respondents said their
organization had engaged in the practice.

VI. How greenwashing harms a brand’s reputation

Greenwashing has changed over the past 20 years, but it’s certainly still around. It’s easy to
see why marketers are enthusiastic: According to Statista, 64 percent of Gen Z’ers and 59
percent of millennials are willing to spend more on a product if it comes from a sustainable
brand. But greenwashing can also have serious consequences, including the following:
Loss of consumer trust: Lost consumer trust is hard to rebuild. Even a simple mistake could
require years of effort to undo. Estimates from Statista suggest that when consumers lose
trust in a brand, up to 40 percent stop buying from that company and begin shopping with
competitors. Therefore, being honest and accurate about your sustainability efforts is vital to
your bottom line.
Lawsuits: Brands that are caught misrepresenting their sustainability efforts could be subject
to a specific type of false advertising lawsuit known as “greenwashing litigation.” It’s not
only outright lies that can make a company a target for these types of lawsuits; inflated claims
about sustainability efforts could also put a business at risk. The costs of these lawsuits alone
are enough reason to make sure you’re being precise when describing your company’s
sustainable practices and corporate social responsibility.
Lost partnership opportunities: Valued partnerships that improve your business’s
sustainability may be harder to come by after you’ve been called out for greenwashing.
Recovering from such an episode is already difficult and requires partnerships with advocacy
organizations, nongovernmental organizations and other groups that can help you
demonstrate a real commitment to sustainability and righting past wrongs. But if you’ve had
a public greenwashing scandal, you may find it difficult to earn the trust of those same
institutions you need to work with to repair your brand reputation.
These consequences can be so steep that it’s never worth it to engage in greenwashing.

VII. What can be done to address greenwashing?

The best short-term means of tackling greenwashing is to build awareness. You’re doing that
by just reading this piece. Plus, we’ve got an action-oriented guide to help you cut through
most murky greenwashing waters. Consumer activism and consumer advocacy groups have
also helped lead the way via third-party certifications, as have environmental advocacy
groups demanding corporate accountability. But for long-term strategies, the government has
to take steps to reduce the burden on consumers.

VIII. 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.
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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.
Fluffy language: Don’t throw around words or terms with no clear meaning (e.g., “eco-
friendly” or “natural”).
Green products versus dirty company: Watch out for hypocrisies, such as efficient light
bulbs made in a factory that pollutes rivers.
Evocative pictures: Don’t use branding images that give an unjustified green impression
(e.g., flowers blooming from exhaust pipes).
False designations: Look out for obvious attempts to “green” a dangerous product to make it
seem safe. (Eco-friendly cigarettes, anyone?)
Imaginary friends: Don’t use a label that looks like a third-party endorsement but is actually
made up.
Outright lies: Never use totally fabricated claims or data.

IX. Case Studies:

Volkswagen - Admitted to cheating emissions tests by fitting various vehicles with a defect
device, with software that could detect when it was undergoing an emissions test and altering
the performance to reduce the emissions level. While the company said that their vehicle had
low emission and eco friendly features of its vehicles in marketing companies. In reality they
were emitting up to 40 times the allowed limit for nitrogen oxide pollutants.

Exxon Mobil – Long history of damaging environment in 1989 they spilled 11 million
gallons of crude oil in what is known as the worst oil spill in the US history until the
Deepwater Horizon Oil Spill in 2010. Exxon spill killed hundreds of seabirds, otters, seals
and whales.

Coca-Cola – Environmental Org. Earth Island Institute filed a lawsuit against the beverage
giant for falsely advertising that it is sustainable and eco-friendly despite being the largest
plastic polluter in the world.
Starbucks – 2018 – Released “straw-less lid” as part of its Sustainability drive, however thus
lid contained more plastic than the old lid and straw combinations.
Lithium Ion battery- Australia-largest producer.
Cause great harm and degradation to our environment and communities where materials used
to make them are mined and where these batteries are disposed off at the end of their useful
life. (Pollute groundwater, danger/life hazard to the miners, safety issues, regulatory issues)
Unethical manufacturers rely on greenwashing - A battery that is 100% sustainable doesn’t
exist but we can select a far more sustainable battery from an ethical manufacturer – one that
actively addresses climate change, reduces carbon emissions and other pollution and
harnesses thoughtful engineering, recycled material and renewable energy to build a high
performance, longer lasting product.