Top tips to spot and avoid greenwashing in corporates

At its core, greenwashing is about misleading consumers into believing that a product or service is more sustainable than it really is.

Companies may engage in greenwashing deliberately or inadvertently, for example by including misleading information in marketing, making false or exaggerated claims to sustainability without evidence, through vague policies and commitments based on unsubstantiated evidence, using questionable methodologies, or via partnerships with false certification providers.

Whether deliberate or not, greenwashing erodes consumer trust and harms a company’s credibility and reputation.

Regulators and standard setters across the globe are clamping down on greenwashing, with new rules and packages of measures to curb false sustainability claims and restrict the unsubstantiated use of terms like “green” and “sustainable”.

Greenwashing can be hard to spot at first, and its certainly more of an art than a science. To help you spot the red flags and get to grips with this all-too-common practice, here are some red flags to look out for when considering a company’s approach to sustainability.

1.      Policies and procedures

It’s basic but if a company doesn’t have a policy or strategy explaining what it’s doing to protect people and the environment, there’s a good chance it’s not doing anything. On the environmental side, look for policies and plans (e.g., environmental policy, climate strategy, sustainability / transition plan etc.) that explain how a company identifies and manages its exposure to climate and other environmental risks, how it measures its resource inputs (energy, water, materials), and outputs (waste, emissions), and what its plans are to reduce its impact over time. Action plans should be detailed, credible, and timebound, explaining not just what but how initiatives will be implemented across relevant categories like energy, waste, water, buildings, transport etc. Plans should also be embedded within a company’s overall strategy with clear responsibilities for the oversight and delivery of the plan. On the social side, the same principles apply, but here look for evidence of a company’s policies and approach to labour practices, health and safety, supply chain management, product quality and selling practices, customer welfare, workforce diversity and equal opportunities, and data security. Finally, watch out for high-level statements that lack oversight and detail, and always question any claims that look suspect.

2.      Don’t believe the hype

If it sounds too good to be true, it might well be. Dig deeper, look beyond impressive sounding statistics, exaggerated claims, and glossy marketing materials. Seek credible data-driven evidence over vague and unsubstantiated claims like “eco-friendly”, “biodegradable”, or “committed to sustainability”.

Look out for omissions of information – like when HSBC claimed to be tackling climate-change but failed to mention its ongoing investments in fossil fuels. In this example they were found by the Advertising Standards Authority (ASA) to have "omitted significant information about HSBC's contribution” to climate change and were forced to end the marketing campaign.

Misleading claims may be fairly obvious - like Ryanair’s “lowest emissions airline” claim which lacked any real evidence – or harder to spot – like H&M’s claims items of clothing had been produced with “30% less water”, when in fact they were produced with 30% more. Look out for companies with a repeated history of false claims and greenwashing, as well as fines and other controversies relating to environmental impacts like pollution, and social issues like abuse of labour rights and poor working conditions.

Finally, look out for companies whose claims do not align with their actions. Consider the glossy marketing materials and claims to be “green” and “low carbon” made by some of the oil and gas majors in the context of major expansion of their fossil fuel operations. Note the exclusion of Scope 3 emissions in their targets, and the overall weakness of targets (Shell pledged to cut Scope 1 and 2 emissions, despite more than 97% of their emissions coming from Scope 3). Be wary of bespoke or in-house metrics with overly complex and inaccessible methodologies (Shell’s ‘Net Carbon Footprint’ metric for example) as well as vague sounding language that may provide a get-out for companies down the line (again think of Shell’s pledge to become net zero “in step with society”).

3.      Commitments and partnerships

Like policies, commitments should be credible - as in achievable - and backed by detailed plans and targets. Watch out for pledges like “net zero by 2050” with no underlying plan, no interim targets, and no progress monitoring procedures. Ideally, companies with targets would be verified or working towards verification by an independent provider (B-Corps, CDP, TCFD, SBTi. etc). Companies aligning to such groups tend to have implemented a process to measure and report against environmental and social factors, allowing for comparison and providing transparency, accountability, and ultimately confidence that they’ll do what they say they will. Partnerships with recognised independent certification groups (LEED/BREEAM, Rainforest Alliance, Fairtrade, Forest Stewardship Council (FSC) etc.) are also a good sign but watch out for fake certification providers that sound similar to the real ones e.g., “Rainforest certified”.

What to do to avoid greenwashing?

• Start by developing a robust approach and make sure you deliver it consistently across teams/the firm.

• Create a shared framework or log for recording suspected incidents of greenwashing to help build up a list of practices and companies to be wary of.

• Provide regular training to staff to help them know what to look out for.

• Ask questions, where possible, of companies of interest. Challenge claims and request evidence.

• Get your own house in order. Check your products and funds are correctly labelled and don’t make exaggerated claims about the level of sustainability you’re working at. Report against the relevant industry standards and communicate both your approach and your risks and impacts in relation to environmental and social factors.

If you need more information or help spotting greenwashing, get in touch!