Why is greenwashing bad for my company?

Greenwashing is almost as old as climate activism itself. For as long as there has been value in green business, there have been people looking to exploit it. 

Now is make-or-break time for companies associated with greenwashing. Consumers are savvy to it, governments are determined to prevent it, and investors want nothing to do with it. 

In short, don’t greenwash; you’ll get caught out. 

Here are the details on why:

It’s the manipulation or marketing of advertising efforts to make a product look more environmentally friendly than reality – if they’re even environmentally at all.

Culprits rely on several different tactics, including:

• Omitting a ‘trade-off’ while claiming a product is environmentally friendly.
• Making claims without evidence.
• Being vague in the hope no one will question anything. 
• Making claims that sound positive but are irrelevant in combatting climate change.
• Simply lying.

Sometimes, companies can greenwash without realising too – because they haven’t researched a product’s carbon footprint thoroughly enough, for example.

One word: penalties – and the term involves more than you might think.

While your mind might first jump to financial repercussions, the true scope could go beyond that if you don’t handle the situation appropriately.

Major global jurisdictions are getting serious enough about greenwashing to introduce new rules that allow fines for any company caught doing it. 

For example, while greenwashing fines for companies in the EU and the UK have been in discussion for some time, both governments are increasingly set on making them a reality, setting them at the same rate as any other violation of consumer law. 

In the UK, suggestions have emerged that companies could be forced to hand over 10% of their global turnover in penalties. 

Previously the threat of such penalties was muted by endless standards, red tape, and general confusion. Now, that room for avoidance is shrinking rapidly, and companies continuing to exploit the climate crisis will pay the price.

Other issues might come and go on investors’ priority lists, but green goals remain there as of 2023. Multiple outlets such as Forbes, Investopedia and Morgan Stanley have already confirmed it. 

Therefore, any discovery that your company has been greenwashing likely means you’ll lose favour with some of those crucial investors. This kind of crisis can snowball as influential backers begin to suspect your company to be untruthful, unsympathetic, and unattached to modern business concerns.

Reputational risk is a real issue when it gets out of hand, and make no mistake: it only takes one revelation or accusation to get going. 

Once in motion, reputational risks could severely damage a company’s reputation in just a matter of days. Cleaning this kind of mess up needs money and extended damage control – tricky if you simultaneously suffer a loss in sales and pressure from shareholders.

Remember that while greenwashing is a marketing/advertising trend, corporate leaders still have ultimate responsibility for this.

The board of directors – in place to act in the best interests of shareholders – should know the threats that greenwashing poses and have safeguards in place to ensure it never happens. 

It’s now more important than ever to get this right.