Counteracting greenwashing practices to embrace the profitability of sustainability
Greenwashing refers to the business practice of misrepresenting or exaggerating goods and services as environmentally conscious. By implementing sustainable products and services, businesses can embrace profitability and meet consumer desires for eco-conscious choices.
Challenge:
Some organizations exaggerate claims to appear as eco-conscious
Opportunity:
Coaches can help business leaders explore the value of green business practices
Impact:
Businesses with a clear, eco-aware plan can thrive financially and create a sustainable future
Wisdom Weavers:
Understanding greenwashing and its impact
Given the strong consumer desire for sustainable product and service options, businesses are making great efforts to market their goods and services as environmentally conscious. However, not all businesses are presenting the whole (or truthful) picture regarding the sustainability of their goods, services, and business practices. When businesses try to cover up or misrepresent their environmental contributions, this practice is known as “greenwashing.”
Greenwashing refers to the practice of deceiving consumers into believing businesses are environmentally conscious when their practices and products do not fit the criteria for sustainability. Studies conducted in Europe found that 42% of eco-business claims were exaggerated, deceptive, or false. Instead of investing in sustainable practices, these organizations spend time and money marketing the perception of green practices to draw the business of conscious consumers.
“The common definition of greenwashing that I keep hearing is the use of misleading information to convey an environmental image. But there are different gradients to this. Is a company really green if they offer one eco product and the rest of its product portfolio is completely wasteful and polluting?”
Wisdom Weaver Nadine Gudz explains that the term greenwashing has been around since the early 1980s. Greenwashing appears now in various iterations, such as climate washing and net zero claims that cannot be substantiated. To address greenwashing, Nadine explains, “global councils are being formed to scrutinize companies’ commitments to net zero. There’s this trend where a lot of companies are jumping on the net zero bandwagon, but there’s no substance behind it.”
Seeking accountability and standardized assessments to counteract greenwashing
One recent example underlining the need for assessment accountability to counteract greenwashing involves organizations marketing carbon neutrality. In a recent discovery, 90% of rainforest carbon offsets by some of the largest global entities are “phantom credits” that may worsen global warming. Whereas these organizations — who use the world’s leading greenhouse gas crediting program, Vera — are marketing their carbon offsets to claim net zero, most of these net zero claims are false.
Wisdom Weaver Marilyn Friedmann fears that sustainability in the business sector “has become a game.” She explains, “people submit their results, and they’re graded in terms of sustainability, but you can actually game these systems. So now there’s a rationalization in terms of whether these rating agencies actually measure the right things because if they don’t, they’re creating a really destructive system.”
Looking toward solutions to counteract greenwashing, Wisdom Weaver Giovanna Enea believes the way forward is to streamline sustainability assessments so that reporting is transparent. Giovanna sees collaboration among governments, NGOs, and businesses as key to ensuring sustainability standards are not underfunded or unattainable. When it comes to addressing greenwashing and the greater goal for companies to reach net zero, Giovanna explains: “Zero is great, but it should not be our ambition to simply do zero harm. We should be trying for a positive impact. But where the market is right now, it’s much easier for businesses to focus on zero, zero, zero.”
In 2017, Japan’s Government Pension Investment Fund selected 3 ESG indexes, including FTSE Blossom Japan, part of the well-known FTSE4Good Index Series, to allocate a portion of their buffer fund investments for the first time. Wisdom Weaver Arisa Kishigami explains this “was quite a symbolic activity, not just for Japan and the region, but globally as well, that the largest asset owner globally was saying they would consider environmental, social, and governance aspects more visibly within their asset allocation.” The downside, Arisa explains, is “that everyone was expected to become an ESG expert overnight,” which can lead to “ESG, SDG and Green washing.” Arisa sees the connection between ESG accountability and greenwashing: “Whilst it is encouraging that considering ESG issues within business and investment practices is becoming the norm, there is a risk that this just leads to greenwashing unless there is a proper thought process behind the actions.”
The profitability of true sustainability
Many business leaders may worry that adopting green business standards will harm their bottom line. Investing time and energy into revamping production processes and overhauling product blueprints to offer more sustainable options can seem like a risky undertaking. Businesses might be tempted to implement greenwashing principles to protect their profitability while enticing consumers who care about sustainability through false or exaggerated claims of ecological stewardship. However, greenwashing impacts how consumers experience a company’s products or services. Studies show that customers harshly judge businesses they perceive to be greenwashing.
Emerging evidence shows that implementing green business practices has a lasting, positive impact on businesses of all kinds. Known as the triple bottom line, businesses that focus on social and environmental issues and profits see lasting benefits to the sustainability of their products and services. According to a recent report by Greenprint, nearly two-thirds of Americans are willing to pay more for sustainable products. Their study also found that 73% of Americans base their purchasing decisions on a product’s environmental friendliness. In the long term, sustainable business practices lead to greater revenue and business longevity.
Findings from Northwestern University’s School of Management indicate “companies that improve their environmental performance need not surrender competitive advantage.” Özge Islegen, Professor of Managerial Economics at the Kellogg School, explains, “we find that there actually are strategic reasons to build sustainable operations. It might even give you an edge.” Crafting a sustainable business model focuses on both sustainability of the planet and sustainability of the business long-term.
According to Business.com, four key elements that make a business model work are commercial profitability, future success, long-term access to resources, and a “give back” ethos. This last component is what sets a sustainable business model apart from a standard business model that focuses solely on profits. By abandoning a “linear take-make-waste” model and investing in a “cyclical borrow-use-return” model, companies can embrace consumer desire for responsible consumption.
Investing in sustainability can seem like a risky undertaking, given the time, energy, and resources often needed to make these changes. However, investing in the environment yields business profits and ensures mutual sustainability of the planet and the businesses investing in its care.
Coaches can help businesses avoid the pitfall of greenwashing by:
- Helping business leaders to clarify values and explore their motivation for pursuing sustainability standards
- Facilitating a process to explore the cost and impact of sustainable practices at every stage from procurement to production, marketing and sales
- Asking business leaders to imagine what successful implementation of sustainable practices looks like for their organization
Coaching Empowers People
A coaching approach can help businesses explore their own path toward sustainability. By creating a safe space for business leaders to reimagine how environmentally conscious products and services can transform their organizations, coaches can help spark meaningful discussions. Key elements of this process include supporting a values clarification process that facilitates buy-in to sustainability goals, helping senior leaders to understand how sustainability practices will affect the business across all functions and value chains, supporting a process for continued dialogue between managers and teams at every level, and helping to shift employee reward and recognition systems to celebrate the achievement of sustainability standards. Businesses may wish to hire a sustainability coach to proactively address the negative incentives that can lead businesses to superficial changes or misleading marketing associated with greenwashing.
The shift to sustainable practices that have measurable positive impact on the planet presents considerable operational and cultural challenges for businesses; it is a fundamental change in the way we do business. Coaches may play a critical role in supporting businesses to make this shift. Namely, when business leaders are empowered to consider the benefits and risks of embarking on sustainability practices, and supported with tools and resources to make necessary changes to their business, they can make more informed decisions to ensure the longevity of their organizations and succeed in both aspirations of profitability and sustainability.
