What is Greenwashing, and is it ethical?

What is Greenwashing?

Greenwashing; the act of a business making misleading claims about the environmental benefits of a product, service or a company practice. Usually this will involve marketing with green fields, trees and the use of environmental lingo like “green” and “eco-friendly”. They often do this with the intention of making the business appear more environmentally conscious than what they actually are. They do this by misleading people who are not as informed on sustainability practices, or sometimes by outright lying to consumers. While it’s been easier to get away with in the past – before the internet made information distribution so easy – companies still manage to mislead and deceive consumers.

Greenwashing can take many forms on many different levels. One common example of greenwashing is when: a rubbish bag is labelled as ‘degradable’ when in fact ‘degradable’ simply means the plastic is broken down into small microplastics, instead of being compostable. Usually this is accompanied by green packaging littered with images of trees and flowers, that consumers subconsciously associated with the environment. So they are ‘nudged’ to buy it – see my video on nudging and manipulation here.

But it can also be a lot more deceptive than that. H&M, the fast fashion brand has undertaken large ‘sustainability’ campaigns in recent years, advocating to recycle clothing[i]. They have also made statements to become 100% climate positive by 2040[ii]. That all sounds really great, to see a leading manufacturer and distributor of textiles taking this initiative. 

It’s just a shame that it’s coming from the same company that burns their damaged or unsold clothes, simply because recycling it would be too costly[iii]. Though this sort of behaviour shouldn’t be unexpected from a business that has a history of using child labour; and one that profits from pedaling massive amounts of  cheap clothes to consumers, with the expectation that the clothes will be thrown out… sorry ‘recycled’, months later, only for customers to repeat the cycle. 

People buy their clothes, thinking they’re supporting a company with a sustainable mission and business model, all the while consumers are inadvertently perpetuating the unsustainable practices of fast fashion.

Worse still is the behaviour of large oil companies. BP for example boasts its renewable energy scheme that it is developing solar capacity in countries around the world. However, they are contributing very little to the grid, only offering 100MW of solar power here in Australia; with similar amounts being produced elsewhere[iv]. As BP attempts to paint their oily practices green, they try to divert consumer perceptions of their company away from the fact they they are one of the largest contributors to manmade climate change in the world[v]. This doesn’t even account for the mass ecological damage that is caused by their business practices, such as the Deepwater Horizon oil spill that affected over 10,000 different species of animals and is still causing adverse effects to the ecology 9 years on. They continue to drill new wells for oil extraction and ignore the very pressing climate emergency we are facing. 

This is also why Greenpeace protestors spent nearly 7 days occupying an oil rig rented by BP, in northern Scotland earlier in June. Leading to 14 arrests, these people faced off against BP demanding they change to renewable energy sources. These people understand that despite the facade BP pushes, they have no intention to stop extracting fossil fuels from the earth while it is still profitable. Now, I don’t know about you: but we can’t all go climbing on oil rigs getting arrested at the drop of a hat.

Tips to Avoid Greenwashing

So, what can we do? How can we avoid this? Well, the 2015 Selling Sustainability Report outlines some key tips to help avoid green-washing tactics[vi]. They are:

Look out for words with no clear meaning 

If items have words with no clear meaning like “degradable” and “green” be suspicious. This is often done to trick consumers into assuming the product is eco-friendly

Green products coming from dirty companies

Even if a product seems sustainable, it may come from a dirty company. By purchasing such an item, you are inadvertently supporting the unsustainable practices of this company through your purchase

Suggestive images 

Often times companies will use suggestive images like flowers and green fields to convey a sense of sustainability. This is the most blatant form of green-washing and is used to subconsciously ‘nudge’ consumers into buying their products. See my video on nudging here to learn more. 

Irrelevant claims

Making tiny claims when all other details of the product are absent. For example, a product may claim to be ‘made from all-natural ingredients’ but may leave out where those products are sourced, and how they’re packaged.

No credibility or proof

A product may make claims about being ‘more environmentally friendly than competitors’ or being ‘the number 1 natural alternative’ without any evidence to support these claims. They are simply used to mislead to encourage customers to buy their products over competitors.

By utilising these tips, we can more readily spot greenwashing in our daily lives and avoid companies that are acting in such manipulative ways. But perhaps the question isn’t ‘how do we avoid greenwashing?’. But instead, why should we have to do this at all? I’m not sure it’s enough to simply improve our consumer habits and allow this behaviour to continue. There are serious ethical repercussions that occur as a result of greenwashing, and to understand them we have to understand why businesses – even those that claim to have our interests in mind – deceive us.

Business Ethics – Shareholders vs. Stakeholders

Business ethics is a term that’s often met with a lot of scepticism purely due to its assumed contradiction – which says a lot about what we intuitively know about the business world and company motivation. Nonetheless, business ethics has a lot to say about business activity, marketing and motivation that can help keep firms accountable for their behaviour.

