Over the last few years, consumers have become increasingly more focused on various aspects of sustainability with respect to the products they consume. In a survey carried out in 2021 by McKinsey & Company, a global management consulting firm, on “consumer sentiment” shows that demand for environmentally friendly products and ethical practices in companies has grown significantly, resulting in increased attention to environmental concerns in the production and sales of products and services.
One key component of the focus by businesses on environmentally and socially conscious practices is “green marketing.” Green marketing refers to advertising and marketing efforts based on highlighting environmental benefits and sustainability with respect to a business’s products and services. Companies throughout the world have sought to use these initiatives to help drive sales in an increasingly demanding market.
There can be a fine line that separates green marketing from “greenwashing” . Companies wishing to demonstrate and highlight their environmentally friendly practices and sustainability efforts may end up advertising their business or products in a deceptive manner in instances where the focus is on rebranding or naming products or services rather than focusing on meaningful changes to their business practices and products.
The term “greenwash” is not a new term in the market. It first appeared in 1989, in an article in the New Scientist magazine, and as the term “greenwashing” became more prevalent shortly thereafter. ”Greenwashing” refers to attempts by companies or organizations to market themselves, their products and actions as environmentally friendly through false or misleading information.
The use of the term “greenwashing” has increased substantially in the current environment, whether due to the various conferences in which it is discussed, such as the Paris Agreement, the European Green Deal and even the UN Sustainable Development Goals (Global Goals) in which where the practice of “greenwashing” was discussed. The exponential growth of the “ESG” (Environmental, Social and Governance) wave around the world during the Covid-19 pandemic has made “greenwashing” an increasingly growing concern.
Although there are serious cases of “greenwashing”, the topic is still subject to a great deal of subjectivity. Greenwashing may range from exaggerating the environmental benefits of products or services to more egregious behavior such as deceptively or falsely advertising environmental initiatives and components of a company’s business. It could also be a result of a failure to properly manage relevant information in the increasingly digital world comprised of various platforms through which information is rapidly disseminated.
Many commentators have seen the current ESG wave as a construct of false advertising by the corporate world, since its growth has occurred very quickly and companies have focused marketing efforts on rapidly implemented policies and metrics to address the perceived consumer demand for environmentally friendly businesses and products.
However, it is important to remember that a focus on ESG should not limited to products that a company produces or sells or such company’s business practices. Rather, true ESG initiatives should be about a change in the mindset in business leaders and should be seen as a road to be followed by companies in which they focus on their long-term commitments rather than immediate financial benefits.
Increased transparency and accountability are the key solutions to limiting “greenwashing.” Providing visibility not only to sustainable goals, but to the entire action plan for implementing such goals is one way in which businesses can limit “greenwashing” concerns. Publicizing commitments and partial results can demonstrate a corporate sense of responsibility and concern on reporting real progress rather than just increasing profits.
Finally, the risk of greenwashing may be considerably reduced if ESG issues and sustainability in general are at the heart of the decision-making process when a company is discussing these issues at the highest level of governance.
Authored by Isabel Costa Carvalho and David Tyler.
