The battle for green credentials

greenwashing

Green credentials are a valuable prize in the PR battle to promote eco-friendliness, writes Nick Gibson. But the race for ‘green’ credibility has seen companies make false and unproven claims that undermine efforts to reach net zero with consumers, businesses, investors and regulators now lacking trust in environmental claims. What is the scale of the greenwashing problem, why do organisations make unfounded claims and how can you navigate the maze of regulation to avoid eco-PR disasters?

In a survey conducted by Clearly PR almost one in five said their organisations have been guilty of greenwashing environmental claims at some point over the last 12 months. Among the 1500 business leaders and marketers surveyed 44 per cent admitted their organisation was constantly failing on their ESG commitments, and 24 per cent said they needed to learn what impact their businesses are having. They need to figure out what their business is doing to address ESG commitments.

“The Competition and Markets Authority research in 2021 found that forty per cent of green claims made by businesses and brands were twaddle,” Paul McKenzie Cummings, MD of Clearly PR, says. “I can only see it getting worse in the next 12 months when that number could reach sixty per cent unless there’s legislation that compels organisations to back up their claims and demonstrate the impact of their actions.”

Sensu Insight research found that when organisations make environmental claims, 30 per cent of consumers expect it to be exaggerated. Thirty per cent did not believe environmental claims from airline operators, energy companies (18 per cent), car brands (21 per cent), and train companies (19 per cent). Thirty-four per cent said they had seen businesses claiming to be ‘sustainable’ without any evidence to justify their claim. Thirty-two per cent also reported seeing false or exaggerated recycling claims.

“The cumulative effect is that these claims cease to have any meaning,” Steve Lee, MD at Sensu Insight, says. “But more often than not, greenwashing is caused by confusion. Environmental reporting is rarely simple and clear cut, there are many shades of ‘green’, and it can be difficult for brands to know exactly how to promote the sustainability of their processes and products.”

Greenwashing for corporate profit

Green advertising hit the mainstream in the early 1990s, and a 2009 survey found 80 per cent of marketers planned to increase spending on eco-campaigns to target environmentally conscious consumers. As a result, today, ‘green’ advertising, marketing and PR is a multi-billion-a-year industry. But with greater visibility comes scrutiny, and big names like Starbucks, Shell, Tesco, H&M, McDonald’s, Volkswagen and airline KLM have been held to account in lawsuits accused of misleading green claims.

“The big increase in unfounded eco-claims has been a side-effect of the pandemic,” says McKenzie Cummings. “ESG was hardly mentioned in corporate agendas in 2019, but by early 2021, organisations were chomping to figure out how to rebound and stimulate growth. During this period, consumer attitudes changed, and many organisations followed the trend and jumped on ESG as something to promote. They thought introducing an ESG policy and saying, ‘Hey, look aren’t we wonderful?’ could boost sales, enhance their reputation and position them as a business that customers and investors want to do business with. Ultimately it’s about PR, marketing and profit.”

A Deloitte study at the end of 2021 showed 70 per cent of consumers put eliminating plastic waste as one of their primary concerns when making product decisions. “But instead of changing their packaging, companies simply repackaged the message and banked on the lack of transparency around eco-labelling,” says Nick Torday, CEO of Bower Collective. “Companies make unfounded eco-claims to test the boundaries of what they can get away with. There is so much sleight-of-hand marketing. For example, many eco-claims around ‘refill packs’ may be technically credible, but it is greenwashing because it is still single-use plastic and waste in another format.”

Pam Barbato of Action Net Zero believes PR and profit is not the only driver. “Yes, greenwashing is driven by competitive advantage and being seen to do the right thing but sometimes I think companies are simply misguided. There is a lack of understanding about regulatory requirements. They don’t understand enough about ESG and disclosure and there’s often a disconnect between marketing functions and ESG functions and ensuring that eco-claims are evidenced.”

Greenwashing and commercial risk

Unfounded eco-claims create and fuel levels of risk that undermine business and investor confidence, says Mandi McReynolds, head of ESG at Workiva. “Investors lack trust in current environmental reporting because it’s been too boilerplate, an accounting add-on after too many lawyers have got hold of it, and they don’t know what the company is doing. Reporting is either too technically disclosed, is not assured, or they can’t even find it.”

According to Barbato, companies that cannot disclose and prove eco-claims are now considered a risk. “Investors are starting to see greenwashing as a real risk due to doubts about the company’s claims. There is often a disconnect between the regulatory framework around ESG, so it is critical that reporting is aligned. If regulation were more stringent, there would be more transparency which would breed confidence, so policy-makers need to catch up.”

