Environmental, Social, Greenwashing: An ECEC Recap  

The discussion got underway by defining greenwashing, whether deliberate or unintentional, as overstating your company’s product or sustainable attributes. It can take many forms such as unsubstantiated claims on packaging like ethical, all natural, conscious, bio-degradable and sustainable, which can prove confusing for consumers.

Some of the worst pollution offenders actually use greenwashing as a deliberate technique to draw attention away from the environmental harm caused by their business activities. From a company’s perspective, there are many potential reasons for greenwashing. Rather than intentionally seeking to lie to consumers, it can be born out of a misunderstanding due to the sheer complexity of the sustainability topic, according to Thomas. While David Attenborough defined it very well on a general level by saying that everything you cannot do forever is unsustainable, it becomes more complex when it comes to specific products, services, companies and value chains.

Given the level of awareness of plastic pollution, packaging is a good example of unintentional greenwashing:

• A new form of bio-degradable plastic emerges that prompts companies to push their products as being sustainable
• The company pushes their products as being sustainable with success
• The fact that the new plastic can only bio-degrade in certain circumstances with specific temperatures, microbes and bacteria is not taking into consideration
• The end result is that the new plastic is sustainable in theory but remains in the environment for as long as usual in practice.

Ursula voiced her belief that companies do indeed intentionally lie to consumers and ensure economic decisions take precedence over the environment with profit and a duty to shareholders the main priorities. She affirmed that there should be a level playing field and companies need to take the environment as seriously as all other factors while championing sustainable supply chains.

There are greenwashing cases across all industries whether it is automotive, aviation, fossil fuels, fashion or retail which makes it difficult to pin blame on a single sector. When it comes to examining the breeding grounds for the practice, it is important to look at the fraud indicators that encourage misrepresentation and false statements, according to Julia. More often than not, this is a mixture of pressure and opportunity. While there is indeed a lack of intention from some organisations, there is still a duty to understand the size of the carbon footprint so that all statements released are accurate.

Inside companies, decisions that lead to greenwashing are often taken at the top. They can also stem from the company’s culture, behaviours within the organisation and what is incentivised. It is also important to look at the speak-up mechanisms in place and whether employees are able to raise concerns around the statements being made to stakeholders or the decisions taken by the leadership.

There was disagreement among the panellists regarding the principle of profit and sustainability going in hand-in-hand, whereby companies have to make money to push an effective green agenda. Ursula voiced concern that we are mainly fixated on the notion of “grow, grow, grow”, despite the fact that we do not have endless possibilities for growth on our planet. She believes the industry must change, adjust its throwaway culture and adopt different business models.

Separating green facts from greenwashing fiction can be achieved in several ways, according to Nadine:

• The integration of sustainability into strategy, targeting and global process
• Ensuring what is said from the top really trickles down through the business
• Aiming to ensure top line messaging and strategy lives on in the tiniest units
• Clamping down on misleading statements
• Examining not only what companies are doing on a daily basis but also why they are doing it

She emphasised how important it is to keep in mind that companies are not on the periphery of society. Rather, they are organisations full of people where proactive dialogue is taking place on environmental issues and grassroots movements are active. Processes such as the Science Based Targets Initiative and UN Sustainable Development Goals are also helping companies initiate cultural change, achieve higher standards and avoid greenwashing.

Reinforcing Nadine’s earlier point, Thomas explained that companies are sums of people with different functions pursuing different interests and that while many organisations are committed to the cause of sustainability, they find themselves in a system designed to satisfy shareholder needs, secure employment and deliver products – a complex web.

There is the question of the organisational allocation of sustainability and one mistake companies make is having too much of a market-oriented view of the debate. Sustainability is a complex subject, but consumer communication is easy, and this can prove a challenge. Thomas added that he views a lack of education in companies as a further enabler of greenwashing.

Ursula called attention to the growing pressure on companies to go green in order to meet stakeholder expectations. This can lead companies to claim they are green when the opposite is actually true. If a competitor is greenwashing, a company may opt to follow the same approach in order to avoid the high costs of following a sustainable approach in reality.

Legislation must come in whereby companies should prove their sustainability claim and if they cannot do so, they should not only remove it but also pay some form of penalty. Organisations only tend to take things seriously where they have seen severe levels of enforcement that can hurt their operations.

Accountability, scrutiny and fines must all play a role, as should legislation. More laws are needed like the forest and ecosystem risk commodities legislation (FERC) which forbids importing products into EU markets that cause deforestation or such as the EU Supply Chain Law which has strict due diligence standards all along the supply chain. The Green Claim Initiative also works well on a European level where a company must prove its green claims.

There was also a feeling that there is a higher level of self-definition of environmental standards at the moment with many organisations defining them alone. Legislation should be standardised across different jurisdictions to make it easier for companies to comply and for consumers to understand.

Thomas has worked in the sector for 20 years and he struck an optimistic note, stating that he has seen more progress with regulations in the last 3 years than in the previous 17. He thinks there is still a considerable enforcement gap which he hopes gets plugged and he believes in more stringent enforcement over more complex regulation. Finally, he called attention to the important role played by NGOs that attempt to hold companies to high standards.

The ECEC audience had the chance to ask the panel their questions and they did not disappoint. Responding to a question about growth, Thomas stated that growth is criticised in sustainability circles but that there are many types of growth. There are forms of growth that do not involve the increased use of resources and there should be a shift towards a circular economy where more can be achieved at a lower cost to the environment. He provided the example of technological innovation which is primarily digital and consumes energy but is otherwise not resource intensive.

A further question revolved around the reasons why media and investigative reporting are relied upon at the expense of strict environmental disclosures. Ursula called attention to the lack of investment in authorities which has undermined their enforcement capabilities, citing the ongoing influx of illegal wood into the EU despite regulations being in place. She also likened the media and civil society to the fourth power of democracy and remarked that there should be a reliance on data rather than investigative journalism.

She nevertheless agreed that media plays a vital role and must stay independent instead of being bought by companies and politicians with agendas – a big problem in her native Austria. The discussion shifted to companies like Coca Cola sponsoring events such as COP27 and the panel remarked that greenwashing is not just about businesses but also research institutions, governments and international organisations. An example was provided whereby European Council meetings were sponsored by big paper companies and Pepsi who have paid EU politicians, a practice that needs to stop.

The session ended with Thomas calling for one actor to do better on holding companies to account: the auditing community. ESG and sustainability reporting calls for balance whereby the good and bad elements are both included to uphold transparency and he challenged auditors to take this more seriously and play their part in the game.