Companies throughout the EU will soon have to justify claims about their products being ‘eco-friendly,’ or face greenwashing penalties, according to a leaked draft plan addressing inflated environmental credentials across the board. But, with claims about businesses’ products being ‘sustainable’ having grown in recent years, an EU survey has found that 53 per cent of environmental product claims were “vague, misleading or unfounded”.
The survey says that sustainability claims are being slapped on products that do not fully qualify just to get them off shelves, as environmental awareness becomes a selling point. The plan urges transparency, public disclosure of claims, and the enforcement of fines for companies that take part in misleading consumers. The commission expects the draft law to save the equivalent of up to seven million tonnes of CO2 emissions over the next 15 years as companies who are making these claims will be forced to follow through on them or stop making misleading products all together.
Not only will companies face penalties and fines for greenwashing, but they also run the risk of missing out on attracting new funding from investment groups that rely on extensive, accurate Environmental, Social and Governance (ESG) reporting to guide where they place their funds.
“With the label of being ‘climate neutral’ becoming a key facet of marketing and increasingly crucial within the investor sphere, many companies are falling into the murky waters of ‘greenwashing’,” says Mark Sait, CEO and founder of SaveMoneyCutCarbon.com. “Some companies claim their products are ‘climate neutral’ or ‘made with recycled materials’ when those claims are not substantiated. Not only does this hinder the goal to reach net-zero by 2050, but it also does irreparable damage to their own value as a company.”
Starting on the journey to sustainability
In the UK, the British Chambers of Commerce has projected that less than half of UK firms will be in profit in the next 12 months. Meanwhile, 1-in-3 hospitality and leisure businesses fear closing this year due to the inability to afford energy costs, according to eEnergy.
In the wake of this setback, a new study from SaveMoneyCutCarbon has found that over half (51 per cent) of employers in the UK still do not know where or how to start reducing their carbon emissions. This is supported by research from Ecologi, which found that 42 per cent of SME owners in the UK believe that it is important to be sustainable, but struggle because of a lack of guidance.
“With new laws being drafted to stamp out greenwashing across the board, businesses unsure about sustainable practices that add real change could be at risk of legal action if they continue to make claims that are unfounded,” explains Sait.
According to a SaveMoneyCutCarbon.com blog post, regulations are playing a larger role in the clamour for greater sustainability. The Streamlined Energy Carbon Reporting (SECR) scheme, for example, now requires around 11,900 companies incorporated in the UK to disclose their energy and carbon emissions. Public companies regulated by SECR also must comply with greenhouse gas (GHG) reporting rules, the Energy Saving Opportunity Scheme, Climate Change Agreements Scheme and the EU Emissions Trading Scheme – as mandatory.
Carbon reduction strategies clearly reduce the investment threat and at the same time make a sustainable and substantial positive difference to a business’ bottom line. Forward-thinking companies are gearing up to act on ESOS and other internal reviews to reduce their energy and water consumption, which has the dual effect of lowering costs and cutting carbon emissions.
From LED lighting and lighting controls to more efficient heating and ventilation as well as low-carbon energy sources like solar panels, businesses of all sizes that can move quickest to reduce their carbon footprint are seen as the most likely to survive and thrive.
The role of carbon offsetting
Realising net-zero targets could also mean companies feel pressured to use carbon offsets, but offsetting can only be credible as a secondary strategy, asserts Anuj Saush, leader for the ESG Center, Europe, at The Conference Board.
“Carbon offsets do not transform the way we produce and consume energy and should only be used to balance out residual emissions that are unfeasible to eliminate. Business leaders must show caution in their use of carbon offsets and use them as one part of a comprehensive strategy to reduce footprint and transition to a more sustainable future.”
Saush argues that carbon offsetting is far from a perfect tool for addressing climate change and reducing greenhouse gas (GHG) emissions, and there are many shortfalls when it comes to measuring their true and enduring impacts on GHG reductions, society, and the environment. If used carelessly, they can be risky, slow real progress in tackling climate change, and allow entities to greenwash their way out of making real changes in the short term.
