Understanding and Preventing Greenwash: A Business Guide

Do you trust business?

If you answered “yes,” consider yourself unusual.

According to a 2009 Edelman study of more than 20 countries, global trust in business is at an all-time low and diminishing, with people less trustful of all sources of information about companies.

 The “Edelman Trust Barometer,” an output of this research, shows trust in advertising is down to 13 percent from 30 percent, and trust in company websites is down to 21 percent from 30 percent.

Paradoxically, other studies show that demand for environmentally low-impact products remains high. The 2009 “Cone Environmental Survey,” for example, found that attitudes toward environmentally responsible products remain strong despite a weak economy.

So, people want products that they believe are better for the environment, but they are skeptical of messages when they come in the first person. From a business standpoint, demand for environmentally sensitive products is growing, but communicating accurately and credibly is becoming more challenging.

On top of this conundrum, the consequences of getting it wrong and being seen as purporting a fraud—or, “greenwashing,” a term now in the lexicon of most industries—are growing. Whether real or perceived, when consumers see greenwashing, they are likely to punish companies with less sales. When NGOs see it, they are motivated to drive negative campaigns and press. And when regulators see it, they can determine that an environmental claim is a “deceptive practice” and fine companies.

The problem should be a concern to all companies, because even if your company is not singled out, greenwashing by your competitors hurts your industry. The more companies are seen as greenwashing, the less likely customers are to trust environmental-related claims in general, and the more likely regulators are to step in and impose restrictions.