Greenwashing
Greenwashing can be characterized as a strategy of selective disclosure by an organization about its environmental practices, product or service in order to obtain a positive brand attitude and increase consumer purchase intention. In fact a study by the Advertising Standards Council of India (ASCI) reported that 79% of green claims made by organizations were exaggerated or misleading, 71% of Indian consumers reported incidents of Greenwashing out of which 60% reported being concerned as per the findings of a YouGov market research study. Additionally, a staggering 29% of consumers reported trusting organizations' environmental claims1.
Types of greenwashing:
Hidden trade-off:
Usually occurs when an organization emphasizes token changes to its environmental practices to appear more sustainable whilst covering up other highly environmentally damaging practices involved in the production of the product. E.g.: An organization claims to make a product out of recycled plastic bottles but creates solid waste that ends up as micro plastics contaminating nearby water bodies
Destroying Biodiversity:
When an organization claims to protect biodiversity through its environmental practices however in reality, it ends up contributing to the mass destruction of the planet's biodiversity. E.g.: An organization may claim to use sustainably sourced timber without accounting for overall damage to the ecosystem caused by its operations.
False label:
It is a label or false eco-label added to a product to give it a green-sheen to make the product seem as the more sustainable choice over its competitors. E.g.: Using eco-labels such as FSC (Forest Stewardship Council) or Fair trade coffee and cocoa which serve as unreliable or ineffective endorsements.
Lack of proof:
When baseless claims about a commodity or an organization's sustainable practices are made without being substantiated with any scientific evidence. E.g.: Claiming to be animal friendly without substantiating these claims with evidence in the form of audits.
Vagueness:
The use of overly broad or non-specific language when describing the environmental practices of an organization that is likely to be misunderstood by the consumer. E.g.: Claiming that a product is 'natural' but being unclear that these natural ingredients, i.e. uranium and arsenic are poisonous.
Fibbing:
When environmental claims made by an organization are outright false. E.g.: When an organization falsely claims to be ENERGYSTAR® certified
Front groups:
Usually an organization that is set up to look like a voluntary association, however in reality it may have been set up to do something else on behalf of its parent group. E.g.: an NGO that proclaims to be protecting biodiversity, when in reality was set up to protect shell organizations from legal liability.
Drivers of greenwashing:
Now that we are aware of the tell-tale signs of greenwashing, let us explore the driving forces behind it:
Consumer demand for green products:
The recent years have recorded an increase in consumer demand for eco-friendly products. Additionally brands are able to charge these customers a premium for these 'green' products without backing up these claims. This is substantiated by a study conducted by Nielsen Media Research which found that 66% of global consumers are willing to pay a premium for environmentally friendly products2.
Government policies and reporting standards:
There is a lack of stringent regulations or guidelines in India regarding greenwashing allowing organizations to misuse and misrepresent their environmental practices to appear more sustainable. Additionally the plethora of reporting standards globally (eg: GRI, SASB, ISSB, TCFD etc.) and in India (BRSR) complicate the reporting landscape owing to their lack of consistency and alignment and facilitate the creation of an environment where Greenwashing can thrive.
Competitive pressure:
The FMCG market is highly saturated with a large number of products with little differentiation and organizations vying for a slice of the market pie, however this pressurized environment has created conditions where organizations compete with each other to make increasingly exaggerated claims about their 'green' products.
Offsetting:
Greenwashing is often utilized to distract consumers, stakeholders and regulatory authorities from an organization's environmental malpractices, by utilizing tokenism to appear environmentally friendly whilst ignoring large scale damage caused by neglect of its environmental practices.
Harm caused by greenwashing:
Although greenwashing might result in short term profitability and competitive advantage, it has significant damaging long term effects:
Loss of consumer trust:
Once a consumer learns about how they have been misled by an organizations deceptive marketing strategy, they may lose faith in the company as a whole leading to a loss of sales and reputation and overall loss of brand equity that arose from 'sustainable' products.
Negative environmental impact:
Along with environmentally damaging practices and products of an organization going unchecked, falsely claiming that a product or service is environmentally friendly can mislead consumers who believe they are making a more sustainable consumption decision while in reality, widespread use of these products could be detrimental to the environment.
Investigation and litigation risk:
The local consumer protection authority may catch wind of 'environmental' claims of an organization and open its own investigation which can carry significant reputational risk and lead to negative brand image. The organization may also end up being sued for 'wrongful claims' which can drain resources and ruin the public image of the organization.
How green products are associated with positive brand image
Difference between greenwashing and green marketing:
Greenwashing serves as a barrier to sustainable development by misleading consumers and investing more resources into building the appearance of sustainability rather than implementing reforms and putting practices in place to ensure lasting change. Green marketing, however, is a moral obligation for companies to their consumers promising to be design their business models to have minimal negative environmental impact whilst remaining honest and transparent in all their practices from the product to the supply chain.
Difference between greenwashing and blue washing?
While greenwashing places greater emphasis on environmental aspects, blue washing focuses more on the social and economic factors of an organizations practice. The term first originated when companies joined the United Nations Global Compact solely to improve public perception of their company values and social and governance practices without introducing any significant reforms.
How to combat greenwashing/identifying signs
There are certain regulations in place that can be utilized to combat green washing:
- The Consumer Protection Act 2019, ensures consumers are protected against unlawful ads
- The Indian Penal code of 1850 penalized misleading ads
- The ASCI has issued a voluntary code that lays down guidelines for advertising in various sectors
The Government of India has issued a draft set of guidelines open for comments till December 05, 2023.
Celina Gandhi, Intern at S.S. Rana & Co. has assisted in the research of this Article.
Footnotes
1. https://www.theggi.org/post/the-problem-of-greenwashing-in-india
2. https://www.nielsen.com/us/en/insights/reports/2015/the-sustainability-imperative.html
For further information please contact at S.S Rana & Co. email: info@ssrana.in or call at (+91- 11 4012 3000). Our website can be accessed at www.ssrana.in
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
