How to Avoid the Pitfalls of Greenwashing

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Wednesday, October 11, 2023
By Jasper Steinhausen
Illustration by iStock/Firn
Consumers want businesses to take the lead on environmental issues. But sustainability efforts can backfire if companies don’t communicate honestly.
  • The term “greenwashing” describes instances when companies overstate their sustainability efforts, make false claims in advertising, or focus on one or two standalone initiatives.
  • Companies that engage in greenwashing can lose customer trust, draw unwelcome attention from regulatory bodies, get fined, and do actual harm to the environment.
  • To communicate authentically about sustainability initiatives, organizations should be specific about their efforts, back their claims with data, and be transparent about successes and failures.

In an era dominated by a growing call for industry to demonstrate environmental responsibility, businesses worldwide are striving to position themselves at the forefront of sustainability. They are driven in part by a genuine concern for the environment, in part by a desire to improve their operations, and in part by a need to satisfy well-informed customers who are demanding that companies help safeguard the planet.

However, some companies exaggerate the effects of their sustainability initiatives or falsely claim to be environmentally friendly. They overstate claims about the benefits of their products, services, or practices in order to appeal to consumers who care about sustainability issues.

In 1986, environmentalist Jay Westerveld coined the term “greenwashing” to describe this deceptive marketing practice. Greenwashing essentially is a public relations tactic that puts a sustainability spin on services and products that have minimal or no positive impact on the environment.

Business leaders need to understand the dangers of greenwashing, take steps to avoid it, and learn to communicate their sustainability efforts to stakeholders in smart and effective ways. Similarly, business schools must teach students how to lead sustainability initiatives that are both impactful and genuine.

A List of Bad Behaviors

Today, the term greenwashing refers to more than simple PR tactics such as deceptive advertising, misleading labels, and packaging that has been designed to look eco-friendly. It has expanded to include a whole range of corporate behaviors. In fact, earlier this year the nonprofit financial think tank Planet Tracker published a report that divided greenwashing into multiple categories. Companies are guilty of greenwashing if they engage in any of the following tactics:

  • Stall their own efforts to change while enrolling in organizations and initiatives that have appealing names and visions but little impact.
  • Have little more than “lighthouse initiatives.” These are very visual and easy-to-communicate efforts that make companies appear to be very serious about environmental issues. But too often a company will choose only one such project and do nothing else toward sustainability.
  • Shift the blame for environmental consequences onto customers, while also making customers responsible for sustainability efforts. Two good examples: manufacturers encouraging consumers to recycle plastics, and fossil fuel companies pushing customers to save energy.
  • Often change focus and set new ambitious targets, while allowing old initiatives to diminish. For instance, many companies have moved from setting climate change policies to making an effort to reduce plastic use to emphasizing biodiversity.
  • Underreport what (little) they do to avoid drawing attention from consumers and regulators.

At its core, greenwashing preys on the goodwill of consumers, misguiding them to believe they are making environmentally responsible choices. In my experience, the risk of greenwashing is greater at companies where sustainability efforts are anchored in the marketing department instead of the leadership team, where such efforts belong.

The Pitfalls of Greenwashing

Greenwashing doesn’t just mislead consumers. It poses a risk for the company—and for society.

First, greenwashing harms the business because it damages the company’s reputation. When consumers discover that they have been given incorrect information, they lose trust in the company, which can have long-lasting effects on customer loyalty, sales, and brand image.

At its core, greenwashing preys on the goodwill of consumers, misguiding them to believe they are making environmentally responsible choices.

Second, regulatory bodies worldwide are taking a closer look at false advertising claims, especially those related to environmental promises. Many countries now have laws regulating environmentally focused advertising. Companies that are found guilty of greenwashing face legal consequences, including serious fines.

Last but not least, when companies exaggerate the good that they’re doing, they are not taking serious action on sustainability issues. We have so many environmental challenges for which we must create new and better solutions that we don’t have time for companies to idle along and do very little.

If you are a company leader, the best way you can avoid greenwashing is to be authentic about your environmental efforts in all your communications—whether you’re posting on social media, writing blogs, publishing reports and articles, appearing on podcasts, giving presentations, or creating marketing and sales materials.

In my new book, Making Sustainability Profitable, I give a three-step recipe for how you can successfully communicate about sustainability. First, articulate a mission bigger than yourself to create the context for your story. Second, create a roadmap for how your company will progress toward achieving the mission. The roadmap not only will give you a place to start, but also will show stakeholders that you are not a newcomer to the game and that you are not simply launching a standalone project. Third, show specific results.

I call this three-part model the Impact Magnifier. As these elements interact with and support each other, they create credibility for your company and your mission. They give your communication a clear and compelling edge and minimize your risk of being accused of greenwashing.

