Together with ‘environment’ and ‘sustainability’, the topic of ‘greenwashing’ is high on the agenda. In this article, Humperdinck Jackman looks at the what, the why, and importance of greenwashing, and how businesses must bring it under control.
What is greenwashing?
Doubtless you’ve heard of greenwashing, but have you realised the implications? Greenwashing is the overstatement of the environmental and social credentials of an organisation or product. Most often, there’s no wilful attempt to mislead, but the consequences can be severe for businesses of all sizes when marketing enthusiasm gets ahead of reality. Even a small business can find itself facing fines or being barred from competing in public tenders.
In 1814, the poet Ivan Krylov (1769–1844), wrote a fable entitled The Inquisitive Man, which tells of a man who went to a museum and notices all sorts of tiny things, but fails to notice an elephant. Greenwashing is rather like that, an embarrassing or awkward topic of which everyone is aware, but too few wish to address.
Our current laws and regulations enable penalties for mis-stating the truth, but the situation is evolving rapidly. Now is the time to put one’s house in order because more regulations are coming, the first of which will be the EU CSRD, and then the UK SDR which is anticipated to follow the EU model.
Even today, false, misleading, or just plainly exaggerated environmental claims lay you wide open to action by the Advertising Standards Agency (ASA), the Financial Conduct Authority (FCA), and even the Competition and Markets Authority (CMA). Consider too, the cost of rectifying any reputational damage.
Pitfalls for your business to avoid
Be cautious of adopting a green theme on your website and product literature unless you’re confident that your messaging can withstand scrutiny. Similarly, avoid words such as ‘natural’, ‘organic’ or ‘eco-friendly’ unless you have substantiated that the product overall meets these criteria.
Always remember that if your communications could influence a customer purchase, a job candidate to accept employment, or an individual or corporation to invest in your products or services, then you made be held to account.
We see the regulatory future as certain to introduce strict penalties for such unsubstantiated claims, very much as the EU CRSD incorporates.
The ESG test
The only solution is Environment, Social, and Governance (ESG) reporting. Whether your organisation makes environmental claims, cites its good work in supporting the community, or even declares itself to be an equal opportunity employer, there must be documented evidence.
Every statement must be substantiated, and where assumptions are made, there must be a documented rational for how that assumption was derived. Publishing a policy isn’t enough, especially if it is copied and pasted from ‘the web’. You must ask how that policy or statement is substantiated? Is it measured, or is it merely paying lip-service to influence a
third party?
Beware supplier audits
Your business is too small? Think again! When you receive your first audit questionnaire from a key client, or when you’re already at mid-stage in a tendering process, it’s too late. Even the most minimal ESG report takes three months to complete.
Such audits demand documentary evidence behind every claim. You need to be prepared to disclose evidence across your internal governance (such as how you measure and manage risk), to specifics as to how you manage equality, corruption, privacy and more.
Statements which reference the environment merit particular caution, so dive deep in quantifying any claims made by third parties whose products or services you’re promoting.
Our advice is to start your ESG reporting now. Over time this will be as ubiquitous as health and safety documentation, and yet now is the opportunity for it to add value to your operations, increase sales and to enhance your reputation.
Humperdinck Jackman, from Advanced UK, is an author who writes and advises on current business topics, including ESG reporting and strategies. His latest book, on how to write a modern business plan, was published in October, and his articles have appeared in magazines and newspapers including The Times and The Telegraph.
Find out more at www.advanced-uk.com