If you are like us at EGÉA SRI, you care deeply about the planet and you do your best to make environmentally responsible decisions, purchases, and investments. While sustainability undoubtedly has an influence on the world of business, unfortunately, some companies engage in greenwashing. At EGÉA SRI, we know how to spot greenwashing so that your hard-earned money doesn’t go toward investments that aren’t environmentally, socially, or governmentally sound. In this article, we will discuss a real greenwashing definition, some greenwashing examples, and commonly greenwashed products. Read on to learn how to spot greenwashing, so your portfolio can make a real impact.
Greenwashing Definition
If you are ready to start investing sustainably, you need to be aware of greenwashing. Before we discuss how to spot greenwashing, what is greenwashing? Greenwashing is the deceptive marketing process of conveying a false impression or providing misleading information about how a company’s products, services, or manufacturing processes are environmentally sound. Companies use greenwashing to falsely appeal to customers and investors who care about the environment. They do this because it works. More than a third of global consumers are willing to pay more for sustainability, according to the Global Sustainability Study 2021.
The History of Greenwashing
While greenwashing is a pretty trendy and well-known term today, it is a word that has been part of the nomenclature for more than 20 years. Environmentalist Jay Westerveld coined the term “greenwashing” in the 1980s in an essay. In said essay, he critiqued the irony of hotels asking guests to reuse towels in order to help the environment, when in fact the move was made to help reduce laundry costs and had little effect on the environment.
Greenwashing Examples
To help you spot greenwashing in the future, it can help to see some noteworthy examples. You might have heard of a few of these examples of greenwashed products, brands, and industries:
Starbucks
The popular coffee brand abandoned straws in favor of straw-free lids. However, studies found that strawless lids actually use more plastic than the separate plastic straw and lid.
Auto Industry
Vehicles are one of the most greenwashed products. Many vehicle manufacturers are trying to improve their reputations by improving their cars’ fuel efficiency or utilizing recycled materials when possible. And some auto companies are making strides toward sustainability. However, others have blatantly engaged in greenwashing. For example, Volkswagen admitted to cheating on its vehicle emissions tests.
Apple
Apple has announced green policies, like shipping its iPhone 12 without earbuds or a wall charger in an effort to reduce e-waste. However, the company is a major contributor to e-waste due to its phones’ planned obsolescence.
Shein
The fashion industry has also come under fire in recent years for greenwashing. One fast fashion company trying to change its reputation is Shein. In a recent campaign, Shein advertised its small-batch release process
How to Spot Greenwashing
One of the many questions we receive about sustainable investing is how to spot greenwashing. Greenwashing can be difficult to spot if you don’t know what to look for. Here are some ways you can spot greenwashing:
Watch for Selective Disclosure
Some companies will highlight a positive environmental fact about their product, while intentionally failing to mention the negative. For example, an auto manufacturer might highlight its vehicles’ fuel efficiency while failing to mention the destructive mining practices associated with producing its lithium batteries.
Look for “Lesser of Two Evils”
Companies might attempt to promote one positive aspect of an otherwise environmentally damaging product. For example, Walmart was sued for misrepresenting the benefits of allegedly “biodegradable” water bottles.
Keep an Eye Out for Symbolic Actions
Look for green actions that are more symbolic than meaningful. Brands might attempt to draw attention to a small positive action that has little effect on its overall environmental footprint. For example, an oil company donating Dawn dish soap to clean affected animals after their own oil spills in the ocean does little to mitigate the damage.
Misleading or Meaningless Labels
Many of us peruse the aisles at our local store and see a label that says something like “made with natural ingredients,” grab the item, and throw it in our baskets. These phrases are often called “greenspeak,” and they are largely unregulated.
Look for Overinflated Phrases
Many companies that engage in greenwashing utilize phrases that while they might be true and sound good to the consumer, give a skewed perception of the product. For example, perhaps a clothing company will advertise that its products are now made with 50% more recycled products, but really they increased from 1% to 2%. While that statement may still be true, it is overinflated.
Check for Measurable Proof
Many companies make claims about how environmentally friendly their product is, but they do not share any certifications or other evidence to back up those claims. Always look for actual measurable claims that demonstrate the sustainability of a product or service.
Be Wary of Vagueness
With the popularity of eco-friendly businesses with consumers, many businesses are making broad, vague statements about their sustainability and other efforts to go green. Keep an eye out for vague terms that don’t really mean anything.
Look for Irrelevance
Many companies are greenwashing products that are making claims that are technically accurate, but are misleading as far as their actual environmental impact. For example, a paper company might label its products as “all-natural,” but most paper contains all-natural ingredients. Or, consider trash bags that are labeled as “recyclable,” though the point of garbage bags is to end up in the trash.
Keep an Eye Out for Suggestive Images
Sometimes, greenwashing doesn’t involve using words at all. A company might simply market its products in visually appealing packaging. For example, a product that comes in a box with green leaves suggests that it’s eco-friendly, without actually saying it anywhere on the package.
Avoid Greenwashing at EGÉA SRI
In terms of investing, greenwashing uses manipulation and misinformation to garner consumer confidence around a company’s ESG (environmental, social, and governance) claims. It can be harder to learn how to spot greenwashing as an investor than as a consumer. That is why it is important to work with a reputable and knowledgeable sustainable investing firm like EGÉA SRI. We are one of the best firms for value-based investing. If avoiding companies that participate in greenwashing is important to you, open an account or set up a free consultation with us today.
Disclosure:
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
