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Sustainability Programs and the Dangers of Greenwashing

Article Overview

Sustainability programs have become an essential part of doing business. Many organizations now publicize their sustainability agendas and boldly pledge to reduce carbon and deforestation and improve DEI. However, creating sustainability programs and ambitious commitments can also expose companies to the dangers of greenwashing, which is the practice of making false or misleading claims about environmental action.

To shed more light on this topic, we interviewed a true industry expert: Forrester Principal Analyst Renee Murphy. Her expertise includes governance, risk and compliance, climate and environmental sustainability management, and building trust with customers. Recently, she served as a co-author on Forrester's Predictions 2023: Environmental Sustainability report and spoke to the state of the Climate Industry as a guest speaker in a recent Persefoni webinar.

Watch the complete on-demand webinar recording here.

In this expert interview, we explore the risks and implications of greenwashing for organizations with sustainability programs and offer tips and strategies to avoid any accusations that could harm their reputation.

Q: How we talk about sustainability plans matters. What are the reputational risks associated with modern sustainability programs?

A: I think the biggest risk is when you have your PR or marketing team packaging information they get from their sustainability team about the company's sustainability efforts in a way where it's technically true but not the whole story.

If you want to protect your reputation, and though it may seem obvious, you have to be transparent. There is no other way to live in this world. For me, reputation and transparency are hooked together.

The risk comes into play when you tell stories that make your data look good and that the program is moving ahead quickly. We're not talking about something that needs to happen overnight. We're talking about something that has to happen over the next 40 years, so telling me these hyperbolic stories now is crazy!

Q: Which industry has been flush with examples of greenwashing?

A: When you look at the hospitality industry, you'd be surprised by how outdated even new hotels are when it comes to how they use water, how they deal with waste, how efficient they are, and how they report on it all. There is practically nothing there. Little infrastructure exists in a way to help them do that.

What have they been doing so far when it comes to sustainability efforts? "Put this card on your bed if you don't want us to wash your sheets because we're conserving water." Well, how did you? What? You have no sensors to do that! You can't even report on it!

Greenwashing is a two-way street. You could have been tracking it for years, and now you have to be able to talk to me in a way that doesn't make it sound like the last ten years were a big lie.

If you are doing this because you need to report it to not only regulators but to your customers, then you need to be transparent about that. No one expects you to get it done today. And as we go through this journey, I expect some years will be worse than others. The carbon footprint will grow and shrink and grow and shrink and grow and shrink until we're eventually to the point where we're going to be right. And I think that's what everybody should think about.

So, where do I think reputation lies? I think reputation lies in transparency. Transparency lies in automation. And automation lies in software.

Q: What tactical steps can sustainability leaders take to manage reputational risk with their sustainability programs?

A: The first step is to think about reputational risk. I hear so many leaders talk about the risk of not meeting our goals and the risks of not being able to report this to regulators. But at the end of the day, you report to more than just regulators. You're reporting your sustainability efforts to your board, to your customers, and your employees. Each of these stakeholders has a different point of view.

Part of your job as a sustainability leader is to figure out how to communicate with these people and which information speaks to what they care about. Employees want to be proud that they work for a company that cares about sustainability.

All of your sustainability risks have reputational impacts associated with them; at least 80% of your risk registry does, too. Understand the context, and make sure you account for reputational impacts to your existing risks to catch more of them in the future.

Big picture advice: Think about your policies, plans, strategies, etc., and how each will impact your reputation within these different constituencies. Then, put those mitigation strategies in place.

Q: The Forrester 2023 Predictions report said, "At least ten companies will incur $5 million or more in greenwashing fines." How can organizations avoid fines like this?

A: When we were writing that prediction, one of the things I thought was that all the Federal Trade Commission (FTC) has to do is say greenwashing is deceptive advertising. The second that happens, the FTC becomes your regulator, and the FTC can come to you with a $25 million fine because you told people you were doing this when you weren't.

We are already seeing this problem in the market. Kohl's is getting beat up. Walmart is getting beat up. Why? Because they say they have sustainable bamboo pajamas. It turns out that the synthetic thread that makes up the fabric is made in a way that isn't really sustainable. So, when a company sells "sustainable bamboo pajamas," which turns out to be untrue, the FTC will come down on them. They have already issued millions of dollars in fines across the board.

I don't see the FTC playing games here. There will be fines for greenwashing. I think it will be called out as deceptive advertising, and the next thing you know, you're on the hook for millions and millions of dollars. It's not hard to see that ten companies would end up that way, if not more!

Q: How should marketing and PR departments approach the issue of greenwashing?

A: If I were leading communications within an organization and talking about sustainability, I wouldn't be trying to sell anyone on anything. I would be as pragmatic as possible, explaining this to you like it’s a financial report.

At no point in a financial report would they promise you that five years from now, they're gonna make $100 million more. Right? It's a snapshot of where we are today and how we're going against our plan. We're not just going to be working on sustainability for the next two or five years. This will be in progress for the next 40 years. We will probably have three generations of people come through this company before we're done.

It's time to strap in and watch the incremental progress. As long as we're all marching forward, there will be progress. I don't want everyone to lose sight of the fact that it's happening at 4% a year. Because, at the end of 10 years, that's a lot. That would be 40%.

Quit thinking about it like we all have to be carbon-neutral tomorrow. We all have to weigh risks, opportunity funding, and priorities. But we do have to get there. And organizations should be considering software to help them achieve their sustainability goals. Without software, it would be like chewing on tin foil.

Q: What are 1-2 ways organizations can drive real environmental change without greenwashing?

A: Be truthful, embrace incremental change, and celebrate it! First, I want you to think really long term. Humans are bad at this. You should adopt the mindset of an astronaut. If you're an astronaut, you start training this year, and one day 25 years from now, you'll be in space. You stay focused, and you keep working on it. We should all go to space camp for this reason!

We need to think about sustainability that way. I fear you get in there, throw your information onto a platform, and walk away. That will not be the answer to this question. That's not how you can achieve your sustainability goals.

Secondly, get the organization involved. The process becomes meaningful when we're all involved and want to know the outcome. To anyone out there who's trying to drive real environmental change without greenwashing, I encourage them to get everyone involved, get them used to incremental change, and get used to celebrating that incremental change. Know that you're not always going to get it perfect, but you're always going to be transparent. You're always going to call it like it is, and you're always going to keep marching forward.

The Importance of Due Diligence in Implementing Sustainability Programs

In an increasingly environmentally conscious world, sustainability programs are essential for an organization to outline its ambitions to drive real environmental change and can be a pivotal market differentiator. However, ambitious sustainability agendas are also susceptible to the risks of greenwashing, which can undermine investor and consumer trust. To mitigate these risks, companies should embed sustainability in their culture to improve governance and cross-functional engagement and celebrate incremental progress toward ambitious goals. And to ensure the environmental data they base their programs and goals on is accurate and trustworthy, they should be considering software to help because, as Renee says," Without software, it would be like chewing on tin foil."

To hear more from our guest, Forrester's Renee Murphy, watch our webinar recording, “The State of the Climate Industry Panel Discussion," where she discusses how companies manage climate risk and make environmental progress alongside sustainability leaders at Burlington and Persefoni.

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