Greenwashing and its implications for reaching sustainability

What is greenwashing?

In an age of increasing environmental awareness, how can we be sure that the sustainable promises often made by companies have substance, and aren’t just a marketing spin? There has been a huge upsurge of support for sustainable products and practices. We are now more mindful than ever about our decisions as consumers.  

According to  Lyst’s 2020 Conscious Fashion Report, searches including sustainability-related keywords have increased by 37%. Over the past year, the term “slow fashion” has been responsible for over 90 million social impressions, suggesting a shift in consumer behavior. Sustainability is a buzzword  at the moment, and it appears all of the major brands are wanting to jump on this ‘trend’.

Greater transparency is needed from organizations to avoid greenwashing skepticism.

This has led to the rise of greenwashing, a practice used by companies to appeal to customers who care about the environment. This tactic is illustrated by the use of green imagery and buzzwords, such as “eco-friendly” and “all-natural,” originally used to divert attention from a company’s questionable environmental record.  

Headlines from Shell’s infamous emission scandals to H&M’s shortfall with its Conscious Collection may be swirling in your mind. In these textbook cases of greenwashing, these major companies made claims of following certain industry standards when that wasn’t really the case.  

Being seen as ethical drives profitability

Whilst regulations do exist, there is no universally accepted definition of what terms like ‘sustainable’ actually mean. Therefore, brands can market an item as ‘eco-friendly’, often at a marked-up price. This is happening more often because being socially conscious sells. McKinsey found that Generation Z (people born between 1995 and 2010) are more likely to spend money on companies and brands seen to be ethical.  

“More than any other generation that came before, Gen Z is more prepared to open their wallets for a brand that promotes causes such as climate action, racial and/or social justice,” says Sertac Yeltekin, the COO of Insitor Partners, a Singapore-based, socially focused venture capital fund. This gives Gen Z, in particular, unprecedented power to shape the success or downfall of companies. They are intrinsically aware that they can drive this corporate change. Companies, therefore, have a financial incentive to appear socially conscious.

Truly sustainable claims are specific, humble and transparent

Intersectional environmentalist, Leah Thomas, worked  on Patagonia’s 2019 “Everything but the teeth” campaign. She uses it as a good example of sustainable marketing. It was an upfront admission that there was still work to do before the jacket advertised could be completely recycled – showcasing how sustainability is a journey.  

Climate action is no longer just for trailblazing corporations with thick profit margins. An increasing amount of companies are getting off the side lines to take a stand on climate change. Consider the following:

  • “Net-zero” is becoming the new north star for corporate sustainability. The beginning of 2020 saw the number of corporations with net-zero goals increased  threefold — from 500 at the end of 2019 to 1,541 in September of 2020. The list includes more than a quarter of  S&P 100 companies. 
  • 31 major companies have signed onto the Climate Pledge, a commitment to reach  carbon neutrality by 2040.  
  • Nearly 200 corporate leaders signed onto a letter on the “purpose of a corporation,“ arguing that companies have a responsibility to the environment — not just shareholders. 

How to measure a company’s real impact

It can feel exhausting trying to check every green claim or eco-credentials a brand is pushing. Fortunately, there are some brilliant resources which help do the hard work for you, such as  Project Cece,  Ethical Made Easy  and  STAIY.  

What labels and certifications to look out for.

Another great resource for this is  B Corporation. They’re an organization which offer certification to businesses which pass their high standards for social and environmental performance and transparency in terms of their supply chain and processes as a business. The certification is rigorous, and you can be sure that if you buy from a B Corp, then you’re supporting a company working for change. Take a look at the  B Corp directory  and see if you could swap any of the brands you buy from regularly.

And of course, there are also a lot of great organisations who clearly embody sustainability and environmentalism at their core. When companies engage with this ethos in a holistic manner, incorporating it throughout their business model, then you can be certain they aren’t greenwashing.

Satgana is working on a B-Corp certification. Meanwhile, our portfolio construction strategy focuses on startups that are prepared to go through the B-Corp certification process too. We also plan to work with internationally recognized frameworks such as the Impact Management Project (IMP) and IRIS+ by the Global Impact Investing Network (GIIN) to measure and manage our impact across our portfolio.  

Businesses operate in a highly complex, globalized context that requires sophisticated thinking, problem-solving and collaboration across sectors. Rather than try to produce a few aspects of their businesses to label them “green”, business leaders should scratch past the surface and seek to integrate sustainability as a core value in their mission – taking an “inside out” approach – which is the key to all lasting change, not only in individual companies, but society as a whole.