Types of Greenwashing and Key Terminology

What is ‘woke-washing’ and is it being regulated?

‘Woke-washing’ can be defined as a firm claiming it is actively working to improve social goods such as gender equality, racial diversity and social inclusion, when in fact there is no proof of a fundamental change in the firm’s activities or culture. For example, firms might be talking publicly about their diversity, but not actively taking steps to recruit and promote people with more diverse characteristics: a better mix of genders, ethnicity, social backgrounds, and so on. Employment watchdogs including the UK’s financial regulator, the FCA, have begun to analyse and test how committed firms are to ESG values, such as diversity and inclusion. 

Why is greenwashing a risk to the reputation of an organisation?

Greenwashing is a risk to business value that arises when a company benefits unduly from misrepresenting its green credentials. We might think of this as a “green valuation bubble” which can all too easily burst when people (and financial markets) discover the truth. Some NGOs and governments are looking to create global reporting standards to stop companies from making such claims.

What is ‘wokenomics’ and why is it harmful?

‘Wokenomics’ is a term used by some commentators as a satire, to describe what’s happening when big brands and financial firms “pretend that they care about something other than profit and power, precisely to gain more of each”. Some critics of ‘wokenomics’ argue that what many firms are doing is simply a new form of window-dressing in their annual corporate reports, that is, boosting claims to environmental and social probity, while suppressing any troublesome evidence of, for example, their continuing to invest in fossil fuels and other environmentally harmful industries. These critics describe ‘woke capital’ as “an exercise in self-interest masquerading as morality”. 

What is ‘magical thinking’ and how does it apply to greenwashing?

All human beings are a little bit prone to magical thinking, but politicians and business leaders maybe most of all. It’s partly a product of our optimistic human nature, but more cynically, it’s a political people-pleasing move. Politicians might use magical thinking to paint a rosy picture of the future, to try to dissuade anyone from asking awkward questions about what’s happening right now. One of my research colleagues coined the lovely word “hopium” to describe this; leaders feed the public with a drug of optimism for a brighter future to keep them loyal and supportive, when actually it’s all an illusion. 

Why is leaking becoming the new form of ‘whistleblowing’ within some organisations? 

A current study by New York University’s Ethics Unit notes that “younger employees no longer regard ‘official channels’ of complaint as the first recourse [for registering social concern]; we might say that for younger employees in particular, whistleblowing channels don’t appeal as a way to fix ethical misconduct problems; instead, ‘leaking is the new whistleblowing’”.