Mounting public concern about climate change is a rich marketing opportunity. But it’s also a challenge, because the public is growing inured to the most spurious green claims and demanding more credibility and accountability from companies. As a result, greenwashing is becoming both more common and harder to spot.
It’s also more damaging than ever. Focus group research suggests that many greenwashed claims are effective at misleading consumers, especially when they provide just enough information or data to appear credible, but not enough for the target audience to truly evaluate them. A 2022 study by Austrian researchers, for example, found that prospective airline customers were more likely to be duped by an ad pitching credits to offset the carbon footprint of a flight (like the KLM ads below), than a more generic ad claiming the airline is getting greener. A little detail, in other words, goes a long way.
But the Austrian study also indicated that when customers did pick up on greenwashing, it took a serious toll on their trust in the brand. So businesses that greenwash, by design or by accident, are gambling their customers away. More importantly, as the impacts of climate change mount and time runs out to meet the goals of the Paris Agreement, greenwashing conjures an illusion of progress that allows political and business leaders to rest on false laurels instead of undertaking substantive action.
“Greenwashing obscures the level of change that needs to happen,” said George Harding-Rolls, an activist with the Changing Markets Foundation, which researches greenwashing. “It’s a giant societal placebo that makes you think we’re moving in the right direction when that’s not true.”
We looked at different ways in which businesses are using greenwashing, from fairly simple imaging tactics that have been around for years, to more novel and sophisticated manipulation of investment products and corporate data. The following is a taxonomy of greenwashing, with tips on how to spot it—and how, with a little bit of extra research, consumers and investors can avoid it.
Packaging or ads often use images of nature—and especially polar bears—to mislead consumers about a product or company’s climate deeds.
Get smarter: Beware of charismatic animals and plants, solar panels, recycling logos, and the color green itself. Be skeptical of vague or pseudo-scientific wording—”green” or “sustainable” could mean almost anything. Look for a third-party verification label, ideally one from a government agency. Trust your gut: If the messaging rings false, it probably is. And remember, the greenest product is the one you don’t buy.
The company promotes one green product but its business still centers on polluting products.
Get smarter: Few of the world’s most carbon-intensive companies—whether in energy, finance, agriculture, utilities, or transportation—have already shifted the bulk of their business into low-carbon enterprises. If they’re touting something green, it’s safe to assume there’s more to the picture. Search the web for a company’s name plus keywords like “emissions” or “fossil fuels” for a better view of its overall climate impact before deciding whether to support them.
A company hawks carbon emission offset credits that don’t really offset emissions, or claims to be carbon neutral based on such credits.
Get smarter: Carbon offset programs are plagued by shoddy accounting, inconsistencies, and fraud. Many do not reliably, fully, or permanently reverse emissions as they purport to. Because individual offsets are hard to verify and so prone to flaws, rigorous corporate climate plan certification standards don’t permit them in most cases. In other words, if a company claims to use carbon offsets, that’s no guarantee that the offsets are legitimate. Consumers should also treat carbon offset purchases as a gamble rather than a sure bet. You can find more details about specific carbon offsets through registers like Verra and Gold Standard.
Asset managers often vote against climate-related resolutions at companies in which they hold shares, in spite of having their own climate goals.
Get smarter: The environmental group Ceres maintains a database of climate-related resolutions, and most asset managers publish their voting records (albeit sometimes long after the vote) so you can see how they voted. If you have a retirement savings account or pension, ask the firm that manages it about its proxy voting policy on climate resolutions, and let them know that you want to vote in favor of climate resolutions. If they don’t, consider moving your money to a different manager.
The methods used to evaluate companies’ environmental, social, and governance credentials are often misleading and downplay climate impacts.
Get smarter: The label “ESG” is so ill-defined that it should not be seen as an indicator of climate quality. Retail investors should double-check that any ESG-labeled fund they may be interested in doesn’t still carry stocks in fossil fuel companies and other large emitters. The SEC is developing rules for how ESG labels can be used on investment funds that should curb the most egregious greenwashing.
The company’s executives and lobbyists oppose climate-positive policies or regulations.
Get smarter: Most of the biggest banks, utilities, and energy companies still belong to trade groups that actively lobby against climate policy, including the US Chamber of Commerce and the American Petroleum Institute. A growing number of pension funds and other institutional investors are demanding that companies align their lobbying activity with their broader climate goals.
Many corporate green “alliances” or “initiatives” set low or nonexistent standards that allow members to tout a meaningless credential.
Get smarter: Be suspicious of voluntary, green-sounding corporate groups and certification schemes, which are more often a low-cost marketing ploy than a marker of genuine leadership. Visit the group’s website and read up on what it specifically requires of members, and under what timeline (some only require companies to take action years after joining). Also check the membership roster: The longer it is, the lower the membership standards are likely to be.
The company has a target for reducing emissions but it’s not science-based and/or won’t meet the goals of the Paris Agreement.
Get smarter: Check whether the plan includes “Scope 3” emissions, from suppliers and customers. This is the main source of CO2 emissions for energy companies and most big emitters, but they are often not counted in corporate climate targets. Also be skeptical of any target that’s set more than 5-10 years in the future. The ratings firm MSCI maintains a database of whether a company’s climate strategy (if one exists) is aligned with the Paris Agreement.
The company’s published climate-related data cherry-picks to highlight the good and obscure the bad.
Get smarter: Watch for the word “intensity,” which indicates a rate (i.e. tons of CO2 per unit of energy), and can obscure total emissions. New rules from the Securities and Exchange Commission should make corporate climate disclosures more consistent. But the rules still allow each company to decide whether emissions from suppliers and customers are “material” for investors or not (and if not, they need not be disclosed).