How can you tell if a company is greenwashing? (2024)

The increase in regulatory intervention has lead to a plethora of advice and guidance about avoiding regulatory risk. This is important, but it's also important to remember that you can be called out for greenwashing and suffer reputational damage and real world losses without contravening regulatory guidance. The rules for this type of greenwashing are less clearly defined, but typically involve unregulated or less well regulated mediums (sponsorships, social influencers, corporate reports or share prospectus). The general rule to observe here is to avoid a perceived gap between your actions and communications, but also test your campaign rigorously to gather a range of views.

In my experience, a good way of checking for greenwashing evidence is social proof. If many people say a company is greenwashing, chances are they are. But one should always triple-check with independent sources. We really need more transparency to help citizens make the right decisions when it comes to purchasing goods and services.

check what they lobby for and against. Individually and in industry groups/associations. Companies that are not lobbying for what they need (regulations, infrastructure, etc) to become more sustainable are not really interested in going all the way to true 'net-zero' or even net-positive for society. They are 'followers' not 'leaders'.Most companies cannot answer the question: what changes in regulations do you need to reach your sustainability goals.

I haven’t found yet any single company above 1 bln usd revenue in the world that is NOT greenwashing, inc those that I am invested in.

Companies should avoid broad brush claims - words like 'sustainable' and 'eco friendly', which are so broad they are hard to evidence and have different meanings to different people. While a company may use these for SEO purposes, they should provide more detail (and data) as to what makes them sustainable, and where this applies in their business. A genuine company won't be afraid to share their limitations too, as it's impossible to be 100% sustainable.

One thing that I always do it to look for proof points and see if data are used to support the claim. Then I conduct my own research exploring the topic and looking for scientific publications - look at scientific journals not secondary data!Third, I do not stop and consider each single word - despite the fact that some flag potential for greenwashing - but read carefully the whole narrative and how the brand company presents and supports the claims.

To discern greenwashing, scrutinize the source of a company's information and communication. Companies relying on self-regulation or self-declaration lack independent verification. Ambiguous terms like "natural," "green," or "eco-friendly" without clear definitions may indicate inconsistency. Emotional or sensational language, such as "save the planet" or "revolutionary," appeals to emotions rather than facts. Credibility lies in companies using specific sources like scientific studies, industry standards, or external audits to substantiate their claims. Seeking transparency in sourcing information is crucial to differentiate between authentic sustainability practices and potentially deceptive greenwashing tactics.

1. **Vague Terminology:** Watch for unclear eco-friendly claims.2. **Misleading Imagery:** Be cautious of unrelated green images.3. **Lack of Certifications:** Check for credible third-party validations.4. **Unsubstantiated Claims:** Look for evidence supporting green statements.5. **Single-Aspect Focus:** Authentic sustainability is comprehensive.6. **Comparisons to Inferior Alternatives:** Ensure fair industry-standard benchmarks.7. **Ignoring Core Operations:** Address major environmental impacts, not just minor efforts.8. **No Clear Sustainability Strategy:** Legitimate companies have transparent goals.9. **Inconsistent Messaging:** Verify alignment between marketing and practices.

Always look out for what companies are NOT telling you. For instance, if they say they've "reduced plastic usage by X%", the burning question is "and replaced it with what?" The hidden answer could be just as bad as plastic or worse. Same goes for incredibly vague claims like "all suppliers are green". What does that mean? Green by what metric or standard? Which body audited this claim? Greenwashing is often done by companies who take advantage of the fact that most people will take claims at face value without interrogating the details.

A good question to ask is “what are you not doing”, “where are you failing (to go or be green)”, or “what can you improve “. Not all companies are perfect. In fact most aren’t. There will be areas where a company is not being green - for example - they are unable to control their supply chain; they may be using the cheapest (rather than the greenest) energy; they don’t recycle their waste products, or other. If they are trying, they will know where they are failing and not try to hide it. They will have reasons for this and plans or aspirations to change. There will invariably be aspects which can be improved. If everything seems perfect, take heed.

This is exactly why we support the EU Climate Bond Taxonomies. They are science based not politically based. They are a regulated method to prevent greenwashing.

One of the easiest ways to see how a company performs in this space is by reviewing their score on the CDP (Carbon Disclosure Project) website and checking if their Net Zero targets have been validated on the SBTI (Science Based Targets Initiative) website. You can also review the shareholder resolutions for each company to see what activist shareholders are concerned about and how the company responds to see if you agree with their business response.I’d advise against believing what a company communicates through their Corporate Sustainability website, since Greenwashing is currently rampant in the United States. Although U.S. regulators are aware and working on this, lobbyists have sadly been creating a lot of push back.

Check if leadership backs their sustainability claims. Are they discussing their strategies in townhalls, investor calls, and capital market days?

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If there is no employee engagement on sustainability efforts. From the first day to the last, employees should have regular touch points, engaging and encouraging them to be a part of the solution and empowering them to lean in. Engagement should be regular and include topics on company wide initiatives and general education. Incentives like bonuses for hitting sustainability KPIs from C Suite to regular employees is the icing on top! In short, if they're only sharing with customers and not with employees, that's a strong sign of greenwashing.

In 2017, I began my sustainability journey at a Euro Stoxx 50 company, which then lacked green practices. It started with grassroots efforts locally, driven by persistent calls for change. Two years later, I was at the forefront of discussions leading to the drafting of the first sustainability strategy for the entire organization. Today, they rank among the world's leading 100 sustainable places to work. Today, top management in many large corporations is notably more open to sustainable practices. For those still facing skepticism, start small and be patient. Authenticity is key; rapid growth risks greenwashing, diluting genuine ambitions. Remember, meaningful changes require time and dedication.