Monday, April 13, 2009

Does greenwashing show the dirt?

I have written an increasing number of firm level "environmental economics" papers and this is an interesting twist on the story.

Why Greenwashing Hurts Even the Most Eco-Friendly Businesses[]

Your business has been designing more environmentally friendly products for the past 15 years. Your marketing team is trained to make accurate and truthful environmental claims about your products. Your company wholeheartedly believes in its sustainability efforts. Think you're immune to the effects of greenwashing? Guess again.

The fact of the matter is greenwashing affects all companies, including those that are making a concerted environmental effort, by degrading consumer confidence. The effort your company makes is hampered by competitors when they mislead the public.

According to the 2008 Eco Pulse survey conducted by the Shelton Group, when asked why most companies that adopt environmentally friendly practices do so, the most common response was "to make their company look better to the public." Only 13 percent of respondents answered "because their owners/shareholders care about the environment."

So what can you do to address this problem and increase the credibility of your company's environmental claims?

First, it's important to recognize that this is a broad problem, affecting every environmentally conscious company in every industry imaginable. The problem won't be solved overnight and it certainly won't be solved with a single company's efforts.

The somewhat newly revised Federal Trade Commission's "Guides for the Use of Environmental Marketing Claims" are a great starting point for at least creating a frame of reference, but unfortunately it is near impossible for the guides to be properly and broadly enforced. The ISO 14021 standard for self-declared environmental claims, along with newer efforts in development from associations such as ASTM are also great points of reference, but unfortunately these are voluntary standards. As a result, environmentally responsible companies follow these guides, while greenwashers continue to proliferate.

Transparency is the key to addressing the problem and restoring consumer confidence of environmental claims. Third-party certification of sustainable products and environmental claims adds an extra layer of credibility to a company's marketing.

For companies that are self-declaring environmental claims, even those that follow standard guidelines, consumer mistrust still looms. A 2008 PriceWaterhouse Coopers survey validated that only 16 percent of consumers trust the environmental claims from manufacturers.

There are dozens of efforts ongoing from standard developers, NGOs, third-party certifiers, industry associations and others that seek to create transparent standards to bring back consumer trust in environmental claims.

There are two critical pieces that must be in place in order for these to succeed:

• First, the standards need to be developed in an open consensus manner with a large and diverse group of stakeholders.
• Second, the standards need to be reliable, repeatable, rigorous, and balance stringent criteria with current technology and commercial feasibility.

As these standards proliferate and truly environmentally conscious businesses jump on-board, then consumers will regain trust in environmental claims and really put their purchasing power into green products.