Avoid Greenwashing by Strengthening Governance

In a major move to combat misleading environmental claims, the Australian Competition and Consumer Commission (ACCC) has recently released its final guidance on greenwashing. The guidance titled “Making environmental claims: A guide for business” not only outlines the principles of good practice for environmental claims, but also emphasizes the increasing scrutiny on emissions and offsetting claims in the coming years.

The ACCC’s guidance follows concerns raised by a recent greenwashing internet sweep, revealing that 57% of reviewed businesses made potentially misleading environmental claims. The ACCC reiterated its commitment to enforcement and outlined its process, emphasizing action against representations about future environmental claims lacking reasonable grounds or intention.

What is greenwashing?

Greenwashing is the deceptive practice where a company falsely portrays its business or products as environmentally friendly. This marketing strategy involves companies claiming environmental consciousness without substantial efforts to reduce their environmental impact. Even well-intentioned companies can engage in greenwashing, contributing to widespread scepticism among global consumers regarding sustainability claims.

Essentially, greenwashing involves a company allocating more resources to marketing their eco-friendly image than genuinely addressing their environmental footprint, ultimately serving as a misleading ploy to attract environmentally conscious consumers.

As it can be seen from the above, most examples of greenwashing involve embellishing the product or service’s environmental benefits.

A Premium for Sustainable Brands

Why is greenwashing risk increasing? Marketers are increasingly driven to imbue their brands with a sense of environmental responsibility, and for good reason. According to a comprehensive report conducted by GreenPrint, a notable 64% of consumers from the Gen X demographic express a willingness to pay a premium for products associated with sustainable brands. This inclination toward sustainable choices becomes even more pronounced among millennials, with an impressive 75% of individuals within this demographic indicating a readiness to spend more on products aligned with environmentally conscious brands.

The findings underscore a significant shift in consumer preferences, where ethical considerations and sustainability play pivotal roles in purchasing decisions. As the market continues to evolve, businesses that embrace and communicate their commitment to sustainability are likely to resonate more strongly with consumers, especially those belonging to younger age groups. This not only highlights the growing importance of environmental consciousness in brand perception but also presents a clear opportunity for businesses to align their values with those of their environmentally aware consumer base.

Key Principles of the ACCC’s Greenwashing Guidance

The guidance explains the obligations under the Australian Consumer Law which businesses must comply with when making environmental and sustainability claims. It sets out what the ACCC considers to be misleading conduct and good practice when making such claims, to help businesses provide clear, accurate and trustworthy information to consumers about the environmental performance of their business.

The ACCC’s guidance encompasses eight key principles for businesses engaging in environmental claims:

1. Make accurate and truthful claims.
2. Have evidence to support your claims.
3. Avoid hiding or omitting important information.
4. Clearly explain any conditions or qualifications on claims.
5. Refrain from making broad and unqualified claims.
6. Utilize clear and easy-to-understand language.
7. Ensure visual elements do not convey a misleading impression.
8. Be direct and open about your sustainability transition.

The guidance sets the stage for transparent and meaningful communication, ensuring that legitimate sustainability efforts receive due recognition while mitigating the risks associated with greenwashing.

Emission and Offset Claims

Looking ahead, the ACCC announced plans to release further guidance in early 2024, focusing on emission and offset claims, along with the use of trust marks. The aim is to help businesses and consumers navigate the complexities of environmental claims, fostering transparency and accountability.

Governance Institute’s Response

In response to increasing regulatory action, the Governance Institute of Australia also launched a guide titled “Greenwashing: a governance perspective.” The guide positions greenwashing as a governance issue, emphasizing the importance of robust governance structures to mitigate reputational, legal, and financial risks.

The Governance Institute highlights various greenwashing risks, including selective disclosure, meaningless targets, virtue signalling, baseless claims, hidden trade-offs, and the ‘green-halo’ effect. The guide emphasizes the nuanced distinction between genuine reporting and greenwashing.

Following the United Nation’s Lead

Since the inception of the Paris Agreement in 2015, an increasing number of companies committed to achieving net-zero greenhouse gas emissions. This involved reaching a point where any remaining emissions are offset by actions such as forest conservation or ocean absorption. However, many of these claims relied on dubious strategies, including emissions offsetting and “insetting,” rather than genuine emission reductions. Consequently, the transparency and integrity of such commitments are alarmingly low, posing a risk to the urgent need for effective climate action.

Responding to the surge in greenwashing associated with net-zero pledges, the Secretary-General has established a High-Level Expert Group. This group has been assigned the crucial task of developing more robust and transparent standards for net-zero emissions commitments across companies, financial institutions, cities, and regions, expediting their implementation.

Minimising Greenwashing Risk

While greenwashing may be deliberate, it can also be done inadvertently.  To avoid greenwashing, consider implementing the following strategies:

• Clear and Specific Claims: Ensure transparency by specifying units of measurement in your sustainability claims, making them easily understandable (e.g., “20% recycled plastic” rather than vague statements).
• Provide Verifiable Data: Support your sustainability claims with accurate and current data, prominently available on your website and other communication channels. Verify all data to enhance credibility.
• Integrate Sustainability into Operations: Incorporate sustainability into your business model by adopting eco-friendly practices in manufacturing and waste disposal. Align your operations with your environmental marketing claims.
• Honesty about Sustainability Practices: Clearly communicate your brand’s sustainability practices and future plans to consumers. Be transparent about your goals and targets, building trust and accountability.
• Avoid Misleading Advertising: Ensure that advertisements and packaging accurately represent your products’ eco-friendliness. Refrain from using nature-related imagery if your brand or products do not align with environmentally friendly practices.

We are here to help you

As businesses increasingly recognize the importance of sustainability, the risk of greenwashing becomes a critical concern, adherence to the ACCC’s principles and robust governance structures becomes paramount.

To safeguard your company’s reputation and foster genuine environmental responsibility, consider partnering with InConsult. Our expert consultants can guide you through the complexities of sustainable practices, ensuring that your environmental claims align with measurable actions.  We have a range of greenwashing audit and compliance services that help reduce greenwashing risk.  We can:

• Evaluate your marketing materials and communications to identify potential greenwashing risks.
• Ensure alignment with local and international regulations related to environmental claims.
• Confirm the accuracy and reliability of data supporting your sustainability claims.
• Assess the methodology used for measuring and reporting environmental impact.
• Evaluate the effectiveness of existing governance structures related to sustainability.
• Review and enhance your policies to ensure transparency and accountability.
• Develop training sessions for internal teams on greenwashing awareness and compliance.
• Provide detailed reports on the findings of the greenwashing audit.

By taking proactive steps to integrate sustainability into your business model and leveraging the expertise of our firm, you not only mitigate the risk of greenwashing but also contribute to a more sustainable and transparent future.

Together, let’s build a greener and more sustainable tomorrow.

Contact us to embark on a journey towards authentic environmental stewardship and responsible business practices.