One of these major ethical questions is whether businesses should prioritise shareholders or stakeholder satisfaction. The more dominant view, especially by large corporate governance is that of shareholder primacy: the view that shareholder interest – those that have shares within the firm – should be prioritised. What are the interests of these shareholders though? Well its rather simple. The maximization of wealth. Often times, that comes with greater moral repercussions. Afterall, this holds a very traditional view of businesses and their motivations. With such a view comes the expectation that manager’s,

Do not factor ethical considerations into their decisions, actions and behaviours, because they believe business activity resides outside the sphere to which moral judgements apply

[vii]

The reason given for this is that upon employment, the individual becomes an agent of the company, WIth this, the individual should put aside their private morality and develop the virtues necessary for achieving the company’s goals[viii]. However, businesses – whether local of international – are inextricably linked to the goals, purposes and practices of the communities that they work within. This makes a business a profound moral entity that influences the surrounding communities. For this reason alone, businesses need to be held morally accountable for their actions, it is not enough to simply dismiss any ethical consideration within the business world, simply for profit.

This is where stakeholder satisfaction becomes relevant; that the interests of those that have a ‘stake’ in the firm should be balanced and prioritised. This broadens the circle of responsibility of firms beyond just the shareholders, as a stakeholder can include anyone with a stake in the company. This will vary from business to business, but this can include:

The public, employees, shareholders themselves, consumers, suppliers, distributors, manufacturers, competitors, partner companies, parent companies, banks, local communities, minority demographics, non-government organisations, watch dogs,  local governments, federal governments, international organisations, whole countries, and even ecosystems and  the environment usually represented by Non-Government Organisations like Greenpeace and the Worldwide Fund for Nature.

Because of this long list, many people criticize stakeholder theory for its lack of identifiable boundaries on where stakeholders begin and end, and that balancing these interests is not defined enough for it to be a feasible theory within business ethics[ix]. If we hold this to be true, this leaves shareholders and the maximisation of profits the dominant ends pursued by corporations, and not the interests of stakeholders, or the wider community. While not surprising to anyone given that we live in a capitalist society, shareholder satisfaction and profit maximization remains the key motivator in business decision making, even if it means manipulating and deceiving consumers through ‘greenwashing’.

Why do Companies Greenwash?

While not the governing theory of business ethics, stakeholders do play a role within business decision making. More specifically they can influence and limit what a business can do to pursue the ends of maximising profits. Now more than ever, with the advent of the internet and access to information, we are aware of a business’s actions. We can ensure that they abide by certain laws and regulations, or when those don’t exist, keep them accountable to certain social rules. If we expect businesses to take environmental damage and sustainability into consideration, we can support those businesses that align with these social values through what we purchase. Perhaps more effectively, the general public has the ability to publicly ridicule, condemn and demand change from businesses that are deemed unethical. We see this happen all the time, when people so often threaten to boycott a business who has said or done something that does not align with community values. At the risk of losing customers as a result, firms will often revoke whatever statement/act they made in order to retain customer loyalty and uphold some amount of Corporate Social Responsibility. These businesses do so, not because they are prioritising stakeholders, but because these things help to maintain profits. However, businesses in their pursuit of profit will circumvent or even exploit these ‘rules’ by greenwashing their products and practices.

Making the changes needed to become more sustainable and eco-friendly can be costly for a business. Whether it be R&D, sourcing new suppliers, implementing sustainable supply chains, retraining employees, or implementing entirely new sustainable systems, it is not cheap. As a result, this actively effects the firms bottomline, and therefore shareholders. Instead of making the change necessary to ‘go green’ – and incur the costs – greenwashing is a cheaper and easier alternative. Moreover, it is a beneficial way to appeal to a greater amount of people, and to corner greater areas of the market through small changes in false advertising.

As people become more aware of the need for sustainable practices, they will look for ways they can actively change aspects of their own lives to make an impact. One such way is to buy ‘green’ or sustainable products; products that have a smaller and less harmful environmental impact to others. In order to capture market demographics and ensure a maximisation of profit companies will advertise a ‘green’ alternative to unassuming customers. Looking back to the example of a ‘degradable’ bag, this exploitation of consumer demands is done solely for the purpose of misleading customers into buying a product. Someone who wants to be more environmentally friendly, but is unaware of what to do will mistakenly buy this product, thinking they are making a change, when in fact they are simply furthering the issue, and giving money to businesses who fail to care about the concerns of the community. Little regard is given to the ethics of misleading the consumer, and instead the profit of the business is being prioritised. This is the epitome of shareholder priorities coming before stakeholders and the community at large. 

Likewise, H&M introduced a recycling scheme to paint an image of sustainability, and to gain the favour of consumers who are eco-conscious but unaware of the effects of fast fashion. So they will paint themselves as eco-conscious, and consumers who don’t know any better can continue to buy their fast fashion with the impression they’re making a change, and supporting an environmentally conscious business. But in fact all they are doing is supporting a business that actively burns their clothes, and contributes to the 500,000 tonnes of textile waste Australians create each year. This doesn’t even address the materialistic values that H&M and other fast fashion companies emphasise in order to prey on consumers. 

