Chapter 2: Understanding Greenwashing, Greenwishing, and Sustainability Challenges: GARP SCR Examination

 

In the last few years, a large section of consumers have become more sustainability conscious. They have been demanding more sustainable products and ready to pay a premium for those goods. Businesses have seized this as an opportunity to ride on the wave of demand for sustainable products and demand a premium pricing. This created a whole new market of "green" financial instruments and products .Some products were produced truly made in a sustainable manner and some were made to appear to be produced sustainably. When the customers realized that they have been falsely informed about a product being sustainable which was not so, there was a deluge of litigations that followed asking for compensation and penalizing the respective businesses. In many countries, Regulators took and taking notice of this and tightened the noose around false advertisements by the business about their products being sustainable. This false and deceptive form of advertising is called “Greenwashing”.     

Greenwashing is the process of conveying a false impression or misleading information about how a company’s products are environmentally sound. Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do.

If it is to be expressed in a simple formula,

Extent of Greenwashing = (How green is the company as portrayed by it)  - (How green a company actually is)

Greenwashing is deceitful and unethical because it misleads investors and consumers that are genuinely seeking environmentally friendly companies or products. Often, green products can be sold at a premium, making them more expensive, which can lead consumers to overpay. If Greenwashing is revealed, it can seriously damage a company’s reputation and brand. Greenwashing thus poses a reputation or legal risk to a company.

 According to Siano et al (2016), there are two main types of Greenwashing identified in the literature: decoupling and attention deflection.

• Decoupling is when organisations claim to fulfill stake-holders’ expectations for action on sustainability, without actually making any changes in what they do in practice. Decoupling includes firms joining voluntary sustainability initiatives established by NGOs to gain credibility by association, the promotion of empty green claims and policies when such commitments are unable to be implemented, and the “sin of fibbing,” which is making false claims and statements.

 

• Attention deflection is when organisations hide unsustainable practices from stakeholder attention, prepare selective and inaccurate disclosures, make incomplete comparisons with other products and services, and use vague and irrelevant statements. Attention deflection also includes the deployment of misleading texts and/or imagery. At the extreme, companies can also undertake falsifications to gain accreditation.

 

Although unintentional and intentional Greenwashing is increasingly well-defined and regulated, the related concept of “Greenwishing” is perhaps even more widespread and probably more challenging to address. Greenwishing are well-intended efforts to tackle sustainability challenges, which may not make enough of a difference or encourage superficial changes when more structural ones are required. This can make consumers and companies think they are doing their bit or making a significant difference to sustainability challenges, when they aren’t. Examples could include, for example, buying an electric vehicle when the grid electricity used to power the car comes from coal-fired power stations or buying soy milk for environmental reasons when the soya is sourced from suppliers causing deforestation in the Amazon.

 

Perhaps the only way to really address Greenwishing is to enhance consumer and company understanding of the scale of sustainability challenges, as well as their understanding of what actually makes a difference. But this creates potential risk, namely people and organizations feeling dis-empowered given the scale of sustainability challenges, and then becoming disengaged.

Other useful links from the same chapter:

The Importance of Ecosystem Services for Human Well-being

Nature-Based Solutions (NbS) for Climate Change

Sustainability Sub-Types, Climate Impacts, and Responses

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