Increasingly well-publicised environmental scandals involving companies misrepresenting their ESG efforts in recent years have caused stakeholders across multiple industries to place increased scrutiny on their organisation’s sustainability claims, seek more thorough reporting and evidence to back these claims, and explore how to avoid greenwashing – whether unintentional or otherwise.
Investing in innovative technologies such as Digital Product Passports can help organisations and customers to do just that. They provide crucial information to customers so they can hold organisations accountable for their environmental claims and allow organisations to prove that their sustainability claims are valid.
Societal and consumer trends have started to lean heavily towards tackling the climate crisis and reducing the impact of humans on the environment – not only from an individual perspective, but from that of businesses large and small.
According to a report from The Roundup, 84% of customers surveyed said that poor environmental practices could cause them to limit their interactions with a brand, and 55% were willing to pay premium prices for products and services from brands they considered to be eco-friendly.
Figures like these are causing organisations the world over, across almost every industry, to rethink their existing operational models and pave the way to a more sustainable future.
Green Marketing vs Greenwashing
Hubspot defines green marketing as “when a company focuses on the environmental and sustainable benefits of their product in their marketing assets.”
It is perfectly fine to highlight a company’s commitment to climate action, provided it’s genuine and can be proven. Green marketing can deliver a competitive advantage, improve brand reputation, and in some cases even cut costs. For instance, sustainable packaging often, by design, requires less material and replaces more expensive compounds like plastic, making it cheaper to produce and can be disposed of with less damage to the environment.
A clean example of green marketing is McCain’s Regenerative Agriculture campaign. The campaign focuses on McCain’s genuine commitment to sustainable farming practices, investments in technology, collaboration with environmental organisations, and minimising waste. Central to this is a document that showcases the company’s goals and timelines, and a clear framework for how they’ll be achieved.
For some organisations, the shift to sustainability makes sense and works well with their existing business models. For others, the transition to sustainable practices is far more complex and requires a lot of effort to ensure they remain equally as profitable, contributing to a rise in cases of corporate greenwashing.
Greenwashing is “a term used to describe a false, misleading or untrue action or set of claims made by an organization about the positive impact that a company, product or service has on the environment.” Essentially, it’s a comprehensive term for organisations trying to benefit from upward trends in the environmental consciousness of consumers, without doing anything to affect the change they claim at best, and intentionally misleading consumers at worst.
Types of Greenwashing
The term ‘greenwashing’ itself is very broad. There are many ways that brands can engage in the practice. Consumers should understand the varying types of greenwashing, and how to identify it. Businesses should understand the differences between green marketing and greenwashing and ensure they fully comprehend how to avoid greenwashing.
While some cases of greenwashing are more subtle and the degrees of impact vary, they’re all damaging to the global effort to create a more sustainable economy.
This is a core greenwashing tactic, often found within sectors that deal in physical products (but it can be done with services too). It’s also the most pervasive form of greenwashing. It involves labelling products as ‘green’ or sustainable using buzzwords or misleading descriptions, without providing the composition details of the packaging or what makes the service sustainable.
Greenlighting refers to highlighting and exaggerating a corporation’s supposed green contributions (regardless of how small those might be in reality), supported by marketing and advertising to that effect.
The intention of this is to distract from other areas of the business which are less sustainable. For instance, an oil company may be opening new drilling sites, but use the fact that they have planted a thousand trees in the Amazon rainforest to distract from the drilling.
Greenhushing involves hiding, underreporting on or staying quiet about key sustainability performance figures when asked about their climate targets. This can be done deliberately as part of a strategy to avoid blame when not hitting targets, or accidentally due to corporate mismanagement.
This involves shifting the responsibility for carbon emissions and other environmental issues onto the consumer, to take away from the impact of the organisation themselves. Cynically, this tactic often includes a reference to consumer demands for their products and services and uses the defence that market forces have dictated their existence.
Increased scrutiny on organisations’ ESG (environmental and social governance) plans in recent years has led some corporates to set lofty environmental targets that sound great for use in marketing and advertising campaigns but without including a clear framework for how they’ll achieve them.
These companies will get close to the target deadlines, only to then move their targets further into the future – ‘moving the goalposts’.
Organisations can hide in a crowd of their industry contemporaries as a smokescreen for their own unsustainable activities. This can allow complicit organisations to move at the slowest available rate of adoption of sustainable business practices – an example of this is the Alliance to End Plastic Waste.
