Samantha Willis, Robert Nussey
September 15, 2024
How companies can avoid greenwashing, with science as the foundation for climate and nature strategies
The risk of greenwashing arises as companies seek to pursue ambitious nature and climate goals to meet stakeholder demands for sustainability. We explore how companies can safeguard against greenwashing by using science-based approaches to underpin their climate and nature strategies.
Companies face increasing pressure from investors, customers, and consumers to integrate sustainability into their core strategies. They demand genuine environmental commitments, yet a 2021 study revealed 42% of green online claims were false, exaggerated or deceptive.
Regulators are pushing back, with a raft of laws and policies to penalise companies that greenwash. The EU Green Claims Directive, for instance, will largely impact the consumer sector and companies relying on the voluntary carbon market, banning practices including use of generic claims such as ‘environmentally friendly’ without substantial proof that the claim is true. The UK’s Financial Conduct Authority has confirmed anti-greenwashing guidance designed to protect consumers by ensuring sustainable investment products and services are accurately described. Similarly, the US Federal Trade Commission has been working to update its Green Guides, reflecting developments in consumer perception of environmental marketing claims. Although only considered “guidance” at the federal level, some states such as California, Maine, and Minnesota have adopted these guides into law.
First used in the 1980s, greenwashing is a catch-all term to describe the practice of making misleading or false-claims about the environmental benefits of a product, service or company. What constitutes greenwashing legally varies by jurisdiction, regulator, product or service. Greenwashing statements are typically found in marketing and advertising material, but with increasing Environmental, social and governance (ESG), climate and nature disclosures, more claims will be open to scrutiny.
Greenwashing could have the effect of stifling genuine sustainability practices, slowing genuine progress towards global sustainability goals, or lead to the misallocation of resources.
For companies, misleading environmental claims erode consumer trust, attract legal challenges, result in fines or penalties from regulatory bodies, and can lead to exclusion from public procurement, ultimately impacting financial performance and market credibility. Climate litigation against companies is rising as governments crack down on misleading practices, while nature-related litigation highlights the growing importance of legal actions in tackling broader environmental challenges, such as biodiversity loss, deforestation, and ocean degradation. More than 140 ‘climate-washing’ litigation cases, that challenge inaccurate government or corporate narratives regarding contributions to the transition to a low-carbon future, have been filed to date.
As consumers and stakeholders demand transparency over corporate actions towards biodiversity, and regulators, financial institutions and advertising authorities require verifiable action over disclosures and marketing claims, greenwashing can no longer fly under the radar. It can lead to fines and legal action, reputational loss, regulatory sanctions and drastic consequences for nature, and companies must adapt their strategies to safeguard against it.
Companies should adopt the Mitigation Hierarchy to avoid harmful impacts and can safeguard against greenwashing by ensuring nature-related targets are science-based, integrated into corporate governance and enterprise risk management, and that business actions follow ACT-D (see graphic below). This is achieved by following these steps:
Science-based targets are measurable, actionable, and time-bound objectives that help companies align their actions with planetary boundaries and societal sustainability goals. The Science-based Targets Network (SBTN) enables companies to set targets for climate and nature, while the Taskforce on Nature-related Financial Disclosures (TNFD) framework is a market-led initiative helping financial institutions and businesses to integrate nature into decision making.
These frameworks provide companies with robust, replicable, scalable, and practical methods to:
- Assess impacts and dependencies on nature
- Commit to clear and measurable science-based targets
- Transform ways of working to avoid and reduce impacts and restore nature
- Disclose progress made towards nature positive goals and communicate findings
Prioritising a company’s material impacts and dependencies ensures they act on the most material ones. Setting measurable goals enables companies to demonstrate credible commitments to their investors and consumers, guard against exaggerated claims and misleading statements, and meet regulatory expectations.
A science-based approach provides a hierarchy of action to reduce impact and contribute positively by restoring ecosystems, while science-based metrics are key to quantitatively measuring the extent and condition of biodiversity. Uniform, transparent monitoring and disclosure of achievable targets holds companies accountable, further enhancing credibility.
Environmental, social, and governance (ESG) factors are central to assessing sustainability and ethical impact of investments, as investors look beyond financial returns to include environmental and social outcomes.
Applying a science-based target approach ensures that companies’ sustainability goals are credible and measurable. Rigorous disclosure and independent validation aligns with the transparency that ESG-conscious investors demand, as mandated by reporting frameworks such as the EU Corporate Sustainability Reporting Directive.
Effective governance around science-based targets involves integrating nature-related risks and opportunities into business strategy and risk management. This ensures clear ownership by directors, supporting companies’ ESG commitments with credible evidence. Oversight by legal advisors also helps prevent misleading claims, thereby maintaining trust with clients, consumers and investors.
Communication between employees, leadership, and suppliers support effective implementation of nature positive ambitions. To be effective and avoid greenwashing, such communication should include:
- Raising awareness around a company’s commitment to science-based targets
- Requiring suppliers, or changing suppliers, to deliver to targets
- Providing training and education for employees on how targets are set and progress monitored
Clear policies, effective communication from leadership, and relevant training, are essential in helping all value chain stakeholders understand the processes and standards necessary to achieve science-based corporate climate and nature targets. Additionally, feedback mechanisms, reward and recognition programmes, and consistent messaging around these targets help companies foster a culture of environmental stewardship, mobilising the workforce and supply chain towards the shared goal of meeting the targets.
With the correct governance and efficient application of targets, companies are better equipped to use more precise language underpinned by scientific evidence and expertise, and avoid misleading language that puts them at risk of greenwashing.
There is a new vocabulary around greenwashing practices, and we have curated the top six terms (adapted from the Financial Times and Planet Tracker).
Greenlabelling: Where marketers call a product ‘green’ or ‘sustainable’, but a closer examination reveals this to be misleading.
Greenlighting: When company communications (including advertisements) spotlight a particularly green feature of its operations or products, however small, to draw attention away from environmentally damaging activities being conducted elsewhere.
Greenhushing: Corporate management teams under-reporting or hiding their sustainability credentials to evade investor scrutiny.
Greencrowding: Built on the belief that you can hide in a crowd to avoid discovery, relying on safety in numbers. If sustainability policies are being developed, it is likely that the group will move at the speed of the slowest.
Greenrinsing: A company regularly changing its ESG targets before they are achieved.
Greenshifting: When companies imply that the consumer is at fault and shift the blame on to them.
Want to know more?
Samantha Willis
Biodiversity Consultant
+44 7920 182228
Robert Nussey
Nature Positive Manager
+44 7974 404579