What is Greenwashing? And why is it a Problem?

What is Greenwashing? And why is it a Problem?

Greenwashing is a deceptive marketing tactic which conveys a misleading impression of a company’s products being more ecologically friendly or having a greater environmental influence than they actually do.  A corporation may also try and hide the fact that their products negatively impact the environment by highlighting only their sustainable features, in attempt to leverage the increasing market for eco-friendly products such as recyclable and chemical-free items.

Marketing

Under the Australian Consumer Law, making false or misleading statements that are likely to mislead or deceive consumer is prohibited. Many companies that partake in greenwashing only present a portion of the facts about their products in an effort to overstate their advantages as a sales tactic. In attempt to manipulate consumers, companies use phrases such as “biodegradable,” “compostable” and “plastic free” to promote their products without using factual evidence to support their claims.  The ultimate goal of this deception is to undermine customer integrity and trust in the marketplace by presenting an image of environmental responsibility without actually adhering to sustainable standards.

What to Avoid

When marketing your products to avoid greenwashing be mindful of the following:

• The products descriptive language;
• Avoid using green symbols such as the recyclable logo if not applicable to the product;
• If you are to claim the product as environmentally friendly, use factual support to back your claim; and
• Specify what the claims relate to such as the product, packaging, or manufacturing.

Regulators:

In recent years, regulators in Australia have taken steps to address greenwashing and uphold consumer protection standards. Organizations such as the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) have launched investigations and proceedings against companies found to engage in deceptive environmental marketing practices. Although regulators have started holding corporations accountable there is a need for stricter standards held by the government, allowing for improvement of green claims for future consumers.  

Examples of Greenwashing

Greenwashing can take various forms, and examples abound across different industries. Here are some common examples of greenwashing:

• Misleading Labels: A cleaning product labelled as “green” or “eco-friendly” without clear evidence of its environmental benefits or certifications to support the claim.
• Exaggerated Claims: A fast-fashion brand advertising its clothing as “sustainable” or “ethically made” without providing specific details or transparency about their supply chain practices or environmental impact.
• Manipulative Advertising: A car manufacturer running advertisements featuring pristine natural landscapes to promote their vehicles’ fuel efficiency, while ignoring the overall environmental impact of car manufacturing and emissions.
• Unsubstantiated Marketing Claims: A restaurant advertising its menu items as “locally sourced” or “sustainably harvested” without providing evidence or transparency about their sourcing practices or supplier relationships.

Why is Greenwashing Bad?

There are several reasons why greenwashing is considered detrimental:

1. Deceiving Customers: greenwashing tricks consumers into thinking that products or the business are more ecologically conscious than they truly are ultimately contributing to the customer making a purchase based on false pretences and contributing to the continuation of unsustainable behaviours.
2. Undermining Consumer Trust: Businesses that participate in greenwashing essentially reduce customer confidence in environmental and sustainability claims. When customers realise, they’ve been misled they tend to stop believing sustainability claims from other companies therefore making it difficult for genuine sustainable businesses to establish credibility.
3. Financial Implications: Greenwashed products usually have a heavier price point then regular products as they’re fraudulently advertised as environmentally beneficial. Consumers who then purchase these products usually suffer financial loss. There are also financial implications on the company if found guilty of greenwashing as they may be subject to fines and legal ramifications, which could negatively impact their earnings.
4. Environmental Impact: Greenwashing can divert attention and resources away from real sustainability initiatives. Businesses that promote deceptive claims of being environmentally friendly may fail to make significant investments in the programmes that actually lessen environmental harm or reduce their carbon footprint, which exacerbates the ecological problems we face.

Case Example:

Australian Competition and Consumer Commission v Volkswagen Atiengesellschaft (Volkswagen) [2019] FCA 2166

Volkswagen claimed that its diesel vehicles met Australian emissions standards when applying for them to be listed on the government’s Green Vehicles Guide website. However, it was found that Volkswagen had installed “two-mode” software in its vehicles, which could deceive emissions tests by emitting lower nitrogen oxide (NOx) levels during testing than during regular road use. This led to the vehicles emitting higher NOx levels under real-world conditions than allowed by Australian standards.

The Australian Competition and Consumer Commission (ACCC) accused Volkswagen of misleading consumers, breaching the Australian Consumer Law (ACL). The Federal Court ruled in favour of the ACCC, ordering Volkswagen to pay $125 million in penalties. The court emphasised the seriousness of Volkswagen’s actions, describing them as driven by greed and constituting a severe breach of consumer law. Considering Volkswagen’s size and profitability, the court deemed a substantial penalty necessary for deterrence.

Despite Volkswagen’s attempt to appeal the penalty, the High Court dismissed its application.