As consumers and markets increasingly recognise the long-term impacts of their choices, they are demanding greater transparency regarding sustainable and ethical practices from businesses and organisations. While this shift in consumer behaviour has compelled companies to prioritise the implementation of sustainability and Environmental, Social and Governance (ESG) practices and goals, and report on them, it has also given rise to concerns about greenwashing.
What is the risk?
Greenwashing occurs when companies make false or exaggerated claims about their environmental impact or sustainable business practices, often for marketing purposes.
In recent years, several businesses in Australia have been fined by the Australian Competition and Consumer Commission (ACCC) for making misleading sustainability claims, leading to extensive brand and reputation damage. This has made many companies hesitant to communicate their sustainability initiatives, fearing that they might be accused of greenwashing, resulting in ‘greenhushing’.
Greenhushing occurs when companies understate or do not communicate their sustainability efforts, either due to fear of being accused of greenwashing or because they do not have the ability to provide sufficient evidence of their claims.
How can you mitigate the risk of greenwashing?
Greenwashing can negatively affect a business through reputation damage, loss of consumer or stakeholder trust, legal consequences and financial loss.
Businesses can mitigate the risks associated with greenwashing by:
- Being transparent about your environmental initiatives. Provide clear and verifiable information about your sustainability efforts, certifications and achievements.
- Obtaining legitimate certifications from recognised organisations and ensure the certification process is thorough and reputable.
- Conduct a detailed lifecycle analysis of your products. Understand and mitigate the environmental impacts for the entire cycle, from raw material extraction to disposal.
- Avoid exaggeration by using accurate and specific language in marketing materials. Avoid vague claims and quantify any environmental benefits wherever possible.
- Educate customers about the real meaning behind eco-friendly terms. Provide information about your initiatives in an accessible and easy to understand manner.
- Continuously work on improving your environmental policies. Update consumers and stakeholders about new initiatives and achievements as you go.
- Engage with stakeholders including customers, employees, and investors to demonstrate your progress. Address any concerns they may have and adjust to incorporate valued feedback.
- Stay up to date with advertising and environmental regulations, making sure your marketing materials comply with these laws.
- Conduct regular independent audits of environmental practices and publish the results to show your authenticity.
- Educate employees about the company’s environmental initiatives and the significance of truthful marketing. This will further encourage a culture of environmental responsibility.
- Ensuring ESG and sustainability goals and initiatives authentically connect to the organisation’s purpose and core product or service offering.
To achieve alignment of ESG and sustainability goals with organisational goals, companies need to integrate ESG and sustainability practices and processes into their business strategy, rather than treating them as separate. By creating a meaningful connection between goals, ambitions and core business values, organisations can establish themselves as genuine champions of sustainability, ultimately driving positive change for a better future.
How can a Moore Australia Advisor can help?
Moore Australia offers ESG consulting and reporting services, with experts across the country. Working with a trusted business advisor and assurance teams can assist in solidifying the credibility of an organisation's sustainability claims. Our experts can provide assurance regarding regulatory standards, offer guidance on best practices, benchmark against industry standards, and verify sustainability metrics and reporting.