The Australian Competition and Consumer Commission (ACCC) recently announced that it is cracking down on companies that engage in greenwashing. This comes in response to a survey conducted by the ACCC in October of last year, which found that 57% of the 247 businesses or brands across eight sectors that were surveyed had promoted “concerning claims about their environmental credentials”. This is a worrying trend, as greenwashing can be harmful to both consumers and the environment, and it can also damage a company’s reputation.
Here is an article to give you an overview of what greenwashing is, why it is a problem and how ESG lawyers can help you. We also provide tips that you can use to make sure that your company’s sustainability efforts are accurately represented and that you do not fall into the trap of greenwashing.
What Is Greenwashing?
Greenwashing is a term used to describe the practice of companies portraying themselves as environmentally responsible or sustainable in their business practices or products, but in reality, they are not making any notable sustainability efforts. It is a marketing tactic that is used to attract environmentally conscious consumers, investors or stakeholders to a brand, often by using vague or misleading language that suggests their products or services are better for the environment than they actually are.
In recent years, there has been a growing emphasis on environmental, social and governance (ESG) standards, which are a set of criteria used to evaluate a company’s performance in terms of sustainability and ethical business practices. Many businesses have developed ESG policies to improve their sustainability and social responsibility practices. However, some companies use greenwashing to create the impression that they are meeting ESG standards, when in fact, they are not.
This is a serious issue as it can mislead consumers, investors and stakeholders into believing that a company is more environmentally responsible than it actually is. Not only can it harm both the environment but also the reputation of the company. Therefore, it is important for businesses to have a genuine commitment to sustainability and to avoid greenwashing at all costs.
How to Avoid Greenwashing in Your Business
Do not use vague language.
Instead of using vague or misleading language when describing sustainability efforts, businesses should use specific and measurable language that accurately reflects their actions.
For example, rather than simply stating that a product is “eco-friendly,” you can provide specific details about the environmental benefits of the product, such as the reduction in carbon emissions that the product provides. This type of specific language helps consumers to better understand the environmental impact of a product and builds trust in your sustainability efforts.
For further details, Information Sheet 271 (INFO 271) from ASIC offers guidance on how to communicate about sustainability-related products and avoid greenwashing.
Avoid misleading images on ads and packaging.
Images that suggest a product is environmentally friendly, such as images of trees or wildlife, can be deceptive if they are not accompanied by specific details about the environmental benefits of the product.
So avoid using an image of a forest on the packaging of a product, which gives consumers the impression that the product is environmentally friendly, if the product itself is not sustainable or the business has not taken genuine steps to reduce its environmental impact. Instead, use an image of a tree on the packaging of a product made from sustainably sourced wood and provide specific details about the percentage of the product that is made from recycled materials.
Support your sustainability claims with factual evidence.
To avoid the trap of greenwashing, businesses must support their sustainability claims with factual evidence. This means including accurate and specific data to back up any claims of being environmentally friendly or sustainable.
For example, rather than making a sweeping claim that a product is “eco-friendly,” provide particular data on the environmental benefits of the product, such as the percentage of post-consumer recycled material used or the amount of carbon emissions saved. These types of specific claims are much more likely to be credible and help to build trust with consumers.
In addition to using specific data to support your sustainability claims, you should also make sure that your data is up-to-date and available for consumers to access. This means keeping current data available on your website and anywhere else that you make sustainability claims. By doing so, you can demonstrate your commitment to sustainability.
Where possible, you should also consider obtaining third-party certification for your sustainability claims. This can add an extra layer of credibility and assurance for consumers that the claims being made are accurate and verified by an independent source.
Be transparent about your sustainability plans and practices.
You need to be open and honest with consumers about your environmental impact and the steps you are taking to reduce it. You should also clearly communicate your sustainability goals and provide regular updates on your progress. This can include information on things like energy consumption, waste reduction and greenhouse gas emissions.
Take the necessary steps and allocate the required resources to begin progressing towards your sustainability objectives.
This means moving beyond making empty claims and actually implementing sustainable practices and initiatives. Businesses should begin by setting clear sustainability objectives that align with ESG standards and developing a roadmap to achieve those objectives. This can involve conducting a sustainability audit to assess current practices and identify areas for improvement.
Once sustainability objectives have been established, businesses should allocate resources, such as funding, personnel and time, to begin making progress towards those objectives. This may involve investing in renewable energy, implementing waste reduction programs or adopting sustainable supply chain practices.
The Role of ESG Lawyers in Business Sustainability
ESG lawyers can help businesses understand and implement best practices for sustainability and ESG compliance, including:
- Environmental responsibility: ESG lawyers can help businesses assess their environmental impact and develop strategies to reduce their carbon footprint, implement renewable energy sources and minimise waste and pollution.
- Social impact: ESG lawyers can help businesses develop and implement social responsibility policies, including fair labour practices, human rights protections and community engagement.
- Corporate governance: ESG lawyers can advise businesses on governance practices, such as board diversity, executive compensation and shareholder engagement, that are aligned with ESG standards.
ESG lawyers can also help businesses navigate ESG-related risks, such as regulatory compliance, reputational damage and shareholder activism. ESG policies and strategies can be tailored to meet the specific needs and goals of individual businesses, and ESG lawyers can work with businesses to ensure that their practices align with ESG standards and best practices.
ESG reporting is also becoming increasingly important for businesses, as stakeholders including investors, customers and employees are demanding more transparency and accountability around sustainability and ESG practices. ESG lawyers can assist in preparing ESG reports that provide accurate and meaningful information to stakeholders, while also complying with relevant regulations and standards.
How Madison Marcus Can Help You
Are you looking to ensure that your business is aligned with ESG standards and best practices? Our team of experienced ESG lawyers at Madison Marcus is here to help. We can provide your business with the legal guidance and expertise needed to develop sustainable practices, mitigate risks associated with noncompliance and fulfil reporting and compliance obligations.
Contact us today to learn more about how our ESG division can help your business achieve its sustainability objectives.