Explained | What is Greenwashing and how is it related to Climate Change?

Greenwashing is using advertising and public messaging to seem more climate and environment-friendly than one really is. According to the Cambridge Dictionary, greenwashing is making “people believe that your company is doing more to protect the environment than it really is.” The Oxford Dictionary, defines greenwashing as “activities by a company or an organization that are intended to make people think that it is concerned about the environment, even if its real business actually harms the environment.”

Origin of the term ‘Greenwashing’

The term ‘greenwashing’ was coined by the environmentalist Jay Westerveld in a 1986 essay while writing about an earlier trip to Fiji. During the trip, he had visited a resort where he came across the resort people asking customers to reuse their towels claiming that this would help protect the environment. Westerveld noted that this was actually a cost-saving measure disguised in the name of environmental protection as he knew that the resort was expanding rapidly at that time with little environmental concern which led him to write about it coining the term ‘greenwashing’. 

How to spot greenwashing?

Greenwashing is about duping the consumers into believing that he or she is helping the planet stay green by choosing a particular product. Businesses across the world are being increasingly held accountable for their involvement in greenwashing. But consumers still need to look out on their own and try to spot the greenwashing in everyday products being sold or advertised around them. Some of the ways to spot greenwashing are: 

Misleading Imagery of ‘Nature’ 

Various images connected with ‘nature’ are often used by companies to hint or misleadingly claim that the company or product is close to nature or ‘environment friendly’. It’s important to try to establish a clear and justifiable link between the image used and the company or product in question. Unless that link could be established, the imagery should not be connected with the company or the product by the consumer. 

See through the ‘Green’ buzzwords

Companies often use ‘green’ buzzwords like ‘sustainable’, ‘eco’ and ‘green’ to make their business seem environment friendly or climate conscious. Consumers should know that these words rarely pertain to any scientific standards. 

False claims or vague language

Companies often make false claims about their products using vague language like a product being described as ‘natural’, ‘organic’ or ‘eco-friendly’, when only some of the ingredients can be described as this. According to reports, this is the area most complaints are registered about and many advertisements get banned. Consumers should check the product’s website to check whether they have any certifications from any regulatory body regarding such claims. 

Hiding information

Companies often hide information regarding their products and ignore the fact that the consumers deserve the whole truth. A company that has declared itself environment friendly but hides the information about its supply-chain emissions from a coal-powered overseas factory. Similarly, a fashion brand might promote its clothes as ‘sustainable’ but in reality, only a particular line or product might actually be made from ‘sustainable’ fabrics while the rest may be damaging to the environment. 

Carbon Offsetting

Carbon offsetting is the practice of paying another entity to absorb carbon in order to compensate for one’s own carbon emissions. So, when a company claims that it is carbon neutral, it is important to see through the practicality of the claim as for example, a big manufacturer of plastic ware cannot actually be carbon neutral at the same time unless, through carbon offsetting, the big manufacturer is paying another entity to absorb carbon in order to compensate for its own carbon emissions. 

Faux Certificates

Companies often use fake certificates to claim that their product meets the necessary standards to be termed as ‘environment friendly’ or ‘green’. Consumers can trust certifications like ISO but trusting some labels like ‘100% natural’ or ‘100% green’ is not a smart thing to do. FSC and Eco-Label are some examples of leading environmental certifications that can be trusted. 

Greenwashing and Climate Change

At this juncture, when the world seems to be a race against time to curb rising greenhouse gas emissions so that global temperatures can be contained within a 1.5-degree celsius rise, carbon emissions by big industries have become one of the foremost concerns in terms of global warming and climate change. The Paris Agreement has led to most of the countries of the world pledging to curb greenhouse gas emissions and target ‘net-zero emission’. Major private corporations are also falling in line and issuing climate pledges. However, instead of truly making their businesses environment-friendly and tackling climate change, many top corporations are indulging in ‘greenwashing’ to improve their public image. 

Recently, the UN secretary-general António Guterres set up a High-Level Expert Group (HLEG) on the net-zero emissions commitments of non-state entities like such as businesses, investors, cities and regions to ensure accountability and credibility of net-zero pledges. The UN secretary-general said, “We cannot afford slow movers, fake movers, or any form of greenwashing.” The HLEG was set up in the backdrop of net-zero commitments by private sectors, in the absence of standard criteria for assessment and accountability.

According to a recent study, as reported by The Guardian, climate claims of leading oil companies in the world are nothing but greenwashing. The study that has been regarded as the most comprehensive scientific analysis to date in this field, found that words are not matched by actions in terms of the oil majors. The research examined the records of ExxonMobil, Chevron, Shell and BP. After analyzing data for over 12 years up to 2020, the researchers concluded that the claims made by these fossil fuel companies do not align with their actions. 

ESG and Greenwashing 

ESG stands for environmental, social and governance and the term was first used in a 2004 report titled ‘Who Cares Wins’, a joint initiative of financial institutions at the invitation of the United Nations. Since then the ESG movement has grown from a CSR initiative launched by the United Nations into a global phenomenon. The ESG is a framework designed to be integrated into an organization’s strategy and an organization’s ESG score is a numerical measure of its performance on a wide range of environmental, social and governance (ESG) topics.

It is a strategy that helps one to invest in companies that score highly on independent measures of their environmental, social and governance practices and has become quite popular for investment portfolios spanning the generations.

But, greenwashing has become a big problem for ESG as studies have shown that more and more ESG funds are including companies that are far from being sincere in their social and environmental responsibility.

According to an Economist study, ‘the world’s 20 biggest ESG funds have investments in fossil-fuel producers, while others held stakes in oil producers, coal-mining, gambling, alcohol and tobacco.’

Greenwashing and India

At present, India has no specific laws to rein in greenwashing. According to the Advertising Standards Council of India (ASCI) advertisements are required to be ‘legal, decent, honest and truthful’, which is nothing but just a code for self-regulation and is far from being effective in terms of reining in greenwashing. 

However, recently the markets regulator Securities and Exchange Board of India (SEBI), in a recently released consultation paper, proposed tighter Environmental, Social and Governance (ESG) rules to minimize the risk of greenwashing. “Increasing reliance on such unregulated ESG rating providers in securities markets raises concerns about the potential risks it poses to investor protection, the transparency and efficiency of markets, risk pricing, and capital allocation, among others,” the Sebi paper said. 

‘The proposed disclosure norms for mutual fund schemes with the ESG theme will provide transparency to enable investors to take a more informed decision,’ industry experts said. 

Also, a new SEBI regulation introduced in May 2021 now requires the top 1000 companies by market cap size to include a mandatory Business Responsibility and Sustainability Report (BRSR) in their annual reports from FY 2022-23. It includes the disclosure and communication of ESG goals of a company as well as a company’s progress towards them. Experts feel that this could discourage the growing trend of greenwashing.

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