Greenwashing is reducing consumer confidence in sustainability
Last month, luxury fashion house Hermès announced its commitment to become a patron of Science’s Po’s European Chair for Sustainable Development and Climate Transition. On its website, Hermès reports that its business is “a value-creating and sustainable French model.” At the same time, recent news stories indicate animal welfare groups have questioned Hermès over plans to build a crocodile farm in Australia. The farm would house up to 50,000 crocodiles that Hermès will turn into luxury goods such as handbags and shoes.
The apparent disparity between an environmental alliance and Hermès’ plans to farm crocodiles has led to an accusation of greenwashing. For many consumers, the farming of animals to extract exotic skins is at odds with the values of sustainable development.
Many luxury brands are now turning their back on exotic skins. In 2018, Chanel announced that their collections would no longer include fur. While there is a long way to go when it comes to adopting sustainable approaches, brands must do more than talking the talk.
This post examines the greenwashing predicament in more detail, taking an in-depth look at perceived commercial duplicity and the effect on the reputation of brands.
What is greenwashing?
For consumers to feel confident in a brand’s ecological values, sustainability needs to be than a box-ticking exercise. To build consumer confidence, brands must embed a circular approach into supply chains and not just for marketing.
It is no longer enough to be seen to be doing the right thing; to build consumer confidence, retailers have to show an ongoing commitment to ethical and environmental issues. The example of Hermès is one of many instances where brands attempt to illustrate a commitment to sustainability but juxtapose marketing messages against tangible business practices.
But what is greenwashing, and what business practices fall under the umbrella of perceived corporate hypocrisy? In broad terms, greenwashing refers to discrepancies between a company’s ethical claims and actual sustainability performance.
However, in a paper for the Journal of Business and Technical Communication, de Jong, Huluba, and Beldad contend that defining greenwashing is far from simplistic. Furthermore, the authors of the paper maintain that there are various degrees of greenwashing. The research goes further to assert that both complete lies and half-lies have a similarly negative effect on reputation.
Doing good is better for business
The research highlights that a company genuinely undertaking green policies brings about a desired upwards effect on reputation. Previous research on CSR (corporate social responsibility) highlights that CSR initiatives can positively affect corporate reputation, increasing the likelihood of purchase and amplifying long-term customer loyalty.
Further studies suggest that a robust CSR policy acts as a buffer in a time of crisis. The coronavirus pandemic has provided evidence for this, as ESG funds have shown to be better at weathering the storm and have remained resilient in a bear market compared to peers.
What do companies stand to gain from greenwashing?
Business leaders must incorporate sustainability initiatives into the top-level of strategy to have a purposeful long-term impact. Investing in CSR has demonstrable benefits for organizations in terms of stronger customer relationships and long-term loyalty.
On some occasions, when companies attempt greenwashing, the intent may be to reap the benefits of seeming to act responsibly and garner the reputational advantages of greener positioning, without the accompanying investment or required change in organizational behavior.
The Seven Sins of Corporate Greenwashing
Greenwashing can encompass many different types of corporate behaviors and strategies. In 2007, TerraChoice (later acquired by the global safety science leader, UL) attempted to understand and quantify greenwashing. Based on Terrachoice’s research, the company developed a Seven Sins of Greenwashing framework to help consumers identify products and services that make misleading claims about sustainability.
The seven sins are:
- The sin of lying – making completely false environmental claims.
- The sin of no proof– this refers to environmental claims that cannot be easily verified or backed up by evidence.
- The sin of vagueness– this involves making a vague claim so that the consumer misunderstands the meaning.
For example, when food companies claim their products to be “natural,” this does not necessarily indicate that the food is healthy or has a high nutritional value.
- The sin of worshipping false labels – this is when companies give the impression that a third-party regulatory body has endorsed their products or services. It may also refer to using unauthorized, seemingly objective labels. There is still much ongoing debate about the ethics of the fair-trade label, for example.
- The sin of the hidden trade-off– this is the suggestion that a product is green because it adheres to a narrow set of principles, without paying attention to other ethical issues.
Consumers may perceive vegan leather to be eco-friendly because it does not make use of animal-based materials. However, very few vegan leather products are sustainable. PVC is often the principal component of faux leather. Moreover, as well as being composed of non-biodegradable plastic, the manufacturing process of PVC uses fossil fuels and results in the production of toxic chemicals.
- The sin of irrelevance - this refers to an accurate environmental claim, but one that is unimportant for consumers to decide whether a product is sustainable or not.
- The sin of the lesser of two evils – this refers to when a claim may be correct, but stated facts detract attention away from the unsustainability of the industry as a whole. As an example, consumers may perceive electric vehicles to be more sustainable than petrol. However, the energy from electric cars comes from fossil fuels; so in reality, electric autos may emit as much CO2 per kilometer as petrol or diesel vehicles.
What is the effect of greenwashing on consumers?
While there are many case studies involving corporate greenwashing, few studies have examined the effect on consumers. As stated in the Journal of Business and Technical Communication by de Jong et al., greenwashing negatively affects consumer attitudes and behavioral intentions towards a brand.
Additionally, the researchers concluded that open, honest, and transparent communication about environmental behavior pays off in terms of stronger customer relationships and boosting the reputation of brands. Furthermore, greenwashing diminishes consumer trust; perceived corporate hypocrisy leads to a reduced intention to share positive views and increases the likelihood of spreading negative word-of-mouth. It’s clear that greenwashing results in a detrimental impact on reputation.
Further studies indicated that the impact of green policies is measurable in terms of a boost to financial indicators. In comparison, greenwashing correlates with negative commercial performance.
Having appropriate CSR and sustainability policies in place is a business decision. Those companies with a clear-cut commitment to truly green policies will reap the benefits of reputational gains, with financial performance exhibited on the bottom line.
Research indicates that greenwashing is by no means a simple issue and entails more than just informational disclosure. Furthermore, commitment to sustainability is an ongoing journey. Greenwashing encompasses a range of different behaviors. The research findings suggest it is not necessarily deliberate or always initiated by brands.
On occasion, accusations of greenwashing may be a result of unrealistic expectations or simple miscommunication. Nevertheless, the onus is on firms to ensure their messaging is honest, open, and transparent. Additionally, with developments in social media and the rise of an increasingly well-informed customer, companies can no longer afford to be complacent when it comes to sustainability issues.
 Different Shades of Greenwashing: Consumers’ Reactions to Environmental Lies, Half-Lies, and Organizations Taking Credit for Following Legal Obligations, Article first published online: September 18, 2019;
Issue published: January 1, 2020 - Menno D. T. de Jong, Gabriel Huluba, Ardion D. Beldad, University of Twente, Enschede, the Netherlands.
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