Becoming a Sustainable Business: Beware of Greenwashing

February 21st, 2022

Sustainability is a hot topic in business. More and more companies realise the growing consumer support for businesses that minimise or eliminate any negative impact that their operations or products have on the environment. Many businesses are increasing their focus on sustainable initiatives accordingly.

However, the increasing consumer support for sustainable business activities and products can tempt some organisations to ‘greenwash’. Read on to find out everything you need to know about greenwashing and why it’s something your business should avoid.

What is greenwashing?

‘Greenwashing’ is a blanket term that’s been given to any attempt by a business to falsely claim or exaggerate their environmental credentials. It is often done via marketing spin.

Examples of marketing spin that could potentially be greenwashing could be claims such as the following if they are not correct:

  • our packaging is fully biodegradable
  • our washing machine uses 50% less water.

There are no laws in Australia to prohibit greenwashing specifically. However, it falls under the general consumer law prohibiting organisations from making deliberately false or misleading claims. These claims are subject to heavy financial penalties if the responsible organisations are prosecuted by the Australian Competition and Consumer Commission (ACCC) or any other aggrieved party.

The negative impacts greenwashing can have on a business

Greenwashing can obviously have legal ramifications. For example, Australian gas company Santos is currently being sued by an Australian environmental group in the Federal Court for allegedly making false claims that their gas is “clean” and that the organisation is on target for net-zero carbon emissions by 2040.  

Even if an organisation is only accused of greenwashing, it can negatively impact consumer perception and support for it.  Greenpeace recently called out Australian companies that it believes are ‘greenwashing’ by claiming that they are working towards cutting their carbon emissions without having plans in place to reduce their reliance on fossil fuels. Among the companies mentioned by Greenpeace are Qantas and AGL Energy.

Finally, and perhaps most importantly, greenwashing can encourage consumers to buy environmentally damaging products in good faith that they are more environmentally friendly than they are.

The importance of sustainability

Consumers are not the only ones driving the push towards more sustainable business activities. There is also increasing government pressure for organisations to become sustainable in their operations. 

The Australian government has committed to a net zero carbon emissions target by 2050, which means that policies will increasingly be developed to encourage businesses to meet this target. It has already introduced the Emissions Reduction Fund, which enables organisations to collect Australian carbon credit units for each tonne of greenhouse gas emissions that it  either cuts or stores. 

These units can then be sold to organisations who want to offset the amount of carbon emissions they produce or meet emissions reduction targets or compliance obligations. 

    The bottom line

    Organisations should promote their verifiable sustainable credentials, but should avoid the temptation to make unsubstantiated claims that could lead to damaging accusations of greenwashing.

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