Greenwashing is a term used to describe a false, misleading or untrue action or set of claims made by an organisation about the positive impacts that a company, product or service has on the environment and its related stakeholders.
Greenwashing can occur when a company makes an environmental claim about something the organisation is doing that is intended to promote a sense of environmental impact that doesn’t exist or may only be temporary. For example, a car vendor claims that a vehicle is eco-friendly and more fuel-efficient, but fails to mention the larger industrial impact of vehicle manufacturing on the environment. It is a marketing practice whereby the company is seen to exaggerate or make false claims to adopt environmentally friendly initiatives to attract environmentally conscious consumers.
Watch this video to learn more about greenwashing
Potential impacts of greenwashing on businesses
- Loss of Trust from Customer
Greenwashing erodes customer trust as it creates a dissonance between a company’s professed commitment to environmental responsibility and its actual practices.
- Legal Liability Issues
Greenwashing can expose businesses to legal issues, as regulatory bodies may penalise companies for deceptive marketing practices.
- Financial Consequences
The financial impacts of greenwashing extend beyond potential fines. Companies may face increased marketing costs to repair their tarnished image, and the loss of customers can directly affect revenues and profits.
Regulations for greenwashing around the world
A new law is currently making its way through Korea’s National Assembly that would slap a 3 million won ($2,271) fine on companies judged by the country’s Ministry of Environment to have deceived the public about their green credentials.
Competition and Consumer Commission of Singapore (CCCS) developed a set of guidelines to provide greater clarity to suppliers on the environmental claims that could amount to unfair practices under the Consumer Protection (Fair Trading) Act (CPFTA).
China took a key step to fight greenwashing: The Shanghai Stock Exchange began requiring that 100% of the proceeds from green bond issuances be invested in green projects such as clean energy, up from 70% previously.
The Australian Competition and Consumer Commission (ACCC) recently published its much-anticipated draft guidance on environmental claims, identifying eight key principles to avoid greenwashing (Greenwashing Guidance).
The Financial Conduct Authority (FCA) has held a public consultation on its Sustainability Disclosure Requirements (SDR). The new general anti-greenwashing rule requires all financial firms to make sure that their labelling is fair, clear and not misleading.
Lawmakers in the European Parliament adopted a new anti-greenwashing law banning a series of commercial practices. Key aspects of the new law include rules aimed at making product labels clearer by banning the use of generic environmental claims not backed up with proof, and the regulation of sustainability labels to allow only the use of those based on official certification schemes or established by public authorities.
Articles of greenwashing cases
Below are some links of articles about a few companies as examples of the above greenwashing challenges and issues:
- https://www.eco-business.com/news/critics-question-labelling-of-plastic-products-as-eco-friendly-in-earth-day-promo/?sw-signup=true
- https://www.eco-business.com/news/petronas-says-it-needs-regulations-to-support-scope-3-reporting/#:~:text=Greenwashing%20allegations&text=%E2%80%9CThe%20fact%20that%20Scope%203,materials%2C%E2%80%9D%20the%20watchdog%20said.
- https://www.eco-business.com/news/are-singapore-formula-one-grand-prix-green-claims-glossing-over-huge-carbon-footprint/
- https://www.eco-business.com/news/greenwashing-hogwash-dbs-banks-eco-warrior-marketing-brag-draws-flak-in-social-media/
- https://www.eco-business.com/news/palm-oil-plantations-absorb-more-carbon-than-tropical-forests-claims-indonesian-palm-lobbyist/
- https://www.eco-business.com/news/singapore-energy-firm-sparks-confusion-with-promotion-for-green-gas-fired-heaters/
- https://www.eco-business.com/news/singapore-watchdog-bans-aircon-ad-claiming-it-can-save-the-earth-after-greenwash-complaint-in-first-ruling-of-its-kind-in-asia/
- https://www.eco-business.com/opinion/its-world-oceans-day-an-aquarium-that-keeps-dolphins-captive-is-promoting-ocean-conservation/
- https://electrek.co/2023/11/24/toyota-is-still-greenwashing-after-change-in-leadership/
What companies can do to mitigate greenwashing?
YTL Group Sustainability is here to provide support if there are any individuals in doubt about an activity, advertisement or promotion involving YTL Group that they feel may be perceived as greenwashing.
