Editor's Choice Ethical Banking

Preventing Greenwashing: the Warning Signs in Your Value-Chain

Greenwashing has become a very hot topic, and consumers are not shying away from naming and shaming companies that aren’t actually as ‘green’ as they claim to be.

Greenwashing should not be ignored, considering the ramifications of jumping on the ‘green’ bandwagon and mindlessly labelling a company as ‘eco’ and ‘sustainable’, says James Swenson, managing director, research and operations, of ethiXbase, a value chain sustainability solutions business that delivers data analytics to assist corporates and third parties, create and maintaining sustainable business practices. 

James Swenson
James Swenson, MD, ethiXbase

No one is exempt from this spotlight, and being inaccurate about important sustainable practices that should have previously been implemented is costly to both reputation and revenue. It is now time for businesses to walk the walk, and put in place reporting measures that ensure they are operating as sustainably as possible.

What is greenwashing and why is it important to identify?

Greenwashing is an umbrella term that has been around since the 1980s, and encompasses numerous activities ranging from organisations deliberately lying and misleading consumers to accidentally exaggerating or misrepresenting practices without a genuine motive. It is often used as a marketing and advertising technique to make a company appear greener and more sustainable than it is.

Firms often selectively disclose relationships with ‘good’ suppliers rather than relationships with ‘bad’ suppliers. It is a practice used to gain preference with customers who choose to purchase and support businesses that care about their impact on the planet. Bluewashing, a term used to describe deliberately deceptive marketing, has also become more prevalent. One example is seeing companies claiming to follow United Nations rules relating to non-slavery clothes production when they actually aren’t.

If a company is participating in greenwashing, its entire reputation, image and brand are on the line which can lead to a plummet in sales and revenue. In fact, 77 per cent of consumers are motivated to purchase from companies committed to making the world a better place, and 73 per cent of investors state that efforts to improve the environment, and society, contribute to their investment decisions.

The risks of greenwashing in your value-chain

Although it may seem beneficial to brand image, greenwashing only possesses very short-term benefits and has detrimental long-term impacts on reputation and revenue.

Competitive markets have meant that many smaller suppliers and firms are claiming to be green and sustainable, due to pressure from rivals that are doing the same. They do not have the resources to invest in companies that score high on corporate social responsibility reporting (CSR), and subsequently try to volumise their green image at minimal cost and operational disruption.

Businesses under EU disclosure have not only a legal obligation to annually report on environmental, social and corporate governance (ESG), but also an added internal revenue and investment requirement. Organisations that take a proactive approach and drop inadequate traditional methods of point-in-time assessments, and instead implement a risk assessment automation platform, will be better prepared for the risk obstacles thrown their way. It is important that businesses view ESG as an important requirement, and invest in tools that can help them meet the standards laid out.

The steps to identify and prevent greenwashing in your value chain

In many cases, greenwashing is hidden in supply chains and manufacturing procedures, meaning organisations can easily bury environmental degradation and malpractices. It is imperative that supply chain executives look for greenwashing in their own company and along their supply chain.

  1. Measure impact

There are two common ways to assess the impact of a given product or organisation to help identify whether a company is guilty of greenwashing. Implementing inventory reporting can report the impacts of a company’s operations such as social equality, carbon emissions and biodiversity impact – aligned with the UN’s Sustainable Development Goals. Additionally, this can also measure the impact of a particular investment to compare what would have happened in its absence and conclude whether the investment is of value or not.

2. Verification

Another part of the solution is verification. Specialist organisations can be employed to carry out screening and testing, to verify the validity of a company’s sustainability claims. This can highlight genuinely effective initiatives while outing those that could result in claims of greenwashing.

Data collected from screening tests at all levels of the supply chain can prevent and confront any accusations of greenwashing by providing evidence that verifies green credentials. Many greenwashing cases happen when a company makes environmental claims that are not backed or verified by data or a third party.

3. Automated risk assessments

To anticipate the road ahead and identify instances that might threaten environmental credentials, companies must implement ongoing supply chain risk management to monitor risk regulations, and risks presented by supply chains and internal operations. This will monitor and collect appropriate data from third-party partners in real-time to identify risks before they escalate, and protect an organisation from involuntarily falling into the category of greenwashing.

Many consumers are now aware of greenwashing and are holding brands accountable for their misleading sustainable pledges, and absent verifications. By closely monitoring supply chains and reporting on environmental credentials and the authenticity of the suppliers used, companies can avoid any accusations and involvement in greenwashing.


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