Daniel Michalk, senior manager of sustainability solutions at ENGIE Impact, agrees. He says that, until a few years ago, offsetting was the easiest way for companies to present themselves as green. The thought process was often as follows: ‘I simply buy green electricity and carbon credits to offset the emissions of my gas consumption, and on paper I am 100 per cent CO2-free – even though I continue to consume just as many kWh and generate just as many emissions as before.’
“This approach has now changed considerably. For example, the Net Zero standard in the SBTI Framework (which is now increasingly becoming the industry standard) requires that companies first actively reduce their consumption, then decarbonise their remaining energy needs, and only then offset the residual emissions that cannot be reduced by other means. Offsetting may therefore only be used for a small residual amount that cannot be decarbonised in any other way; this is usually 5 to 10 percent of total emissions.
“And there are also differences in offsetting certificates themselves. Under SBTI Net Zero, only projects that actively remove CO2 from the atmosphere (removal credits) are permitted. This is because only these offset the CO2 emitted by the company in purely mathematical terms. Other CO2 certificates are only sufficient to become climate neutral – but companies will not achieve Net Zero with these. Offsetting, if approached correctly, actually offers a real chance to achieve Net Zero and is no longer a greenwashing tactic.”
Communication is key
Once a business has begun doing real, tangible work to reduce their environmental impact, efforts can then be driven into setting out an effective ESG communications campaign. Half-hearted efforts or attempts to spin the trust will not wash with the public, so genuinely proactive ESG work must be a pre-requisite to any communication strategy.
Chris Daly, CEO of the Chartered Institute of Marketing, says that research they carried out as part of their sustainability marketing skills gap report showed that sustainability is now a critical factor for consumers in choosing brands, with two-thirds expecting businesses to take a more active role. However, consumers are largely sceptical of brands’ sustainability initiatives, with 63 per cent also believing that companies only engage in sustainability for commercial motives rather than ethical reasons, highlighting the need for increased transparency and communication.
To gain customer trust and address this scepticism, businesses should prioritise transparency when it comes to how they communicate and market their sustainability credentials. Responding to growing consumer and investor demands, brands must provide clear and comprehensive information on their sustainability initiatives and progress, including metrics, goals and challenges faced. This increased transparency will not only help to build consumer trust, but will also foster a more sustainable business model, driving positive environmental impacts while remaining accountable to stakeholders.
Greenhushing and the power of effective marketing
To add to that, out of more than 1,000 employees surveyed for Sensu Insight’s ‘50 Shades of Greenwashing’ report, almost a quarter reported the organisation they worked for had been accused of greenwashing. The prevalence of greenwashing accusations today may deincentivise businesses from publicising their eco efforts, even the ones making genuine strides to improve their relationship with the environment. This phenomenon has itself been dubbed ‘greenhushing’, but keeping schtum is not the most effective approach a business can take to ESG communications.
“Businesses should strive to be transparent, keeping a dialogue going with the public to ensure meaningful changes can be communicated to customers. Just some of the positive impacts this could have include winning new business, recruiting and retaining staff, and helping to raise standards in the wider industry. But in the process, businesses should also prepare to open themselves up to being held to account if they do not maintain progress,” says Steve Leigh, managing director at Sensu Insight.
“Criticism is a possibility, and businesses cannot expect immediate acceptance and praise. Fallen short on an ESG target? Detail how the company is going to change to meet the existing target or set a new one altogether. Remember that independent experts can help to scrutinise your ESG policies to make sure they hit the mark.”
Staying true to the business’ values and turning any negatives into a positive by listening to your audience are essential, concludes Leigh. Marketing can be a powerful tool in driving sustainable change, and brands have a responsibility to effectively communicate their sustainability practices to consumers and stakeholders in order to build trust, enhance their reputation and influence a more sustainable future.
While there is no ‘one size fits all’ approach to avoiding greenwashing accusations, businesses must continue to adapt and evolve in this area to stay ahead of the curve.