Updated December 2024
No matter what market you are in and no matter what products you manufacture, your consumer base is increasingly demanding environmentally sustainable products.
Most businesses are responding to these market trends in one of two ways:
- Making their goods and services more environmentally responsible
- Claiming their goods and services are more environmentally responsible
One of these choices leads to more client loyalty, increased profits, and better public relations.
The other results in a temporary PR boost, followed by a disastrous crash.
What is greenwashing? It’s making the claim that your product is environmentally sustainable without any proof, or even worse, outright lying about it.
Many companies practice greenwashing, and almost all of them get called out on it by environmental scientists, consumer advocates, and a growing demographic of consumers who actively seek out green products.
Why Companies Greenwash and the Risks They Face
The modern consumer is growing ever more likely to prioritize sustainability over other factors when choosing which products to buy. A survey by McKinsey found that 60 percent of respondents said they would pay more for products with sustainable packaging. This is just part of a broader trend that applies to everything from consumer packaged goods to vehicles.
A study by McKinsey and NielsenIQ shows that products making ESG-related claims have averaged 28 percent cumulative growth between 2019 and 2023, compared to 20 percent for products not making those claims. This clearly highlights the benefits of sustainability claims in marketing, but what happens when those claims don’t hold up?
There have been many controversies surrounding corporate greenwashing in recent years. In 2022, coffee brewing system manufacturer Keurig Canada Inc. reached an agreement with the Canadian Competition Bureau to pay a $3 million penalty after finding claims surrounding the recyclability of their single-use coffee pods were false or misleading.
Another recent example of greenwashing saw $5.5 million in total Federal Trade Commission (FTC) settlements with Kohl’s and Walmart. The FTC says that items advertised by the retailers as being made of bamboo were actually made of rayon, semi-synthetic fiber.
These are just a few examples of greenwashing scandals in recent years. There have been many more, and your company could find itself at risk if you can’t back up your claims with reliable data on the materials, energy, and other resources that go into making your products.
New Greenwashing Regulations Crack Down on False Environmental Claims
Greenwashing regulations are becoming more common and better defined in an effort to crack down on greenwashing companies. This is happening in the USA, the EU, and other markets worldwide.
On September 20, 2023, the U.S. Securities and Exchange Commission (SEC) amended the so-called “Names Rule” under the Investment Company Act of 1940 in an effort to regulate ESG claims and reduce greenwashing. The change requires any registered investment fund with ESG-related factors in its name to place 80% of its assets in investments corresponding to those factors. This rule will help ensure that those looking to invest in sustainable companies can do so accurately.
The European Commission put forward the EU Green Claims Directive on March 22, 2023, with the proposal since passing its first reading and currently under negotiations as of 2024. The rule seeks to establish clear standards for companies making green claims. It will introduce regulations on labelling schemes and place the mandate on businesses to substantiate any green claims they make.
As the regulatory landscape continues to shift, companies need to know that they’re keeping up with their responsibilities concerning sustainability data. Accurately tracking and managing sustainability data across a full range of metrics is essential to have the information you need to back up your green manufacturing claims.
How to Avoid Greenwashing
If you’re worried about greenwashing products your company manufactures, it is time to get yourself an environmental data management system that can manage and quantify all of your processes’ inputs and outputs.
Here are some common greenwashing warning signs to avoid using for your own products:
- Using official-looking but meaningless certifications. Some businesses simply create their own eco-standards, design a convincing logo, and slap it on their product. Instead, only use credible third party certifications, like ISO 50001.
- Vague or meaningless terms. Thousands of products now have the term “eco-friendly” on them. Unfortunately, there’s no definition for this term, so it can mean almost anything. Similarly, there’s no minimum threshold for claiming a product is “made from recycled materials.” Your “recycled” product might only contain 1% recycled materials. It’s far better to use real numbers to make your statement.
- Pretty pictures of trees and animals. When environmentally responsible products first came onto the market, it was a game changer to portray green valleys rather than a spotless kitchen counter. But now consumers see right past that type of imagery. The market has been over-saturated, but companies that greenwash don’t have much else to work with.
- The biggest warning signs of all are the terms “eco” and “green.” These get so overused that they mean nothing anymore. It goes far beyond being meaningless that people barely look twice when they see toxic chemicals being labeled “green.” If you’re using your environmental stewardship as a selling point for your product, you would do well to avoid relying on just being “green.”
Backing Up Your Reputation as a Sustainable Business
Demonstrating your sustainability efforts to consumers through your marketing practices can help support the success and growth of your company. However, you had better be ready to back up those claims with solid data.
ERA’s software solutions offer a variety of tools to help your team tackle these challenges. Our Environmental Management System lets your team track and manage all kinds of environmental data and meet your reporting needs. Our Corporate Sustainability Software lets you achieve goals and demonstrate performance across an extensive range of metrics.
If you’re looking to put your company’s best foot forward and accurately highlight your commitment to sustainability, schedule a discovery call today to discover what ERA can do for you.
For more about managing your company in a sustainable manner, download our free guide, The How’s & Whys of Sustainability.
This Blog Was Co-Authored By:
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