Industry Spotlight – Airlines
Greenwashing type(s): Greenlighting, Greenlabelling
The advent of low-cost airlines has made air travel cheaper and more accessible – Ryanair is a European airline that boasts low fares to popular destinations.
They came under investigation by the Netherlands Authority for Consumers and Markets over carbon compensation schemes for their flights. It is common in the airline industry to use carbon offsetting schemes as part of airline ESG commitments.
They were found to be using phrases like ‘Fly greener to…’ and indicated that the emissions on their flights were offset by the company’s investment in certain green initiatives, and promoted the suggestion that flying is sustainable if customers use Ryanair.
“Businesses must be honest and clear about the sustainability claims they make. Even with CO2-compensation schemes, flying remains a highly polluting way of travelling,” explains Edwin van Houten, director of ACM’s Consumer Department.
Carbon offsetting schemes in aviation may offset some of the emissions generated by air travel, but it doesn’t amount to air travel being a sustainable travel option and therefore shouldn’t be marketed as such. It can give customers a false impression that one airline’s services are more sustainable than others, which could sway customer decision-making.
In response, Ryanair made the following changes to its website and information:
- A clear message that CO2 compensation itself doesn’t make flying more sustainable. Changed ‘Fly greener to…’ to ‘compensate your CO2 emissions’. Green leaf symbols were removed
- Estimated emissions for each ticket – calculations are shown so that customers understand how they reached that figure, including the CO2 compensation
- Ryanair was made to clarify which CO2 reduction projects were paid towards by the ticket and highlight the certification of each
Ryanair is not the only airline to come under fire – 19 countries have joined a lawsuit that alleges 17 airlines have been making misleading sustainability claims. A study by Science Direct investigated 37 airlines in how they use sustainability in their marketing and found that 44% of them had misled customers in some way.
The Consequences of Greenwashing
With 46% of consumers looking to brands to take the lead on creating sustainable change, the focus is on businesses to pave the way and, if possible, make it easier for individuals to engage in eco-friendly activities by interacting with their brand.
An abuse of this trust can mean consumers sometimes unwittingly end up supporting organisations that are damaging the environment, after being misled. This can cause scepticism around all claims of sustainability, meaning brands that are genuinely making positive changes to help the environment may be met with apathy from their consumer base.
Companies stand to see a loss of brand reputation if their organisation is found to be greenwashing. Depending on the size of the organisation and the nature of the industry, the detrimental effect of a greenwashing scandal can vary.
Regardless, it can badly affect a brand’s relationship with its stakeholders and create an air of distrust that has the potential to stick with your brand name for a long time, which in turn can hurt the business’s bottom line.
EU Green Claims Directive
From a legislative perspective, the EU is leading the charge on moving towards supply chain sustainability, with strict targets such as reaching carbon neutrality across the bloc by 2050.
Research from the European Commission states that “53% of green claims give vague, misleading or unfounded information, and “40% of claims have no supporting evidence”. Part of the EU Circular Economy Action Plan (CEAP), the EU Green Claims Directive is being implemented to hold businesses accountable and “stop them from making misleading claims about the environmental merits of products and services”.
The European Commission adopted a proposal in March 2022 on Empowering Customers for the Green Transition. A year later, the commission adopted a further proposal to strengthen the legislation further.
The EU Green Claims Directive has very specific objectives:
- make green claims reliable, comparable and verifiable across the EU
- protect consumers from greenwashing
- contribute to creating a circular and green EU economy by enabling consumers to make informed purchasing decisions
- help establish a level playing field when it comes to the environmental performance of products
Pieces of legislation like the EU Green Claims directive are important for educating organisations on how to avoid greenwashing and staving off the negative effect it has on the environment.
How to Avoid Greenwashing with Digital Product Passports
The EU legislation places the onus on organisations to lead the charge towards a sustainable future, and eliminating greenwashing in all forms is a tangible step on that journey. To avoid greenwashing and remain compliant, businesses can:
- Double-check their communications – make sure what you’re putting out to your customers and the wider world can’t be misinterpreted, seen as misleading or vague.
- Put out genuine data and continuously monitor it – don’t try and massage the data or hide anything negative. Be open and honest, and ensure to keep monitoring their operations to keep results as accurate as possible.
