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What is Corporate Greenwashing and its Consequences?

Quality InsightsQuality Insights Volume 18April 18, 2024

Preventing greenwashing is crucial for businesses to maintain trust and credibility, so what is corporate greenwashing?

Corporate greenwashing is deliberate or indeliberate and the types vary in severity.

Effective environmental communications (effective communications and good environmental value)

Sustainability is part of a business strategy and core mission statement. Every organizational process and operation are considered, challenged and improved to reduce environmental and social impacts.

Efforts and successes are then accurately communicated using an evidence-based approach to back claims. These brands operate as sustainability leaders.

Misguided greenwash (poor communication, some environmental value)

Corporate greenwashing is unintentional, but comes from ineffective communication that undermines the efforts to improve an organization’s environmental performance. Most often, this includes numerous sweeping generalizations and common terms, such as “natural”, “eco” or “environmentally friendly”, without data to back these statements.

A revised communication strategy is needed to deliver data-driven, focused marketing.

Greenwash noise (poor communication, poor environmental value)

This occurs when organizations shout louder about their green credentials than their competitors.

These brands spend more time and money presenting themselves as green relative to the actual time and finances spent on making a change and becoming more sustainable.

A lot of work is needed to move these brands into the effective environmental communications area. However, this can happen by:

  • Addressing the brand’s environmental impact through the value chain
  • Developing and implementing an effective environmental strategy
  • Accurately communicating environmental efforts using a scientific, data-driven approach
  • Achieving third-party certification (such as from SGS)

Unsubstantiated greenwash (effective communication disguises poor environmental value)

Organizations are involved in positive environmental projects and can provide data to evidence these claims. However, the claims mask the organization’s damaging environmental impact.

Such organizations cause the most harm to the environment because their behavior could cause public disillusionment and disengagement from the environmental debate. This is because their impacts are still happening, masked by minor positive actions.

The rise of corporate greenwashing equals distrust

In 2020, the European Commission extensively examined cross-sector websites to identify greenwashing cases. 42% of cases had exaggerated, false or deceptive green claims. A 2022 Harris Poll survey for Google Cloud interviewed 1,419 C-suite and VP-level executives at global corporations. Almost 60% of interviewees said their company has engaged in corporate greenwashing, while this was 72% for North American-based companies.

Corporate greenwashing prevalence is creating distrust. An Advanced Trends Report in 2022 found that 43% of employees thought their company was greenwashing. Furthermore, a 2019 Edelman Trust Barometer Special Report indicated that just 34% of consumers trust the brands they buy.

What are the consequences of greenwashing?

Whether an organization’s environmental credentials are ineffectively communicated or blatantly embellished, the consequences are the same. Greenwashing can:

  • Cause reputational damage – consumers punish untrustworthy brands by ceasing their custom
  • Result in legislative and regulatory penalties, including hefty fines
  • Expose consumers, employees and the world in general to toxic, dangerous and/or environmentally harmful products or production methods
  • Pose an investment risk, with investors avoiding such companies

This is but an extract from our new greenwashing white paper.

About SGS

We are SGS – the world’s leading testing, inspection and certification company. We are recognized as the global benchmark for sustainability, quality and integrity. Our 99,600 employees operate a network of 2,600 offices and laboratories around the world.

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