Finally, BP. The company tries to pedal the image of being ‘sustainable’ through the use of solar farms, all the while it remains one of the largest contributors to climate change through their profiteering of the world’s natural resources. Their use of a ‘sustainable’ image is to improve their public perception in a time when energy companies are coming under justified scrutiny for their disastrous business practices, and unethical behaviour. By over-emphasising their miniscule contributions to solar farming, the general public and other stakeholders are less likely to demand change from BP, other large energy companies and the government action. Because of this greenwashing, the perception of oil companies shifts from “they need to stop doing this” to “at least they’re starting to make a change for the better”. Even when their renewable energy contribution is minimal, and their impact on climate change only increases. So the issue of greenwashing extends beyond our consumer habits  It can be used to drastically influence the public’s perception of major corporations and halt the progress toward a sustainable future altogether. That is why paying attention to greenwashing in our buying habits – while beneficial – is not enough.  We have to demand change from governments, for the larger and systematic change that is needed. That is the only way we will see true and impactful change occur to mitigate climate change. And a big part of that is to prevent greenwashing from occurring.

Virtue in Business

However, addressing the entire issue of greenwashing is difficult. Afterall, the issue of greenwashing, and more so the issue of manipulation through marketing (you can see my video on that here) is a rampant issue. However, the absence of ethics, or the idea that the business world should operate independently of our own ethical standards is downright foolish; not when corporations have such a profound and incestuous influence on the way we live.

Instead, much like we do in our own lives, we should be encouraging the virtues within the business world too. Not simply virtues that are aligned with business goals, but the very same that we hold in our personal lives. Instead of creating a separation of personal ethics and the business world, the actions and motives of employees within the workplace should be held to the same moral scrutiny as the rest of our lives. If we try and draw a line between the two and,

To pretend that the virtues of business stand isolated from the virtues of the rest of our lives… is to set up that familiar tragedy in which a pressured employee violates his or her ’personal values’, because from a purely business point of view, he or she ‘didn’t really have any choice

[x]

The expectation of employees to put aside their developed virtues and moral standing for the priority of profit maximisation and shareholder satisfaction is short-sighted at the least, and egregiously unethical at the most, as we see with companies like H&M and BP. In encouraging the same virtues that we should be developing in our personal lives to subsist in the business world, we can help encourage ethical business practice for not only employees, but the wider community too. In exercising certain virtues like truthfulness, magnificence, and modesty in employees, managers and CEO’s alike, we can start to actively change the moral landscape in which businesses operate. In bridging the gap between personal and business ethics and holding them to a single moral standard, we can correct the blatant manipulation that occurs in modern marketing and the business world. If we can bring such ideals into the workplace through the way we behave as employees, and managers, we may perhaps see a shift toward moral accountability within businesses. 

It’s not enough to simply place the responsibility on consumers. We should not have to carefully navigate the waves of deception and misleading marketing in order to live an ethical life. It’s time that we demand change from our governments and start holding businesses that the intense moral scrutiny that has been sorely lacking.

[i] Bain, Marc. 2016. “Is H&M Misleading Customers with All Its Talk of Sustainability?” Quartz. Quartz. April 16, 2016. https://qz.com/662031/is-hm-misleading-customers-with-all-its-talk-of-sustainability/.

[ii] Farmbrough, Heather. 2018. “H&M Is Pushing Sustainability Hard, But Not Everyone Is Convinced.” Forbes, April 14, 2018. https://www.forbes.com/sites/heatherfarmbrough/2018/04/14/hm-is-pushing-sustainability-hard-but-not-everyone-is-convinced/#3ec4f7f37ebd.

[iii] Brodde, Kirsten. 2013. “Why Is H&M Burning New Clothes?” Greenpeace International. 2013. https://www.greenpeace.org/archive-international/en/news/Blogs/makingwaves/hm-burning-new-clothes-fast-fashion-incineration/blog/60640/.

[iv] BP global. 2019. “Renewable Energy | Sustainability | Home.” BP Global. 2019. https://www.bp.com/en/global/corporate/sustainability/climate-change/renewable-energy.html.

[v] Riley, Tess. 2018. “Just 100 Companies Responsible for 71% of Global Emissions, Study Says.” The Guardian. The Guardian. February 14, 2018. http://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change.

[vi] Futtera. n.d. “Selling Sustainability PRIMER FOR MARKETERS This Primer Was Published by the Sustainable Lifestyles Frontier Group.” https://www.wearefuterra.com/wp-content/uploads/2015/10/FuterraBSR_SellingSustainability2015.pdf.

[vii] Stout, Lynn A. 2002. “Bad and Not-So-Bad Arguments For Shareholder Primacy.” SSRN Electronic Journal, 1193. https://doi.org/10.2139/ssrn.331464.

[viii] Morse, John. 1999. “The Missing Link between Virtue Theory and Business Ethics.” Journal of Applied Philosophy 16 (1): 49. https://doi.org/10.1111/1468-5930.00107.

[ix] Morse, John. 1999. “The Missing Link between Virtue Theory and Business Ethics.” Journal of Applied Philosophy 16 (1): 48. https://doi.org/10.1111/1468-5930.00107.

[x] Orts, Eric W., and Alan Strudler. 2009. “Putting a Stake in Stakeholder Theory.” Journal of Business Ethics 88 (S4): 605–15. https://doi.org/10.1007/s10551-009-0310-y.