The Wrong Way and the Right Way

Real-world examples make it even clearer what companies have to lose by mishandling a sustainability initiative—and what they have to gain when they do it right. In recent years, three prominent corporations were called out for greenwashing:

  • Starbucks. In selected locations in 2019, Starbucks introduced a strawless lid on cold drinks as part of its ongoing commitment to reduce its environmental impact; a year later, the lids were offered in broader markets. The only problem was that the new lid used more plastic than the old lid and its straw combined. Since these lids are rarely recycled, the result was that more plastic ended up going to landfills and being incinerated. This is an example of how an initiative can seem smart when it really isn’t.
  • Ryanair. In 2020, Ryanair started to advertise that it was the airline with the lowest emissions in Europe because it had the youngest fleet, the highest load factors, and the most fuel-efficient engines. It turned out the company could not back this assertion with data. The claim was just wishful thinking—or false.
  • BP. In 2019, BP altered its name to Beyond Petroleum and installed solar panels on its gas stations. The company started to focus on this low-carbon energy source in its advertising, but it was accused of greenwashing because 96 percent of its annual spend was still on oil and gas. This example shows how a lighthouse project can backfire when the rest of the company is operating in a business-as-usual mode.
If you’re a business leader, failing to communicate about your environmental initiatives is like sowing without reaping—like manufacturing products without bothering to sell them.

By contrast, many companies are doing an excellent job of marketing their green initiatives. One good example is the “Enrich, Not Exploit” campaign used by The Body Shop. It describes the company’s targets, the problems it has chosen to address, the methods it has used to solve those problems, and the status of its initiatives. With this marketing strategy, The Body Shop creates a context for its story by positioning its efforts as part of a larger mission.

Another example is Patagonia’s “Buy Less, Demand More” campaign. Released on Earth Day 2023, the campaign encourages consumers to buy fewer, better, and more environmentally friendly products. While the marketing effort does not promote specific solutions or products, it shows some of the actual steps Patagonia has taken toward long-term goals. No mission is explicitly stated, but for consumers who know the brand, the mission shines through.

Reap the Fruits of Your Efforts

Despite the importance of communicating honestly about sustainability efforts, many top executives hesitate to do it. Some want to wait until they have already accomplished a great deal—or even, ideally, achieved their goals. Others actively avoid discussing sustainability initiatives because they are afraid people will accuse them of greenwashing or will point out the areas where they are still lacking.

But if you’re a business leader, failing to communicate about your environmental initiatives is like sowing without reaping—like manufacturing products without bothering to sell them. If your company is doing all the right things, but no one knows about your efforts, you will never get credit. Not only that, you might be accused of not doing enough to adopt sustainable practices.

There’s another benefit to publicly sharing your environmental efforts. The more you are known for these actions, the more feedback you will get from the market. The more feedback you receive, the more you can refine your efforts so you will make an even bigger impact.

Listen, nobody is perfect, and nobody expects you to be. What the market does expect is that you will up your game and contribute in some way to making the world a better place. To do that, you will need to demonstrate progress on your goals, be transparent, and share your story. This means that, as soon as you have an interesting and appealing mission that is bigger than yourself, and as soon as you have some results to show, you can invite your customers to join you on your journey.

Once you have committed to sharing your story, you will need to determine how to tell it. While this depends on context, you are more likely to be successful if you follow these four steps:

  • Be specific. Too often, companies use generic descriptions for what they do. No doubt you’ve seen these phrases in the marketplace: the sustainable choice, our climate-friendly product, our green formula, our sustainable company. But such broad and loosely defined terms can be challenging to live up to. They leave much room for interpretation, so odds are that stakeholders will expect more than you have to offer. In a growing number of European countries, it is even illegal to make such claims, because they are considered misleading.
  • Say what you do and do what you say. Talk about your results and the specific scope of your sustainability pursuits. Be ready and able to back your claims with evidence and data. That significantly reduces the risk that you will be accused of greenwashing.
  • Be transparent by sharing both successes and failures. And there will be both, because sustainability in business is an innovation game, and not every innovation effort turns out the way you anticipate. When you are honest about the times you didn’t meet your goals, you show stakeholders that you are genuinely committed to improvement.
  • Shift your focus from advertising to educating. When you share information about the ways your company is helping to solve the larger environmental challenges, your communications become far more interesting—because they’re about something bigger than yourself. This type of messaging also gives you opportunities to produce almost endless amounts of valuable information.

Key Takeaways

Sustainability shouldn’t be a marketing ploy; it should be a core business value. In a world where environmental concerns are paramount, businesses have both a moral and a commercial impetus to champion genuinely sustainable practices.

Business schools can help companies achieve that goal by integrating sustainability into every appropriate course in their curricula, rather than offering standalone lectures on the topic. In these courses, instructors should teach students how to communicate about sustainability and how sustainability and business connect on a level beyond branding. Professors also should make it clear that there is no place for a business-as-usual attitude. They should help students understand that business can be a force for good—but only when companies commit to making a difference.

Greenwashing may offer short-term gains, but when companies take this dangerous path, they risk alienating informed customers and jeopardizing brand trust. When business leaders prioritize authenticity, transparency, and continuous engagement, they can more effectively navigate the complex but rewarding landscape of sustainability. Business educators can help corporate leaders achieve sustainability goals by training them to articulate their missions, frame their messaging, and bring stakeholders along with them on their journeys.

Jasper Steinhausen
Author, business coach, founder and CEO of Business With Impact
The views expressed by contributors to AACSB Insights do not represent an official position of AACSB, unless clearly stated.
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