How Greenwashing Can Harm Your Company, Society, And The Environment

Greenwashing is a deceptive marketing practice that plays on the consumer's desire to help protect the environment. Unfortunately, many companies see this as an opportunity to make easy money. But what about businesses that inadvertently use misleading marketing practices? Both intentional and unintentional greenwashing can have devastating consequences for your business.

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Greenwashing Harms More Than Your Reputation

The dangers of greenwashing fall into four categories. Most important are the direct impacts on the environment. Next, greenwashing has adverse effects on society and your business's role in it. In addition, there are both financial and legal implications for companies that greenwash, whether they do it intentionally or not.

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Environmental Implications

Greenwashing has direct consequences for the environment. These impacts occur because consumers are willing to pay extra for goods they believe will help them slow or reverse climate change and other environmental problems. Essentially, there is a demand for legitimate green products.  

Successful greenwashing sells products with higher-than-advertised rates of emissions and other types of pollution. Moreover, these items may also require more natural resources than the consumer believes—an arrangement that undermines the sustainability movement.

While many companies spend time and money researching and developing legitimate green initiatives, the businesses that greenwash their offerings likewise spend a tremendous amount. If greenwashers diverted the resources spent on empty initiatives to R&D, there would be lasting benefits to the environment, the economy, and the businesses themselves.  

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Greenwashing Degrades Social Trust

Public trust is vital to any business. Therefore, when it comes to brand image, any company that engages in greenwashing is playing with fire. Research shows that businesses who get caught greenwashing take a massive hit to their brand image. Furthermore, this PR nightmare can snowball quickly through negative product reviews, on social media, by word of mouth, and in the media.

Unfortunately, after a few high-profile stories, the public becomes jaded and loses trust in any corporation making positive environmental claims—not just the businesses that have been busted. One knock-on effect of this tendency is that legitimately eco-friendly firms must increase their marketing resources to differentiate themselves from the greenwashers. And, of course, higher costs for the business usually translate into higher prices for the consumers.

Finally, companies earnest in their sustainability efforts often decide not to advertise them, fearing accusations of greenwashing. This phenomenon, called "greenhushing," dampens awareness and education of environmental issues. Companies should be free to tout their substantive contributions to environmentalism—the public backlash to rampant greenwashing makes this more difficult.

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Potential Legal Consequences

Watchdog groups can call for investigations of businesses they catch greenwashing. In addition, local and federal agencies can start investigating if they think a company may have crossed environmental regulations. And even if the inquiry turns up without infractions, the stress of the procedure can be enormous. Moreover, public accusations, even unfounded ones, often harm a brand's image.

In the worst possible case, companies that make inaccurate claims about their products can face litigation, which is expensive. Some companies can settle matters quietly, preventing public embarrassment or rulings against them. Unfortunately, others with fewer resources run a severe risk. Although lawsuits are uncommon, they are not unheard of.  

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Businesses Stand To Lose Financially

Perhaps the most apparent harm greenwashing can do to a business is destroy its revenue. Of course, the loss of sales through negative public opinion is a tremendous blow, but companies also lose the cost of the marketing campaign that caused the problem in the first place. Furthermore, on top of potential litigation costs and damages, some businesses face boycotts by large consumer segments.

Companies can also lose B2B partners, as firms with an intact green reputation do not want the public to assume they are guilty by association. This can make it difficult to form partnerships and attract investors. Also, when lenders perform due diligence into a company's history, they may have to assume a higher risk if there are lawsuits or scandals in the past. These skeletons in the closet could raise the cost of financing.

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Avoid Greenwashing

Greenwashing is not always intentional. For example, some businesses might not have the resources to employ experts who know which claims are persuasive marketing and which ones cross the line. On the other hand, some corporations have used environmental claims to encourage consumers to pay more for a product that is not what they say it is. In either case, through negligence or avarice, greenwashing can harm businesses. But more than that, false environmental claims hurt other companies, society, and the environment itself.

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Key Takeaways

• Get certified—If your business wants to claim "organic" or "vegan," several trusted third-party certifications are available.  
• Be specific—If your product is good for the environment, say so. But do it clearly and avoid buzzwords. Many consumers appreciate a product's "story" on the package—the more specific and fact-based, the better.
• Don't be hush hush—Greenwashing is not the way to go. Eco-friendly brands are the driving force behind public awareness of environmental issues. If you censor your voice out of fear that people won't believe your clearly-stated and verifiable claims, you are letting the greenwashers destroy legitimately sustainable brands.