Greenwashing & What to Know About the Lack of Reporting Standards

As focus on sustainability increases for everyone from consumers to businesses to governmental agencies, there is a growing concern about the negative impacts of greenwashing and how we can seek to eliminate it. Greenwashing, or exaggerating and making false claims of an organization’s environmental commitment, is creating significant challenges by misleading consumers and undermining the efforts of those who are truly committed to making a positive impact on the environment.

To better understand greenwashing and how companies can guard against it, we’re looking at the differences between greenwashing and actively reducing carbon emissions, plus why establishing standards is essential to environmental reporting.

A Brief History of Greenwashing

With the current focus on environmental issues, it may be surprising to learn that the word greenwashing was first used back in the mid-1980s. Environmentalist Jay Westerveld noted the irony of a beach resort asking guests to reuse towels for the sake of the environment while expanding their business operations with seeming disregard for any other environmental concerns.

A number of marketing campaigns in the 80s and 90s were also criticized for blatant greenwashing. Oil company Chevron ran a marketing campaign that became known as the textbook example of greenwashing. In it, they used nature and wildlife shots to indicate a positive impact on the environment, when in fact, their investment in preservation was a fraction of the cost of spreading the green marketing message—roughly 0.1%.

In the 80s and 90s, many consumers received news from the same sources where companies invested in advertising, like television and print media. Consumers had less access to information on the company’s actual sustainable efforts outside of what they claimed publicly, as through commercials. While consumers generally have become more attuned to seeing through gimmicky marketing messages, unfortunately, greenwashing continues, in part due to the high pressure on companies to cultivate a green image.

In 2021, the EU Commission investigated 344 websites for greenwashing and discovered:

• Vague and general statements without substantiation in 37% of cases,
• Exaggerated, false, or deceptive claims in 42% of cases, and
• A lack of easily accessible evidence to support claims in 59% of cases.

These companies may greenwash by making vague or exaggerated claims, but the prevalence of the third category — the lack of accessible evidence — shows the biggest problem may be in substantiated proof and reporting.

Why Greenwashing is Harmful

Companies engaging in greenwashing are not taking meaningful action to reduce their carbon footprint, and they may even be doing harm by continuing with business as usual while claiming to be more environmentally friendly than their actions show. This makes it more difficult for consumers to make informed choices, but also pushes aside important environmental concerns that need to be addressed. Here are four main consequences of greenwashing.

Loss of Trust

Greenwashing erodes the trust of customers, suppliers, and other stakeholders. This can make it more difficult for the company to repair strong, long-lasting relationships with its partners and can ultimately harm its reputation and brand image.

Legal Risks

Companies that make false or exaggerated environmental claims may face legal action from regulators, consumers, and environmental organizations, resulting in lawsuits or substantial fines.

Negatives Impacts on Competition

Greenwashing reduces the competitive advantage that a company can gain by truly being a leader in sustainability, making it harder for environmentally responsible companies to distinguish themselves in the market.

Difficulty Attracting New Partners

A company that claims to be environmentally friendly but does not take meaningful action may find it difficult to attract partners who are committed to sustainability and looking for environmentally responsible partners.

By engaging in greenwashing, a company risks damaging its reputation and relationships with stakeholders and makes it harder to form partnerships and maintain a competitive advantage.

More investors are seeking assurance that the companies they invest in are sustainable. A recent report found an increase in the use of voting, engagement and stewardship policies targeting ESG (environmental, social, governance) issues at asset managers—currently over 80% of asset managers have voting policies on climate change versus just 56% in 2020. Asset managers are making efforts to invest in environmentally responsible companies, and in light of greenwashing, transparency and accountability are crucial. By ensuring companies are held accountable for their sustainability claims, investors can be confident they are truly making a positive impact, and companies that are genuinely committed to sustainability can be recognized and rewarded for their efforts.

How to Tell if a Company is Greenwashing or Actively Reducing their Emissions

Deciphering whether a company is greenwashing requires additional research into their claims and actions. The way something is phrased can significantly alter its meaning, and ultimately, it is the company’s current actions that speak louder than words. Here are three questions to ask when considering a company’s claims of reducing carbon emissions.

