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.
| Mechanism | Classic application | Sophisticated application |
|---|---|---|
| Misleading information | Misleading claims made by firms themselves | Greenlabelling by third parties, which certify firms’ performance |
| Attention deflection | Greenshifting of blame on to demanding consumers | Greenlighting of good-news case studies |
| Attention reduction (absolute) | Limited disclosure of worthy ambitions | Fuller disclosure, but with greenhushing of details |
| Attention reduction (peer-overshadowed) | Decent disclosure but substandard vis à vis peers | Greencrowding: substandard disclosure en masse |
| Attention timing | Delayed disclosure | Greenrinsing: headline-grabbing targets get gradually diluted |
The oldest and simplest trick is disclosing misleading information. In the classic version, companies themselves make green claims that stretch the truth or are simply false — a petrol station, for example, may bill its fuel as “carbon-neutral” when a look at the full supply chain would reveal a big carbon footprint.
In more sophisticated variants, companies lobby, fund or even co-found apparently independent third parties that make the desired claims via an index or ranking. Fledgling NGOs that build good reputations but face volatile funding streams are particularly at risk of being co-opted into such “greenlabelling” schemes.
Attention deflection strategies involve not lying, per se, but diverting blame or attention in a way that flatters the company’s green image. The simplest version is “greenshifting”: a polluter tries to shift the blame away from its products and on to its customers — by arguing, for example, that consumer demand is the reason it sells pet food in unrecyclable single-use sachets. This, however, has the drawback of denigrating the company’s source of income.
A more sophisticated ploy is to deflect attention from a company’s misdeeds by “greenlighting” — that is, by spotlighting a dazzlingly green product or project, no matter how small a contribution it might make to the bottom line. When passing through European airports these days, one gets the impression that more than 95 per cent of some oil companies’ marketing budgets are devoted to greenlighting their best projects, even though their capex investment budgets are barely 5 per cent green.
Attention reduction comes in absolute and peer-overshadowed forms. In both, the aim is to present information in a way that reduces the likelihood that it will face critical scrutiny.
With absolute attention reduction, a company simply gives less information for observers to latch on to. In its classic form, disclosure is limited to a few grand-sounding ambitions without any supporting data. The advanced alternative is to give plenty of disclosure items, but again with minimal details.
An example of this “greenhushing” would be a company that switches its sustainability reporting from a pdf format to an interactive website — and in the process drops all footnotes, supposedly for reasons to do with web design and smartphone readability.
Peer-overshadowed attention reduction may use both of the ruses just described, but it also relies on the old stratagem of hiding in a crowd — of counting on the fact that one is unlikely to be singled out, like a school of fish menaced by predators.
In its simple form, this means substandard reporting, in the expectation that any media or NGO attention will probably be focused elsewhere. A company may give copious details, for example, about carbon offsets that look impressive to a non-expert eye but fall short of best practice among industry peers. Here, the risk is that, if found out, the company will be revealed as worse than its competitors.
The more sophisticated variant, then, is to ensure that one’s peers are doing the same — perhaps by converging on the “lowest common denominator” standards established by an industry association that, like its members, wants to seem green. The more dubious those standards are, the more pernicious such “greencrowding” is. With respect to offsetting through “avoided emissions”, for instance, companies know that campaigners lack the resources to challenge more than a small number of them — and, even if they are, they can say that they are in line with industry norms.
The last, and perhaps most problematic, type of greenwashing is attention timing — that is, carefully managing when green disclosures are made. In its classic form, this simply means delaying disclosure until well past fiscal year end, which is annoying but manageable (most sustainability disclosure has been voluntary to date and lacks a statutory deadline).
The advanced approach, however, makes clever use of people’s limited attention span: by contrast with the strategies discussed so far, it consists in disclosing impressive, high-quality information — which is then deliberately given a short shelf life.
For example, a company may invite the media to report on a new, rigorous water target that wins it public praise. But, once the world’s attention has moved on, the company silently and incrementally scales back the target on its website. Many stakeholders may not regularly check the corporate website, and so may carry an inflated impression of the company for years to come. This deliberate dilution of attention-grabbing ambitions — or greenrinsing — is a particularly problematic form of greenwashing, because tackling it requires constant scrutiny of companies’ commitments.
How to combat these tricks? Apart from continuous accountability monitoring of corporate disclosures, it is paramount for regulators to establish a small set of mandatory anti-greenwashing disclosures. To avoid overburdening companies, these could be limited to about a dozen indicators such as Scope 1, 2 and 3 CO₂-equivalent emissions, emissions to water, commercial operation on protected nature reserves, and so on.
These disclosures must be unconditional, because any clause such as “subject to materiality testing” leads straight back to co-opting third parties, along the lines set out in the discussion of misleading information above. It is all too easy for companies to encourage nominally objective but financially dependent evaluators to legitimise their commercial interests — including declaring some Scope 3 emissions, say, to be non-material.
Greenwashing thrives on wriggle-room. The task of regulators is to ensure that companies don’t have any.
