Insight: Greenwashing Matters
In our contemporary era, data is a powerful tool. It is one that has the power to ensure we clean up our planet if we utilize it in the right way, yet in the wrong hands, it can also be used as a tool for manipulation. This is why many companies and organizations have to be aware of the data they’re utilizing.
In the 1980s, the environmentalist and academic Jay Westerville introduced the term 'greenwashing' during a trip to Fiji when he witnessed a hotel chain utilizing green credentials as part of its branding, while evidently not following such values in its other practices.
Henceforth, the term has come to refer to deceptive tactics certain businesses employ to portray themselves as more environmentally friendly than they truly are.
This is done either by giving false impressions of their operations or sharing misleading data about the eco-friendliness of their products or services.
As more and more people have become aware of corporate greenwashing, and with significant social and brand-recognition penalties to pay, greenwashing has become increasingly refined and sophisticated.
Manipulation in the Market
Greenwashing matters because it can provide an unfair competitive advantage. Given the modern consumer is increasingly climate-conscious, sustainable products and services are in high demand, and the temptation for brands to manipulate consumers is rife.
In fact, greenwashing is such a significant problem that in 2020 the European Commission highlighted that 53.3% of examined environmental claims in the European Union (EU) were found to be vague, misleading or unfounded, and as high as 40% were unsubstantiated.
In order to understand how this functions in the marketplace, Sherif Tawfik, Chief Sustainability Commercial Officer for Central and South-East Europe, Middle East and Africa with Microsoft recently highlighted what he termed "new shades of greenwash". In doing so he laid out several key themes as per below:
· ‘Green-crowding’: This occurs when collective efforts for change are compromised by the least progressive member
· ‘Green-lighting’: This involves companies emphasizing a single eco-friendly facet while concealing others
· ‘Green-shifting’: This is the act of placing environmental responsibility on consumers, thereby ignoring detrimental behaviours within an organisation
· ‘Green-labelling’: This is misleading eco-conscious language that lacks substantiation
· ‘Green-rinsing’: This is outlining sustainable objectives without fulfilling them
· ‘Green-hushing’: This is keeping sustainable practices under wraps to avoid greenwashing accusations
Amidst these intricate dynamics, the essence of transparency, accurate evaluation, and consistent authentic initiatives cannot be overstated.
Utilizing technology, data, and AI is now essential for modern companies in fulfilling ESG pledges and steering a true course through sustainability challenges.
Cleaning Up the Environment
In response to the above challenges, a proposal for an EU Directive on substantiation and communication of explicit environmental claims (the so-called "Green Claims Directive") was published in March, 2023. This has been created to provide further reassurance on marketing claims of sustainability in Europe, and regulation is to be used to substantiate environmental claims, including:
• Definitive guidelines for companies to validate their environmental assertions and labels
· Mandates for an independent and certified verifier to review these claims and labels
· Updated rules governing environmental labeling systems to guarantee their robustness, clarity, and dependability.
If this directive becomes legislation, general claims we see on products such as ‘environmentally friendly’, ‘eco-‘, ‘biodegradable’, and so forth, will not be possible without third-party verification.
This provides a model that can be replicated worldwide and will provide a blueprint for dealing with greenwashing. In closing, we must remain vigilant and strive to aid companies in remaining on the right side of history.
The EU has also recently produced its Corporate Sustainability Reporting Directive (CSRD) requiring companies across Europe to report on sustainability, resource use, and ‘circular economy’ performance.
A ‘circular economy’ is an economic model of production and consumption which involves sharing, reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible – thereby extending the life cycle of products.
The UAE has already done its part here in creating the UAE Circular Economy Council, a public-private initiative chaired by the Minister of Climate Change and Environment, Her Excellency Mariam Bint Mohammed Saeed Hareb Almheiri.
Recently, it has been decided to focus on accelerating the implementation of the UAE circular economy policy in four main sectors: manufacturing; food; infrastructure; and transport.
It will be now important to ensure we do not get ‘circular washing’.