The greenwashing reckoning is upon us

The crackdown on greenwashing is coming fast and furious. And not a minute too soon.

Source: SproutVideo

The state of greenwashing

Net Zero Tracker, a global climate watchdog that monitors net zero targets, released its most recent findings this week. They found that 37% of the world’s biggest corporations do not have a greenhouse gas emission mitigation target, with US companies lagging behind Europe. Additionally, only 4% of corporate net zero commitments were of the highest integrity (including a publish plan, immediate emission-cutting measures, interim and annual progress reporting and long-term targets).

This is echoed by CDP, a global non-profit that focuses on corporate climate disclosures, in its recently published 2022 report on the climate transition. The key finding in the report was that in 2022, over 18,600 companies disclosed information through CDP’s climate change questionnaire, and only 4,100 had already developed a 1.5C transition plan. Of those 4,100 transition plans, only 81 were of sufficient quality to be considered credible.

Not great!

Greenwashing occurs when companies disclose their positive societal impact without also mentioning negative effects, displaying a beneficial public image that is not a full representation of performance. This includes deliberately releasing deceptive information to misinform investors. Companies do this because they think customers will take them at face value and incorporate these facts into their spending habits.

According to research published last year by the Harvard Business Review, customers judge greenwashers harshly, with direct impacts on how customers interact with a greenwasher’s product or service. However, customers are more forgiving of companies they already hold in high esteem. So if a product is of sufficient quality, greenwashing is not as material (though the researchers argue this could be a temporary effect and long-term preferences could shift).

Regulator response to greenwashing

If companies don’t have a coherent plan, one way to get them to commit is by punishing them for misrepresenting their progress / actions to the public. In response to this aforementioned greenwashing, regulators are starting to step up to the challenge.