What is Greenwashing?
Keith Mullin
35 years: Capital markets editorial
In the first video of this series, Keith begins by introducing Greenwashing and some examples of how some companies could potentially be seen as greenwashing. He also talks about some of the regulatory moves around data disclosure that investors and other stakeholders are calling for.
In the first video of this series, Keith begins by introducing Greenwashing and some examples of how some companies could potentially be seen as greenwashing. He also talks about some of the regulatory moves around data disclosure that investors and other stakeholders are calling for.
Greenwashing is making knowingly false claims about the ESG qualities of a product, project, service or business with the intent to mislead. There are many ways companies can engage in greenwashing. It can and does result from cynical behaviour by companies but it can also result from a lack of robust data, while perceiving it can depend on one’s perspective.
Key learning objectives:
Understand how companies greenwash
Identify the ways to stop greenwashing
Outline the concept of Greenwashing
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What is greenwashing?
Greenwashing is making knowingly false claims about the ESG qualities of a product, project, service or business with the intent to mislead. At best, greenwashing is a by-product of virtue signalling or vacuous marketing. At worst, it’s suppressing information, cynical manipulation, deception; and fraud.
How do companies greenwash?
- By concealing or using false messaging to disguise poor environmental performance.
- By claiming their products have positive environmental impacts without data to back it up.
- By promoting themselves as sustainable or eco-friendly, while only a small proportion of their production actually offers environmental benefits.
- By using intentionally vague and unclear language to infer ESG benefits.
What can companies do to escape claims of greenwashing?
To escape claims of greenwashing, companies must move towards science-based targets, supported by hard data. Transition must be embedded in formal transition pathways that set out timelines, milestones, actions and expected impacts. Stakeholders need to be regularly updated on performance. In hard-to-abate industry sectors, in particular, transparency is critical, leaving investors to make up their own minds about whether targets and progress towards them are credible.
How can greenwashing be stopped?
Only through open and transparent dialogue will people be made aware first of all that greenwashing is happening, and secondly how it can be recognised, called out and stopped. Over the past few years, we have witnessed an upsurge of debt issued with green, social or sustainable labels. More than $524 billion of ESG bonds and loans were issued between January and mid-May 2021, and some $3.1 trillion in 2020, according to Refinitiv.
A vital part of the transparency story is data capture and standardised disclosure, as well as detailed impact and environmental performance reporting, ideally verified by independent agencies. Having regulated disclosure requirements will be a huge benefit to verification agencies and will relieve them of any guilt by association, moral hazard or complicity if corporate data integrity is in any way compromised.
Now free to watch
This video is now available for free. It is also part of a premium, accredited video course. Sign up for a 7-day free trial to watch more.
Keith Mullin
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