- Invest in technology – technological innovations such as Digital Product Passports (DPPs) enable businesses to combat greenwashing from an organisational and consumer perspective.
Digital Product Passports (DPPs) are a revolutionary technology that can collect and share product data throughout the product’s lifecycle. Data can include manufacturing information, raw material composition, recyclability attributes and more.
This information could be made accessible on an individual product level using either a QR code, specialised barcode or NFC technology, providing instant accessibility and transparent data sharing.
DPPs can boost buyer confidence by allowing customers to make more informed decisions regarding sustainability when making purchases. Product value is maximised throughout its lifecycle, and the abundance of verifiable data can help with recycling and resale. This’ll also naturally help customers identify and combat greenwashing. For example, an environmentally conscious customer purchases a pair of new jeans from a business that claims that all its jeans include 50% recycled materials.
To back up that claim, a business that’s operating a DPP solution could attach the relevant information to the jeans’ Digital Product Passport – this could include what those recycled materials are, where they’re sourced from, when and where the remanufacturing took place and so on.
Digital Product Passports can also help to provide granular insights into an organisation’s supply chain, helping them identify areas where they can improve on sustainable practices that may not have been visible before. The data available can help establish a framework for how to avoid greenwashing that can be communicated throughout the supply chain, promoting collaboration on sustainable practices at an industrial level.
After all, not all greenwashing is intentional – some can be put down to genuine mistakes and inefficiencies, or a lack of oversight and governance.
What benefits can a blockchain-based DPP solution provide?
The European Commission has mandated via the Ecodesign for Sustainable Products Regulation (ESPR) that Digital Product Passports must be implemented on a wide scale by 2030 to improve the traceability of products and provide product information to organisations and customers.
At the time of writing, there aren’t any specific compliance guidelines for the technical infrastructure for Digital Product Passports. However, blockchain technology is one of the key technologies that can underpin Digital Product Passports because of the innate benefits it provides.
Security & Immutability
Blockchain technology’s inherent data encryption would ensure that DPP data is secure and immutable – organisations, regulators and customers can trust that what they’re seeing hasn’t been tampered with.
The ‘blocks’ – entries on a blockchain digital ledger that contain metadata – contain a hash, which is a compressed version of the block’s metadata that can’t be reverse-engineered. Each block contains its own hash and the hash of the previous block.
Network validators looking to verify the information has not been tampered with just need to check the hashes within the specific ledger entry – if they don’t match, this shows the data has been tampered with.
For example, if companies could simply retroactively change the raw material composition data for their product, they could easily engage in greenwashing by tampering with product information behind the scenes to make it appear more sustainable – blockchain-based DPPs make this practice impossible.
Transparency & Efficiency
All blockchain transactions are provable, traceable and searchable on-chain, providing complete transparency for all ecosystem stakeholders in relation to the data stored within Digital Product Passports.
Regulators would also have easy access to an audit trail for each product’s data. When organisations make claims that they’re hitting their ESG targets, the data required to prove (or disprove) those claims is easily accessible and available to regulators, often in near real-time.
With DPPs being updated over time – when a product is recycled or resold, for example – it would be cumbersome to have a third-party organisation facilitate these updates in a large, complex, and interconnected DPP system with many participants.
For efficiency, blockchain networks rely on smart contracts. These are pieces of code that automatically execute blockchain transactions when certain agreed conditions are met. Smart contracts disintermediate the process, enabling DPPs to be updated quickly without needing constant third-party input.
Greenwashing is an increasingly prevalent issue that can take many forms, from misleading statements and deceptive marketing to unachievable environmental goals and manipulated statistics.
There are many examples of the practice across various industries, the consequences of which include the loss of brand reputation, consumer distrust, and of course, overall environmental degradation.
The European Commission has introduced legislation aimed at tackling climate challenges, putting businesses at the forefront of the fight against climate change. Amongst these initiatives is the Green Claims Directive, directly combatting illegitimate sustainability claims and greenwashing.
They have also proposed the implementation of Digital Product Passports, an innovative technology that’ll help businesses and customers figure out how to avoid greenwashing and provide the technological backbone for the circular economy.
The EC is setting a preliminary timeframe to roll out DPPs within the first target industry of industrial and EV batteries in 2026/7 – with many other industries including textiles to follow suit immediately after. If your organisation plans on selling (or is currently selling) products within the European market, it is wise to start making strategic moves towards DPP adoption now.