When I started writing about sustainability circa 2019, my inbox was promptly flooded with emails from PR agencies pitching “sustainability” stories on how their clients—many of them manufacturing, bottling, and oil giants—had valiantly rid their staff canteens of plastic straws.
In the short years since, the sustainability space has matured enough that most companies now feel the pressure to set serious targets for how they will decarbonize their own operations and products. But the issue of greenwashing persists.
“If you’re in any way misrepresenting, cherry-picking, being selective, or being ambiguous [about your sustainability credentials], that’s greenwashing,” says Lyons O’Keeffe, ESG director at investor services group IQ-EQ.
Last month a law firm brought a class action lawsuit against Delta Airlines, alleging the company had misled consumers by selling “carbon neutral” tickets. Delta, the lawsuit says, based that claim on the use of “offsets [that] overpromise and underdeliver on their total carbon impact” and likely unfairly won over customers because of it.
The Delta case is just one of the latest cases of a company being sued for bogus climate brags. But, O’Keeffe says, companies more often fall into the pit of “unintentional greenwashing,” typically by setting a target for emission reductions and then failing to collect the data necessary to measure its own progress. Yet even that can have “profound impacts.”
“Firstly, the investor doesn’t get what they think they’ve invested in. Secondly, at a fund level, there’s a massive reputational and indeed legal impact for them if their portfolio is [guilty of greenwashing]. And at a further level [greenwashing means] the system is not directing capital to the right place,” O’Keeffe says.
Investors, at least, have a few more tools at their disposal to help weed out greenwashing claims than consumers do, including time and money. There’s a major economic incentive for investors to ensure their portfolio is sustainable, and shareholders are increasingly demanding companies disclose progress on environmental goals.
“Investors have really taken the place of regulators in looking into companies and seeing if they’re doing what they need to do to become resilient,” says William Theisen, the CEO of climate consultancy EcoAct North America.
Nevertheless, as I reported earlier this month, regulation is coming and it will bring a touch of consistency to corporate climate reporting and help standardize the language used around environmental goals. Tighter standards will make greenwashing a little easier for consumers, and litigators, to spot. But while the increased scrutiny on dubious climate claims is warding off greenwashing, it is also having the adverse effect of boosting “greenhushing.”
“Greenhushing is when a company just shuts up about [its climate work] because they’re worried about being called out over greenwashing,” says Andrew Coburn, CEO at climate analytics firm Risilience. “So you keep doing your net-zero plan but reduce the number of things you say about it and hope to be able to almost retroactively demonstrate it.”
That might be better than greenwashing, but the key downside of greenhushing, according to the people I spoke with, is that it distorts markets and prevents green capital from flowing to where it’s needed.
I hope that when standards are more settled, companies will have the guidance they need to not fear “accidentally” greenwashing.
Eamon Barrett
eamon.barrett@fortune.com
IN OTHER NEWS
Crowd-sourced intelligence
Leaders in A.I. have suggested governments establish committees of tech experts and entrepreneurs to advise on legislation for the nascent industry. But don’t “the billions of ordinary citizens around the world that the A.I. revolution, in all its uncertainty, is sure to affect…deserve to be included in decisions about the future of this technology?” That’s the question this Fortune op-ed asks and argues in the affirmative.
Titan recovered
A search and rescue team has recovered wreckage that is most likely the remnants of the missing Titan submersible. Early reports suggest the small submarine suffered a “catastrophic implosion” after encountering pressures beyond its capacity. But years-old reports had previously flagged safety issues with the jerry-rigged submersible and the ongoing investigation will no doubt question how the company, OceanGate Expeditions, was allowed to continue operations despite its track record.
The persistence of demagogues
“Ramaswamy’s device to avoid scrutiny of his own record is by flamboyantly making outrageous proposals targeting everything,” is the conclusion from an interesting take-down of Republican candidate Vivek Ramaswamy’s claims of being a self-made billionaire. Yet Ramaswamy’s rise in Republican polls might show how trust is more often based on feeling than fact.
McKinsey needs an ethics coach
McKinsey is beefing up its ethics department after a series of high-profile controversies damaged its reputation. The management consulting giant is hiring for a newly created position with its global “ethics allegations management team.” The “specialist” will be responsible for the “intake and triage of matters” that could present a risk to the firm.
TRUST EXERCISE
“You have to be transparent with literally everything, no matter how uncomfortable the data is or the conversation is. You have to tell everybody everything, including the media. And you’re going to get whacked along the way, and that’s life. But for us to regain trust, number one with our own people, and then with the flying public, they were going to have to believe us. And that was the culture we were going to carry forward.”
That’s an excerpt from Fortune’s latest Leadership Next episode, in which Alan Murray and Michal Lev-Ram sit down with Boeing CEO Dave Calhoun to discuss how the executive is using “radical transparency” to rebuild the aviation giant’s reputation.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.
