Greenwashing is a term used to describe communication and marketing practices that intend to lead consumers to believe that a company’s business practices create a positive impact on the environment without being able to substantiate those claims. Often, they are misleading terms that create perceptions of a company being “green”.

In doing so, consumers feel positive towards the product or services being marketed, believing that their purchase decision will do good to the planet. Examples of clear greenwashing practices are “Recyclable packaging” using green fonts and visuals to make the consumer believe that the packaging of their product is certainly going to be recycled when they dispose it.

Recyclable packaging simply means that it is technically possible to recycle the material used in the packaging, however whether the disposed material is ultimately taken to the recycling facilities and processed in such manner is not part of this description. Most packaging does not get recycled due to the lack of economic returns in doing so and end up in the landfill.

Greenwashing is an adaptation of the word “whitewashing” which means covering something up by putting a more pleasant layer on top of it instead of getting rid of what is underneath.

Essentially, all of the inaccurate or exaggerated claims in an organization’s environmental or social impact can be considered greenwashing. In the recent years, there have been more specific terms to point towards more specific impact areas within greenwashing such as SDGwashing and others.

Yes. You can imagine this being a version of inaccurate claims and advertisement, and any business can be exposed to this type of risk if their content is not carefully drafted and monitored.

Most SMEs do not deliberately make an effort to greenwash. Rather, they are normally exposed to this risk as they are handling their communications, product descriptions and other tasks in-house without necessarily the full capacity and experience in how to avoid greenwashing or other types of washing.

At times, SMEs may have external freelance work contracted to create marketing material, without necessarily the full sustainability context of the business. These materials may get reused and repurposed overtime, which also – depending on the context – may create greenwashing risks where the context may not always be clear.

By performing an audit, SMEs can understand whether or not their current approach is sustainable for their business and how they may be able to reduce their risk.

There are a few key consequences

1. Customer trust

Customers are very sensitive to greenwashing nowadays. Across the globe various analysis have shown that ranging between 50-90% of the products and services on the market have some sort of “green claim”, yet equally many of these claims cannot be substantiated in any way and customers lost trust in these brands.

The lost of trust has direct business implications. Several studies have shown that consumers change their purchasing intention and even their perception of the product’s quality when they find out that a company has been greenwashing.

2. Regulatory compliance

In the EU there is a Green Claim directive that prohibits companies in using phrases and words that are considered greenwashing. Whilst this is one of the few more progressive pieces of legislations, many other jurisdictions are already using existing marketing and consumer rights legislations to regulate greenwashing issues.

3. Blurry product / service positioning

The foundation of greenwashing are unsupported claims described by using generic, non-specific descriptions to create a perception of environmental and social consciousness. When that is taken away, some products or services do not have a strong value proposition to the customer on its own. A product without its own merit in innovation, or quality is essentially a blurry product.

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The lack of policies that regulate these activities are also a reason why some companies turn to these shortcuts.

In a perfect world, the first step to avoid greenwashing is to conduct a materiality assessment to understand what are they key impact areas the company’s activities could involve, both positively and negatively. Performing a thorough materiality assessment means that the company will comb through its entire value chain, collect input from its stakeholders, and have a stronger understanding in the gaps and opportunities of their current processes.

With this information, companies can set up processes to capture their sustainability data and create metrics to measure their performances over time. This information is then used to perform sustainability reporting and disclosures. The output of such reporting may then be the backing evidence and datapoints in which company communications are built upon.

Another method is to obtain sustainability ratings through credible audits and certifications. Certifications such as B Corp, or others that are industry-specific, often involve a solid verification process to validate the sustainability context and claims of a company’s ESG impact.

However, not every company is in a position to take the time and resources in going through an elaborated process in the short-term. This does not mean that they must accept the risk of greenwashing. Contrary, our website audit services offers an immediate solution where we can help review your website and identify whether specific areas need urgent attention. This is often a great starting point to building a more forward-looking sustainability strategy.

Studies mentioned on this page:

• The effects of greenwashing on purchasing intention and perceived quality by the consumer (2024);
• An experimental test of a greenwashing inoculation intervention in Ireland: Effects of ‘pre-bunking’ on identification, consumer trust and purchase intentions (2024);
• Effects of Greenwashing Practices on Consumer Perception (2024)