58% of Forbes 2000 companies’ climate policy “at odds with net zero goals”
Greenwashing is a major challenge in ESG reporting. Greenwashing is when a brand/company shows that it’s more environmentally friendly than it really is. Greenwashing has become a major concern in today’s consumer world due to ESG being heavily promoted by brands to hook consumers, who are increasingly becoming environmentally conscious. A 2022 Harvard Business Review (HBR) discussion mentions a study conducted in Europe, which found that 42% of green claims were “exaggerated, false, or deceptive, which points to greenwashing on an industrial scale”.! (How Greenwashing Affects the Bottom Line-By Ioannis Ioannou, George Kassinis and Giorgos Papagiannakis).
A very recent study (October 2024) on greenwashing by Sara M Hassan (Greenwashing in ESG: Identifying and Addressing False Claims of Sustainability) found three ‘patterns’ in greenwashing.They are ‘selective disclosure’, ‘vague claims’ and ‘use of irrelevant claims.’ In ‘Selective disclosure’ companies showed ‘specific positive environmental or social initiatives but downplayed negative impacts.’ (Eg: A transport company may show increasing use of EVs in their fleet but may not show their use of fossil fuel volumes). ‘Vague claims’ resulted where “terms such as “eco-friendly” or “sustainably sourced” used without providing clear definitions or third-party verification, leading to inflated perception of company’s actual commitment to ESG principles.” The “Use of irrelevant claims” (often in retail and consumer goods sectors), is where companies show ESG achievements that had ‘no relevance to the product or service being marketed.’
A common greenwashing is the practice of ‘net zero’. The London-based nonprofit InfluenceMap found that 58% of the companies it analyzed, advocate on climate policy “in a way that’s at odds with their stated net zero goals” (published in November 2023-The research also found 300 companies in the Forbes 2000 to be at risk of “net zero greenwash”). InfluenceMap said the findings point to the “prevalence of net zero greenwash.”
Things started to go further south when the UN began getting involved on the greenwashing issue. In November 2022, the UN Expert Group released its report and UN Chief António Guterres, at the COP27 summit in Egypt, said: “We must have zero tolerance for net-zero greenwashing”.
Adding a new layer of confusion to the story of companies’ greenwashing, is the realization that consumers are aware of the greenwashing credibility gap of the brands. The 2022 Harvard Business Review (HBR) discussion by Ioannis Ioannou, George Kassinis and Giorgos Papagiannakis, reveals that “customers are highly likely to be aware of the gap between stated goals and implementation, and that customer satisfaction levels.” It adds: To be more precise, we estimate that companies that are perceived to be greenwashing suffer, on average, a 1.34% drop in their ACSI customer satisfaction score. Even though at first glance, this might sound like a small effect, it actually isn’t.”
