What Can Companies Do About Greenwashing?

Lately, criticism of environmental statements made by large companies has been particularly tough. Such criticism is a result of commercial practices carried out by many companies that give the impression of concern and performance to address the environmental crisis when their efforts are just a marketing charade to get the consumer's attention. Such practices are misleading advertising that has been labeled as “greenwashing.”

The definition of greenwashing has changed in recent years. It was initially coined in 1986 by the environmentalist Jay Westervelt. In the early 1990s, the term was used to describe deliberate and cynical attempts by companies to mislead the public about their environmental commitment and performance. 

The greenwashing criticism is a matter of concern for any company trying to implement a green initiative. When implementing an environmental initiative, companies question the benefits of acting as well as the benefits of publicizing such initiatives. In response to the current context, some companies have chosen to keep their green initiatives largely to themselves, or to simply delay such initiatives. Those attitudes do not favor the public conversation, which is greatly  needed in this kind of crisis. 

To further understand the companies’ greenwashing concerns, it is useful to analyze the causes of greenwashing scandals. As such, some researchers consider that one of the main issues is the quality of information. The concern is that the information released by companies can be considered misleading as it is vague, scarce, and without evidence, traceability or transparency. 

Once the issue has been identified, companies may work toward mitigating such risk and improving the quality of information released. Improving the quality of information will prevent confusion and mistrust among consumers. Companies, for example, may use certain concepts, such as “carbon footprint,” which refers to the trail of CO2 emissions that we leave in the course of our lives. These emissions can be produced directly or indirectly. 

There are several approaches to quantify the carbon footprint, among others: the life cycle approach of a product or service, personal, event, territorial and corporate. The latter assesses the carbon footprint of an organization over a set period of time, usually a calendar year. For proper management, the corporate carbon footprint groups greenhouse gas emissions into three scopes:

• Direct emissions (Scope 1): are those emissions of greenhouse gases that come from sources that are owned or controlled by the company.

• Indirect emissions from energy consumption and distribution (Scope 2): correspond to emissions of greenhouse gases associated with the consumption of electricity and/or steam, which are generated by third parties.

• Other indirect emissions (Scope 3): these are greenhouse gas emissions that are not owned or controlled by the company; for example, transportation of employees, air or land travel for work purposes, transportation of supplies, generation and transportation of waste, among others.

Illustration 1  Scopes 1, 2 and 3

Source GHG Protocol

Authorities may also participate in addressing the issue of quality of information. The authorities responsible for consumer protection should strengthen their surveillance of compliance with international standards that certify compliance with environmental obligations. Local authorities may also demand that companies disclose their carbon footprint for both the company that is marketing the product or service and the product itself.

Among other organizations working toward improving the quality of information are certain nonprofit organizations, including the International REC Standard Foundation (“-REC Foundation). The I-REC Foundation makes it possible to combat greenwashing through robust methodologies that facilitate traceability and promote transparency to contribute to the reduction of indirect emissions, i.e.  those corresponding to Scope 2, which include electricity consumption. The standard set by the I-REC Foundation (I-REC Standard) is recognized by leading reporting frameworks, such as the Greenhouse Gas Protocol (GHGP), CDP (Carbon Disclosure Project) and RE100 (RE100 Climate Group), as a reliable backbone for credible and auditable tracking instruments.

If information issues are addressed with the collaboration of companies, authorities and NGOs, it may be possible to incentivize more companies to join the net-zero commitments with less risk of being labeled as companies with greenwashing practices. It is crucial that companies commit to reducing their carbon footprint to avoid reaching a point of no return.