New laws such as CSRD and Taxonomies in the US and Europe will clamp down on unfounded eco claims. For example, new products or packaging will be banned from statements such as ‘biodegradable’, ‘environmentally friendly’ or any other equivalent environmental claim.

“The problem lies partly in the fact that regulation around environmental claims is un-harmonised,” Ann Marie Taylor, director of regulatory compliance at DWF Law, says. “Companies, even with the best intentions, do not always know how to do the right thing because numerous bodies regulate eco-claims.”

According to Barbato, advertising standards around ESG are generic and non-specific, so it is easy for even the best-intentioned business to go wrong. “It’s such a nuanced area that standard methodology reporting and labelling would help people substantiate green claims. However, it’s a bit like the Wild West because there are no universal advertising standards that businesses can work to. People talk about transparency, but the core issue is standardisation and harmonisation.”

Scope 3 complexity fuels greenwashing

Unfounded eco-claims can often result from the many ambiguities in Scope 3 reporting. In addition, recent legal rulings have seen companies censured because they needed to consider their entire operation’s life cycle footprint and failed to verify their claims.

 “All frameworks and certifications have some ambiguity because you’re measuring such a complex and dynamic set of criteria,” Torday adds. “Scope three could be simplified and mandatory with more rigour applied to businesses that rely on offsetting rather than innovating within their supply chain to improve what they are doing legitimately.”

Simplified regulation around Scope 3 could backfire, Taylor believes. “Research into ESG and the circular economy shows that businesses and consumers are confused. They need information and want it to be simple. But if you simplify too much, it becomes meaningless and futile. So instead, there should be a standard set of claims you can make, like the traffic light system on food labelling but linked to environmental reporting and impact.”

According to Lee, regulation should be strict but flexible enough to allow businesses to tell their story fairly. “Brands are under pressure to declare themselves eco-friendly, and many are falling into the gaps in reporting criteria. More transparency and standardisation are needed, so it is clear to see who is doing the right thing and is simply dressing up in green clothes.”

Holding greenwashers to account

Company directors and execs can now be held personally responsible for how they run their business, including environmental impact. “It’s starting to change the agenda and a compelling reason for large organisations to raise their game,” Barbato says. “Failure to achieve and prove eco-claims will hit these companies financially, where it hurts most because carbon is now considered a risk. If you are not mitigating that risk and preventing false claims, the cost will be greater than failure to change.”

According to Mauro Cozzi, CEO of Emitwise, performance-based reward has been touted as a solution to boardroom inaction. “There is a new trend for executive compensation tied to environmental targets, but how will it be measured?” he adds. “Companies must have credible, transparent numbers based on science to ensure accurate claims. I applaud the path of new regulation that creates common standards that will move the needle and generate results. Regulation will help companies get the tools they need to manage their environmental impact.”

Companies should not wait for authorities to lead the charge to net zero, McKenzie Cummings believes. “Organisations recognise that it is not down to governments to take the lead; they are responsible for being the change-makers. Embedded ESG reporting is the key to demonstrating environmental impact. It’s what investors and customers are looking for and should be a business imperative.”

Greenwashing is commercial suicide

The ultimate reason for companies to verify eco-claims and avoid greenwashing is simple: money. Sustainability can not only reduce costs, but it can also increase revenue. “Companies like Unilever have seen much of their revenue growth coming from a competitive advantage with their sustainable living brands,” says Cozzi. “Walmart has found huge cost savings with ESG while reducing shipping costs and carbon emissions. Sustainability is profitable for some businesses, so why threaten that by greenwashing?”

ESG regulations that aim to reduce greenwashing are driving a significant shift in business models to ensure commercial survival. “Sustainability will be your licence to operate in coming years,” McReynolds says. “Companies now see sustainability as a business value, imperative to remaining profitable and even staying in business. However, it requires accurate data, assurance, and clarity about how they’ll comply with regulation so that investors and customers can trust them.”

What can what can organisations do to make sure that they don’t sleepwalk into an eco- PR disaster?

“If you’re going to claim something, be sure you back it up with clear, relevant and verified reporting and avoid any hyperbolic marketing,” says McKenzie Cummings. “If you’re going to commit to something then actually do it, not just talk about it. Be realistic in your targets, start with the things that you can control and build from that.”

When you hit the bottom line, greenwashing in the current economic climate could be commercial suicide says Anne Marie Taylor. “Statistics now show that up to 60 per cent of people will pay more for a product if it’s environmentally friendly. That fact alone must be a driver for businesses to do the right thing.”

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