Strategic CSR - Greenwashing (I)

According to the article in the url below, the term 'greenwashing' was introduced in 1986 by the "environmentalist Jay Westerveld." In the intervening years, this term has come to represent much of what is bad about corporate CSR—attempts by companies to convey the idea they are taking sustainability seriously when, in fact, they are continuing business as usual (often at the expense of the environment). The reason this happens is clear, because there is money to be made in pretending to do something without incurring the costs of actually doing it:

"Experts in the financial sector, independent watchdog groups and academics who study such issues say that unsubstantiated and exaggerated claims about sustainability and other 'green' credentials are increasing in advertising and marketing materials, and on product labels. … The U.S. market alone for products considered environmentally friendly is expected to grow to as much as $150 billion next year from $128.5 billion in 2018, according to Nielsen Holdings PLC."

The problem is that such deception is becoming taken-for-granted among those who watch companies closely:

"A [survey by the financial data company, Refinitiv] from February found that 57% of the 250 institutional investors polled, with more than $10 trillion under management, believe companies are presenting misleading environmental credentials, and 84% think the practice is becoming more common."

The article goes on to explore greenwashing, giving examples of companies that have been accused of doing it, and what to look for in identifying possible cases. For example:

"In a U.S.-based case, the Federal Trade Commission in September 2019 filed a complaint against Miami-based Truly Organic, alleging that the company mislabeled beauty products as 100% organic or vegan when they weren't."

 

One of the reasons why these deceptive practices continue is that many of the claims made by such companies cover terms with no official definition:

 

"Regulation of claims about ESG credentials in the U.S. tends to vary and is not centralized. Use of words like 'bio,' 'eco,' and 'natural' in packaging and advertising is not regulated at all."

 

And, where terms are regulated, there can be confusion over which agencies control which practices:

 

"… the Agriculture Department regulates use of the word organic in foods and personal products that use agricultural ingredients, but the Food and Drug Administration oversees the use of the term in other types of products but doesn't have a definition of the word."

Another challenge is the liberties that U.S. courts have read into free speech claims by companies:

"U.S. courts have consistently upheld a company's right to 'marketing speech' as long as it isn't demonstrably false, [Todd Cort, a lecturer in sustainability at Yale University's School of Management] says. 'Aspirational and vague statements have tended to be protected from liability in court,' he says."

And yet another challenge is confusion in the marketplace among consumers who are looking to purchase sustainable products, but are simply overwhelmed by the choice on offer and the lack of transparency that comes with product packaging:

"Product labels that make ecological or social-responsibility claims are especially confusing. When product labels feature such buzzwords as 'eco,' 'bio,' and 'fair,' it can be difficult to know what is merely an attempt to green up a product's image and what is actually meaningful information. There are at least 457 environmental and social product labels in 25 industries and nearly every country in the world, according to Ecolabel Index, a data provider and certifications directory that has been tracking eco labels since 2007."

On the plus side, the article also gives examples of counter-practices—effective and genuine implementation, often by nonprofit monitors:

"Jenny Ahlen, senior director of sustainable food and product at Environmental Defense Fund, a nonprofit that works with companies on their environmental goals, cites the Forest Stewardship Council, a nonprofit based in Bonn, Germany, that fights for responsible forest management, as a good example of sustainability certification. Ms. Ahlen says she trusts the council, whose certifications are found on items ranging from furniture to yoga mats, because of its rigorous criteria, monitoring and verification methods."

Ultimately, the article puts the onus back on consumers to do their homework, with the aid of nonprofits that investigate certification schemes on their behalf. But this feels unsatisfactory. Consumers are important actors (and have an obligation to be better informed), but cannot know everything. My sense is that it is employees who bear the greatest burden. Any deception by a company is decided upon and implemented by someone, often multiple people. If we know and turn our backs, then we are at least somewhat complicit. I am not saying that employees should go around threatening to resign every time they see something untoward. But, at the same time, we each make choices about the kind of organization we are willing to work for, and the extent to which we are willing to compromise our principles in exchange for our pay check. The Strategic CSR framework does not draw red lines in the sand, but asks each of us to think through for ourselves where those red lines lie.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

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How to Tell if a 'Sustainable' Business is 'Greenwashing'

By Fabian Negrin Ochoa and Dieter Holger

October 10, 2020

The Wall Street Journal

https://www.wsj.com/articles/how-to-tell-if-a-sustainable-business-is-greenwashing-11602342001