It’s been repeated over time that ESG transforms Risks into fruitful Opportunities, especially for companies and investors, and that is true. However, be aware of Greenwashing, as this effect has exponentially grown at the same pace. Marketing tactics transform ‘dirty’ products into ecofriendly ones’, either by vague and unsupported claims or by using fake slogans or exaggerations to promote a product. Basically, through false pretenses. Companies often claim their product has a positive environmental impact, unjustifiably or by not disclosing if this may cause a negative impact in another area.
The material drawback is that greenwashing certainly undermines the efforts of companies that are genuinely working to improve their environmental impact.
Another form of greenwashing is observed in ‘sustainable investments’, where investors are triggered to invest in so called green services, that also do not back up what they claim. And so, after trillions of dollars have poured into sustainable investment strategies in recent years, where regulators have taken little to no action to ensure funds are marketed accurately, now is about time.
The European Union has recently drafted a directive to require companies to back up green claims about their products with evidence, in an effort to fight greenwashing and misleading advertisements. It is expected to be presented for approval at the end of March. If so, companies will only have few days to justify green claims about their products or face ‘effective and proportionate’ penalties. Hopefully then, catch phrases like ‘climate neutral’ or ‘containing recycled materials’ shall require proof of statement, otherwise heavy penalties will knock on their door.
Consumers in general, should be skeptical of vague or overstated environmental claims and look for specific details about a product's environmental impact. They can also look for third-party certifications or ratings, such as the ‘Energy Star label’ or the ‘Forest Stewardship Council certification’, which can provide more credible information about a product's environmental credentials.
Five ways you can fight greenwashing:
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Check the label for proof
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Beware of unclarity
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Be careful and scrutinize
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Look for actions, not words
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Buy local or reputable brands