Greenwashing: Are Companies Walking The Talk?

NEW DELHI: The issue of greenwashing is one that must be taken into account when considering sustainable consumption as it involves the influence of the style of communication of the goods via advertising and hence emphasizes the linkage between consumption and advertising. In fact, firms spend large amounts of money on green advertising and CSR initiatives because they want to be perceived as socially and environmentally friendly with the hopes that such perception would lead to more favorable brand attitudes and purchase intentions. It should be noted that when this green advertising becomes misleading, however, it is attributed to corporate greenwashing claims, which, as previously detailed, adversely impacts on CSR efforts and reputation. While greenwashing is a phenomenon, there should be consideration of the importance towards sustainability that is being adopted by companies. While Corporate Social Responsibility (CSR) has been a buzz word of which one outward manifestation is reporting on an annual basis of work carried out towards CSR and the fact that for many companies, the Triple Bottom Line: Society, Economy and Environment, which is also referred to as ‘Planet, People, Profit’ is considered in all business decisions and the growth trajectory of businesses.

An emphasis on sustainability is usually only associated with organizations such as the United Nations but work on Sustainable Consumption and Production (SCP). After all, it should be noted that SCP is most specifically been recognized by the United Nations Sustainable Development Knowledge Platform and is referred to as “Ensure sustainable consumption and production patterns,” and is goal number twelve out of the seventeen Sustainable Development Goals. Therefore, it has now been established that sustainable growth is now a recognized goal for many institutions, including corporate as well as non-corporate ones. Let us consider the benefits of being sustainable for the former, in a little more detail. After all, “the benefits by appearing to be a green company come in the form of a higher stock price, more customers or favoured partnerships with green organisations. Not to mention, the tax benefits associated with maintaining a green and sustainable image, as in, “if the perception of environmental quality is high, the demand is so large that a lower level of taxation is sufficient to reach the optimum.”

In a rush towards meeting demand for a sustainable and environmental image, some firms have resorted to not walking the talk. According to the Independent, the Volkswagen scandal involves “fitting cars with software designed to give false readings in emissions tests.” Thus, there needs to be the realization that Mandated disclosure without monitoring the truthfulness of reporting could lead to incentives for firms to lie about or exaggerate their environmental performance . This scandal, according to the Economist is “likely to throw into question a wider range of claims about emissions and fuel efficiency.” The Economist also cites a domino effect which would make people question the quality and credibility of Made in Germany products. Most importantly, the scandal has revealed the need for companies to have evidence to support what is disclosed in Corporate Social Responsibility reports. Volkswagen was finally caught off-guard by the EPA in terms of its claims as according to the Economist, the EPA “goes on to acquire vehicles at random for testing at a later date, to see if the cars on sale to the public live up to the claims.”

Thus, the aspect of greenwashing has only come into play when the claims of Volkswagen have been cross-examined. Therefore, the better definition of greenwashing is in its application as a strategic communication tool to camouflage a firm’s lack of efforts in engaging in true environmental performance. The Volkswagen scandal has shown how consumer behavior is actually malleable but at the same time has caused one to question whether organizations that claim to be sustainable are often subject to closer scrutiny from government, competitors, and consumers. The reputational risk that the Volkswagen scandal has caused is, from a particular perspective, on the level of rigor of European rigor over regulations, in comparison to the rigor of regulations over emissions that are applied in the United States. In fact, most recently, in the aftermath of the Volkswagen scandal, European policy makers moved ahead on Wednesday with plans to begin subjecting cars to on-the-road testing of exhaust emissions, rather than rely solely on laboratory tests, according to the New York Times. However, not all stakeholders are happy with the level of rigor of these tests and in fact; automakers have lobbied for the testing to be easier to comply with.

Let us consider the steps that are being taken by companies in order to avoid being tinged with green-washing claims. One such method, in the case of companies involved with furniture, is to opt for collaboration with forest certifying bodies such as the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC). Such collaboration is being carried out in order to uphold the credibility of the sustainable work that is being carried out by paper producers, which in turn reflects their sustainable best practices in terms of sourcing supply. In fact, many companies thus resort to certification schemes so that they do not have to spend money in marketing, as in, certification appears to be in a transition period in which security of supply and production efficiency is becoming more important than consumer communication.

Another way in which companies can show that they are walking the talk, so to speak, with regard to sustainability is by making use of eco-labelling. In fact, timber-based products have been associated with the implementation of eco-labelling schemes, for example, eco-labelling has existed in paper products such as paper and disposable coffee cups. When considering eco-labelling, it must be carried out in a manner that is complemented by adequacy of information. To take an example about the importance of adequacy of information, Green Mountain Roasters (now Keurig Green Mountain) realized that the majority of American consumers did not understand the abstract term “fair trade,” despite the use of the Fair Trade Certified Label on the brand, according to GreenBiz. However, another issue with eco-labelling is its regulated usage. It must be only applied on the product after the respective due process has been carried out and that just placing the label should not equate a sustainable supply chain.

Overall, there is a vital need to allow there to be progress towards a climate change-positive environment, where a variety of stakeholders are aware that climate change is occurring, including consumers. The Volkswagen scandal has shown that corporate efforts towards meeting clean air targets cannot be solely relied upon. In fact, the greenwashing side of the Volkswagen scandal must evoke questions pertaining to sustainable consumption and those who are meaning to make a difference by the purchase of durable goods, such as cars. After all, it is all right to implement regulations and policies hoping to meet climate change target both nationally and internationally, but to ensure a wide participation over meeting them, there needs to be variety of ways to make a difference, including the population at large, of which many are consumers and who may want to make a difference by sustainable consumption of cars, which has been taken advantage of in the Volkwagen scandal. After all, societal adaptation occurs at multiple social scales, including (i) individual behaviour, (ii) formal laws, incentives and governance arrangements, and (iii) evolving norms, attitudes and understanding.

(Nitya Chhiber, is currently with YES Institute, a public policy initiative of YES Bank).