What do they mean exactly?

Companies can use vagueness or overgeneralizations to make their message’s meaning less than clear. They can also word their claims in such a way to imply one thing, when they really mean something else. Those that are actually reducing carbon emissions will not hide behind an unclear message or certifications lacking any kind of real meaning.

What is the supporting plan to reduce emissions?

If a company claims to have a goal, like net-zero carbon emissions by 2050, but there are no intermediate goals or plans to achieve what they have pledged, this may be a sign there is no action to back up their plan. It is important to consider the company’s present actions. If they are continuing with the same methods they have always used with no change, it is unlikely they will meet their future goal.

How much do they rely on carbon offset programs?

A company claiming to have net-zero carbon emissions sounds good, but they may be paying for carbon offsets instead of investing in greener practices. There is still an expectation for companies to make responsible choices; this goes beyond simply achieving net-zero emissions. If reducing the carbon footprint without offsets or with fewer offsets is possible, this is the preferred solution, and refusing to take the more environmentally conscious solution could be a sign they are greenwashing.

The Challenges of Reporting Carbon Emissions Without Constructive Standards

The difficulty with carbon emissions reporting comes from the fact that it is possible for companies to abide by regulations without actually making a positive impact on the environment. For example, companies can buy inexpensive financial instruments like Renewable Energy Certificates (RECs) for Scope 2 emissions but continue using the same non-renewable energy sources they always have. These practices only give the illusion of change.

Other standards, like those for Scope 3 emissions, acknowledge the difficulty of accurate reporting and give a lot of freedom in calculation and reporting, leading to imprecise and inconsistent numbers, not to mention a lack of consistency from one company to the next when they use different methodologies. The result is not only an opportunity for greenwashing but also a lack of clarity into the action that truly matters. Claims of emission reductions are common, and without better standards, the challenge is verifying their accuracy and positive impact.

What Does the Future Hold for the Standardization of Carbon Emission Data?

There is more need now than ever before for the standardization of carbon emissions data. New regulations and initiatives to encourage sustainability are becoming more common, but the difficulty is that they are not specific to logistics. Without ISO standards to measure carbon dioxide equivalent emissions (CO2e) data in logistics, many companies use the Greenhouse Gas Protocol or ISO 14064, based on the GHG protocol, which are not tailored to logistics but at least provide a place to start.

The Smart Freight Centre (SFC) was created specifically for the freight sector, to create better standardization of accounting methodologies for each mode of transportation, and in 2016, the SFC released the GLEC (Global Logistics Emissions Council) Framework. This is a step in the right direction, however, there is still room for improvement, as the data methodology of the GLEC framework leaves room for some degree of inaccuracy and imprecision when calculating freight carbon emissions.

Currently, as of 2023, a new ISO standard, ISO 14083, is under development to target the quantification and reporting of GHG emissions from transport chain operations. Overall, progress is being made, but carbon emissions reporting and standardization still have plenty of opportunities for improvement to help companies everywhere engage in more sustainable practices.

Get Assurance of Accurate Carbon Emissions Reporting

With the pressure on companies to be more sustainable and environmentally responsible, many are left to tackle reporting the best they can. Unfortunately, this is where greenwashing comes in, when some consider the costs of investing in sustainability too great for real change. The good news is twofold. For one, growing awareness for issues like greenwashing is likely to decrease their prevalence. Secondly, there are more resources available to help any company manage their carbon emission reporting accurately and develop plans moving forward to reduce emissions.

Searoutes is the leading visibility provider of carbon emissions by transport type—ocean, air, rail, road, and inland waterways. Searoutes offers the data, methodology, and dashboard for shippers and freight forwarders to ensure reliable reporting for their stakeholders and themselves, that drive decisions and make an optimal vision for the future a reality.

To learn more about what Searoutes can do for your carbon emissions, reach out today to schedule a demo.