Andreas Hoepner co-leads the GreenWatch team at University College Dublin. He also heads the Data Science Hub of the EU Platform on Sustainable Finance
Nobody wants to be caught out as a liar, and no company wants to be caught out as a greenwasher. Trust matters, and a company that is found to be lying about how green it is risks losing the goodwill of its customers and its investors.
Yet greenwashing is rampant, to the point where regulators in jurisdictions including the EU, Australia and the US are cracking down. So why do companies persist? Because, it seems, they think they can get away with it and are using increasingly sophisticated means to do so.
Consider what needs to happen for a greenwashing allegation to stick. Three conditions need to be fulfilled: first, a company must make a green claim; second, someone must pay enough attention to discover that it is not entirely true or even outright false; and third, the blame for the greenwashing needs to be directed towards the company instead of a third party.
The most straightforward way for a company to avoid such unwelcome accusations would be simply not to make any green claims. But that would have big downsides: marketing teams would lose a key narrative for societal engagement; human resources teams would find it harder to recruit; and sustainability teams could find their role in business development curtailed.
An alternative strategy would be to invest lots of money and time in research and development to create products whose greenness stands up to scientific review. But, apart from being resource-intensive and slow to market, this would require companies either to produce all parts and raw materials themselves or find exclusively like-minded suppliers.
Given the business realities of the 21st century, the upshot is that, while many companies like to make green claims, they also feel pressured to cut green corners. To avoid accusations of greenwashing, therefore, they are resorting to increasingly sophisticated means that focus on the second and third conditions outlined above, with the aim of diverting attention and avoiding blame.
Building on previous work by Lucia Alessi at the European Commission’s Joint Research Centre, John Willis at sustainability researcher Planet Tracker, and their respective co-authors, I classify greenwashing according to five different mechanisms, each of which has classic and sophisticated applications. These are set out in the table below.
The oldest and simplest trick is disclosing misleading information. In the
