7 Simple Rules: Getting wise on greenwashing
As CEOs return from Davos, a great deal of attention is focusing on questions around the efficacy of ESG – both as a tool for achieving change and as a means of communicating progress to customers and stakeholders. In particular, many leaders are wrestling with the thorny issue of greenwashing and what it means for their business and their reputations.
As consumers and regulators become more savvy – and less forgiving – some companies are questioning whether speaking up about environmental and social commitments is more trouble than it’s worth. The bad publicity that can result from getting communication wrong can often exceed the brand credit and trust that is built from being proactive and public in the first place. So, why bother at all?
Well, the truth is that we have to keep doing and we have to keep talking. Davos discussions around the fundamental role that energy security and decarbonisation play in investment and policymaking serve to highlight an accelerating macro trend. The US has set the pace through President Biden’s Inflation Reduction Act and its $1 trillion of green subsidies, and the EU is likely to counter with its own package as soon as it can.
At the very least, mitigating the environmental impact of our businesses – whatever industry we work in – is critical to all of our licences to operate, with the public and with regulators. You can’t bury your head in the sand. But you can work hard, up-front, to get it right and to ensure that you are not creating risk for your business and your reputation. Moreover, there’s an argument that mere mitigation is not enough to keep you going – as recent PwC research shows, nearly 40% of CEOs think their organisations will not survive the next decade by doing business as usual.
So, what is greenwashing? Well, at its most basic, it is the practice of being disingenuous about your environmental impact and the steps you are taking to improve your performance. This could be by talking a lot about a part of your business that is doing well in terms of social value while hiding the bits that aren’t. It could be sponsoring a public-facing initiative that is designed to distract from the day-to-day reality of your business and its supply chain. It could be as simple as overclaiming the actual or relative environmental benefits of your product or business-model. And it is ubiquitous.
As the Institute for Strategic Dialogue highlighted in their recent report, Deny, Deceive, Delay: ‘3,781 ads were active from fossil fuel-linked entities, who spent roughly USD $3-4 million between 1 September and 23 November 2022 on Facebook and Instagram’ – that is a vast quantum of ads, from oil majors, focused on influencing the conversation around the latest COP summit.
It is no wonder, then, that greenwashing is experiencing growing negative attention – as consumers, investors, and regulators begin to call out companies that have either made excessive claims in the commercial arms-race to appear environmentally friendly, or who have sought to occlude their harmful business practices.
Here in the UK, the Advertising Standards Authority has recently penalised brands including Oatly and Quorn for promotional materials which made unsubstantiated environmental claims about their products and has added a dedicated greenwashing complaints portal to its website. Meanwhile, UN Secretary General Antonio Guterres recently gave a speech insisting that his organisation will have “zero tolerance for greenwashing”. The wider public is also wising up. According to Sensu Insight, less than a quarter (23%) of the public now take ESG claims at face value with 14% saying they typically disbelieve claims. Finally, there is emerging evidence that funds that merely talk about ESG in their investment prospectuses – rather than walking the walk of genuine sustainable investing – perform worse than their peers.
From global to national governments, and amongst consumers themselves, the call is clear – business needs to up its game and speak honestly and transparently about how we are helping, how we are improving and – critically – where there is more work for us to do.
At Lodestone Communications, we work with our clients to ensure that they are avoiding the pitfalls and bear-traps of ESG communications, whilst getting the credit they deserve and contributing constructively to conversations on business and the environment. We help our clients to follow seven simple rules to get ESG communications right.
- Keep communicating. Despite the challenges, ESG is not going away. As the World Economic Forum said – in their latest Global Risks report, launched at Davos this week – while the next two years will be dominated by the cost of living crisis, looking ten years ahead, climate action failure takes the top spot; with six environmental risks featuring in the top 10. Your business will be expected to have a story to tell, and you can’t shy away from that.
- Admit challenges. The companies that do ESG well tell their whole story – their successes and their mistakes – and focus on communications that are underpinned by genuine transparency. Remember: you can’t ask for trust; you have to show you are worthy of it. That means owning the bad as well as the good.
- Explain and live your purpose. We’re a B Corp, so we would say this. But it matters to the success of our clients’ action and communications on ESG – whether they’ve taken the B Corp plunge or not. Create a purpose-driven business and be clear about – and true to – your values. This will help you to understand and explain what your business should say yes and no to, what success looks like, and why you are taking a particular path.
- Manage expectations. You need to work with your internal and external audiences to help manage expectations about scale and pace – so that everyone understands the journey, how long it will take, and what the destination looks like. This is particularly important to your company’s leadership – help them to understand that there are no easy wins, and that criticism is natural, necessary and often constructive. Help them to embrace it. Help your company to learn from it.
- Track your progress and track sentiment. Tracking and reporting your ESG goals is vital. But so is understanding how your stakeholders – from consumers, to regulators, to investors – feel about those goals and your engagement around them. Do people believe what you are doing? Do they think it’s enough? You need to be armed with that data too.
- Bring in experts and partners. Validate what you are doing, ask for help, engage those who have done it before or who are pushing for faster change. Their ideas matter. Their insights are critical. And a good relationship with a third party – who can see that you are aiming to do the right thing – can help you to mitigate and resolve causes of criticism. Companies that set out to do it all themselves often fall foul of a fast-changing external environment. Better to be open and engaged from the start than to ask for help after the fact.
- Be authentic. To be convincing, you need to believe it. We help our clients to map their own values and goals, through our personal brand purpose pathway sessions. Setting a clear personal purpose can be your lodestar when things get tough, or you face setbacks and challenges.
ESG is here to stay, no matter what the naysayers insist. Yes, it is becoming a tighter and more scrutinised part of corporate life. That is a good thing for any company that wants to genuinely do good things. Being attacked is not the inevitable by-product of striving to do better and talking about how you are getting there. By sticking to these seven rules, you can get the credit you deserve and deliver for the environment and society without sticking a target on your back.