As companies join the green movement in efforts to maintain competitive advantage and meet consumer demands, there grows an increasing risk of ‘greenwashing’. This is the term for claims and descriptions of services and products as being ‘green’ when in fact they are not. The term green can be expanded to include claims such as environmentally friendly, socially impactful or sustainable. Manipulating Environmental Social and Governance (ESG) data and reports is a particularly ripe area of greenwashing.
Is Greenwashing a serious matter? Thoughts from a Legal Perspective
In Canada, the Competition Act has specific provisions dealing with false or misleading representations and deceptive marketing. There is a civil and a criminal regime to evaluate against. Under the criminal regime, violators could face jail time as well as fines from regulators. Claims that a company’s products and services are sustainable, if they are not, is considered a violation of the Competition Act resulting in not only fines, but also the risk of consumer legal action, securities lawsuits and enforcement actions.
Below we evaluate different types of Greenwashing and discuss the companies under fire by regulators and consumers.
1. Selective Disclosure
This is when a company provides the highlights and downplays or omits the negative impacts. A company’s carbon footprint should be assessed using all life cycle stages. Admitting to struggles in a particular area helps build consumer trust and acts as a risk mitigator.
In the European Union, Dutch advocates are suing KLM for misleading advertising. The airline invested heavily into sustainability and advertises this to the public, but its methods, the advocates claim, make it seem that all of its flights are presently sustainable. On the current metrics, they are not and only a reduction in flights would promote sustainability goals.
2. Operational Inconsistencies
Happens when a company incorporates sustainability into only some of its products or services and continues an environmentally damaging, business-as-usual approach in other areas.
3. Misleading or deceptive statements
Playing with semantics to avoid the truth is a big greenwashing red flag. Company statements should represent scientific consensus and refrain from presenting something as a ‘greener’ option especially if there are serious controversies about the topic. For example, presenting vaping as a more sustainable option than cigarettes.
For example, the plant-milk brand Oatley has faced a plethora of complaints and regulatory action for misleading advertising. Examples include stating "Oatly generates 73% less CO2e vs. milk, calculated from grower to grocer" but this comparison is only of a single Oatley product against full cream milk and not reflective of all product options.
In other news, Keurig is being fined $3 million for claiming its K-Cup coffee pods are recyclable. It negotiated to also make a $800,000 donation to an environmental charity and pay $85,000 to the Competition Bureau for investigation expenses. These losses should not be considered as operational costs, as is so often done in the fossil fuel industry. In an era where consumers are on high alert for deception and lies, long term brand reputation should be prioritized.
4. Exaggerating
This differs from misleading statements as it relates to a company’s promises and goals. Making bold and unrealistic mission statements and commitments and failing to deliver on those depletes consumer confidence and creates an air of untrustworthiness that will damage the company brand in the long term.
The Royal Bank of Canada is currently under investigation by the Competition Bureau for claiming it is aligned with the goals of the Paris Agreement, but is still investing in fossil fuel industries. Environmental Groups released detailed reports listing the bank’s transgressions against its own policies.
5. Failing to provide proof
Company claims about its products, services or achievements should be supported by hard facts. These should be made available on the products themselves, the company website and annual impact reports.
6. Vagueness or Jargon
There are many terms floating around that consumers may confuse with standards. Poorly defined claims are still greenwashing. Consumers should be able to understand what they are reading. Confusing the public with jargon that makes it appear that the company knows what it is doing and is an expert on sustainability when in fact there is no such action being taken or it is exaggerated.
7. Misleading symbols and empty labels
Given the large number of sustainability certifications, it is easy for consumers to assume a symbol is a certification if it is presented as such. Symbols should be able to pass the test of whether the general public would be able to distinguish it from a certification. If not, the presentation should change. Companies sometimes try to pass off their own invented symbol or term as certification and that kind of creative endeavor is a violation of the Competition Act.
If pursuing a certification or promoting a label, companies should ensure that real value was created and meaningful change has transpired as a result of that certification. Certifications should be provided by independent bodies, reviewed regularly and provide transparency in the scope and inspections. Enforcement of the standards and avenues of redress must be established.
8. Political motivations
Companies that work to lobby against environmental laws should not be making commitments towards sustainability. Affiliations and partnerships should be closely evaluated to ensure conflict messaging is not created as a result.
In 2021, Greenpeace filed a complaint against Shell with the Competition Bureau for misleading advertising. The complaint states that “Shell’s advertising misleads Canadians into thinking their fossil fuels can be made carbon neutral”. The company tries to convince the public that purchases can be offset by forest restoration and other initiatives. As such, Shell is actively promoting the fossil fuel industry under the guise of making these purchases ‘greener’. The complaint includes reference to lack of transparency on the evidence and a business as usual approach.
In Conclusion
Companies may knowingly or unwittingly commit any one of the eight greenwashing transgressions listed above. Having a third party, such as Bridge Sustainability, evaluate your business operations and provide an unbiased evaluation against an independent standard is the best chance of avoiding greenwashing penalties and litigation.
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