In the previous edition of this article, we explored the concept of greenwashing, looking at consumer impact in particular. This will explore some of the tangible steps like formulating frameworks to protect consumers from greenwashing strategies, and how countries can tackle this issue at a global level. We will also look at how Environmental, Social, and Corporate Governance (ESG) is evolving to meet these new found challenges.
Green marketing at the International level:
Let us discuss in brief some of the global measures taken to address greenwashing:
- United States
The Federal Trade Commission has passed Green Guides. These have been discussed in the previous edition of the blog. The Green Guides were last amended in 2012. It is believed that the guidelines are outdated and in need of new amendments to address the changes in green marketing over the past decade.
- United Kingdom
Guidelines for companies making environmental claims are passed by the Advertising Standards Authority (ASA). They basically state that all green claims have to be accurate and specific.
Independent organisations, like the Rainforest Alliance, also provide certification for environment friendly products. These certifications make it easy for consumers to recognise sustainable products.
The Competition Bureau in Canada, in 2019, issued guidelines, the Environmental Claims: A Guide for Industry and Advertisers, which provides guidance for companies making environmental claims in their advertising and how to avoid making false or misleading representations. The guidelines require that environmental claims be specific, accurate, and not misleading, use clear and specific language and provide evidence to support environmental claims.
- European Union
The European Union has implemented the “Green Claims” Regulation, which sets out rules for companies making environmental claims in their advertising. The regulation requires that environmental claims be specific, accurate, and verifiable. In Europe, the European Commission issued guidelines on environmental claims in 2020, which aim to harmonise the rules for environmental claims across the European Union (EU). The guidelines include criteria for substantiating environmental claims, such as using science based metrics and avoiding misleading or vague language.
Brazil has seen enforcement of anti-greenwashing practices through consumer protection cases. In 2013, the National Council for Advertising Self-Regulation ruled against companies that carried misleading advertising practices about the sustainability of its products (Group of Consumers v. Usina São Francisco, Representation 087/13 and Conar v. Organique Brasil, Representation 046/13).
Before we get into the intricacies of greenwashing, it is relevant to understand another new term, greenblushing. Greenblushing is the exact opposite of greenwashing and occurs when a company which has taken up sustainable practices to protect the environment, does not communicate the same to the public.
While greenwashing can lead to accusations of dishonesty and misrepresentation, and which is meant to mislead consumers, greenblushing is detrimental to the business because it can lead to missed opportunities for companies to differentiate themselves based on their sustainability performance. Sustainable credentials are rightfully valued by several consumers, and inadequately conveying this, can lose customer base and support. At a crucial time such as now, when there is a growing need for sustainable corporations, losing the customer base from poor messaging is not only a loss to consumers, but also to sustainability movements across the world.
However, with legislation in several parts of the world coming strongly down on greenwashing, companies might find it safer to err on the side of green blushing.
In order to avoid both ends of this spectrum, companies must be transparent with their data and use objective, layman’s language to describe their sustainable measures. .
Framework and Standards
It is clear that the biggest challenge is to figure out the correct way to make environmental claims. Most firms end up using “boilerplate language”. These are commonly used, standard templates which do not take into consideration all the data and actions taken by the firm to determine their environmental impact. The use of this generic manner of reporting is attributed to strict Corporate Social Responsibility (CSR) laws that force companies to follow a fixed format that is provided by the regulators, or to obfuscate information in such a way that it crowds out relevant details. While trying to fulfil CSR standards, firms frequently end up greenwashing.
CSR standards should be formulated to discourage boilerplate language by enlisting detailed and industry-specific methods of providing green claims.
It should also be accepted that with increasing specificity, the broad application of CSR standards will reduce. This might clash against the objective of CSR to function as uniform and universal standards. The standards must be designed to provide firms with the opportunity to divulge as much details as has been mandated for that specific category of industry. This can ensure that the standards are universally applicable.
Another step that can be taken is by mandating independent third-party assessments for proving green claims made by a company. Verification and regular review of third party assessors is taken up by EU nations under the EU Green Claims directive.
From our analysis, there are two tangible changes that can be done for moving towards better green marketing:
- Clear Definitions are required for sustainability claims All the existing regulations have failed to provide a clear definition for sustainability claims. In China, the definition is being narrowed down to match the global standards set by the EU, US, etc. It is proposed that there should be different standards for each industry. This will be help avoid greenwashing and greenblushing.
- Ineffectiveness of non-binding standards should be addressed. It is proposed that sustainability claim standards be merged with mandatory CSR standards to allow firms to make substantiated green claims. Voluntary guidelines have failed to convince companies to work seriously towards sustainability. Examples such as the EU’s guideline which are not binding, but hold companies accountable by punishing them for making wrong claims, might prevent greenwashing but also inadvertently encourage green blushing, neither of which is desirable.