The pressure on tech companies to lessen their carbon footprint has ramped up alongside rising CO2 emissions. While some organizations have made sincere efforts to support the environment, others have made commitments without taking concrete action. This is what’s known as greenwashing — portraying products or processes as being environmentally friendly when they offer few, if any, environmental benefits.
Whether it’s intentional or unintentional, greenwashing can tarnish a company’s brand and damage its relationship with customers. Thankfully, there are clear signs consumers can use to identify greenwashing, and there are a number of steps organizations can take to avoid this harmful practice.
What Is Greenwashing?
Greenwashing is when a company makes inaccurate or misleading statements about its sustainability. The practice can be intentional or unintentional, and it often relates to statements about carbon emissions associated with energy within the tech industry.
What Is Greenwashing?
Greenwashing is when a company gives an inaccurate or misleading impression about its sustainability practices. While it often refers to a company making intentionally false, inaccurate or misleading claims about its sustainability practices, it can also include unintentionally misusing terms related to sustainability or even a lack of transparency about relevant details. When it comes to the tech industry, greenwashing often centers around claims made about carbon emissions, leading to “carbonwashing.”
There are many reasons greenwashing happens, but they boil down to the fact that sustainability is demanded by consumers, meaning companies have a motivation to be — or appear to be — sustainable.
“Consumers want to not only consume sustainable products, they want to work at companies with sustainable missions,” Gary Chance, vice president of partnerships and marketing at Prescriptive Data (now Nantum AI), said. The company’s product, Nantum, is a building management platform that aims to improve sustainability and operability of commercial buildings.
But the pressure to be green isn’t just from consumers or potential employees. Investors care about sustainability as well, with a Morgan Stanley report finding that more than three-quarters of global investors have an interest in sustainable investing.
Companies are also increasingly being punished for not being sustainable with fines and regulatory action. According to the U.S. Environmental Protection Agency, median penalties for violations of the federal Clean Air Act have grown, despite fluctuations, over the past several years.
Examples of Greenwashing
Greenwashing is an all-too-common practice among businesses. These are just some of the companies that have been caught in the act.
Volkswagen
In 2015, Volkswagen (VW) launched a marketing campaign to promote the low emissions of its vehicles as part of an effort to increase its diesel car sales in the U.S. However, the Environmental Protection Agency discovered that the diesel engines in VW vehicles were equipped with software that could sense when an engine was being tested and alter its performance to pass emissions tests. In response, VW had to issue costly recalls and lost the trust of its customers and the general public.
ExxonMobil
Esso, a company under ExxonMobil, advertised a “thoughtful driving” marketing campaign to drivers in the United Kingdom. One of the campaign’s major points was the claim that Esso would develop an oil refinery and petrochemical complex into a carbon capture facility. In reality, the project never secured government support and remained in the planning stages, misleading drivers looking to reduce their carbon footprint.
DWS
Asset manager DWS came under fire in 2021 when it claimed that “ESG is an integral part of our DNA,” overstating its position as a “leader” in the ESG space. As a result of the fallout, DWS’ then-CEO resigned, the company admitted that its marketing exaggerated its ESG efforts and it received a $27 million fine for greenwashing charges.
Nestlé
In 2022, activists in the Philippines exposed the insincerity behind Nestlé’s goal of making all of its packaging reusable or recyclable by 2025. Instead of limiting the amount of single-use plastic it produced, Nestlé was actually burning plastic waste to hide its plastic production. This practice threatened to harm wildlife and Filipino communities, revealing the deceptiveness of Nestlé’s sustainability initiatives.
Google aims to achieve “net-zero emissions” across its operations by 2030. While this statement might be well-intentioned, it lacks clarity. Rahul Tongia, a senior fellow at the Centre for Social and Economic Progress and adjunct professor at Carnegie Mellon University, notes the confusion around the “net” portion of net-zero emissions claims.
“Will carbon emissions really be zero, or are they ‘net’ through not just futuristic offsets (which are expensive or unproven at scale) but offsets that are unfair or, even worse, based on accounting tricks?” Tongia wrote in a post for the Brookings Institute. Unless a lot of care is taken in the accounting of carbon offsets, “we risk greenwashing.”
Common Signs of Greenwashing
Greenwashing is often secretive or subtle, but consumers can use tell-tale signs to detect when a company is applying the strategy.
Fluffy Language
Companies committing greenwashing may use vague wording in product labels. Look out for words like “eco-friendly,” “green,” “natural” or “sustainable.” Buzzwords like these are designed to tie a product or process to the idea of supporting the environment, but they don’t have any real meaning or confirm a company’s positive environmental impact.
Broad Statements
Organizations may make bold claims that are designed to turn heads rather than promote actual initiatives. Examples include companies that say they’re “a leader in the environmental space” or “surpassing competitors in sustainability efforts.” If a statement is impossible to prove or isn’t backed up by evidence, it’s probably a case of greenwashing.
Hidden Trade-Offs
Sometimes companies emphasize a particular aspect of a product that is environmentally friendly to draw attention away from its dirtier elements. For example, consider a product that’s made with recyclable materials, but the actual process of creating the product results in large amounts of leftover waste. Be sure to research products whenever possible, and always take product labels with a grain of salt.
Irrelevant Claims
Another greenwashing approach organizations use is making a claim that’s true but unimportant. For instance, a product label that claims a battery is “mercury-free” means nothing since mercury has been banned from many types of batteries for decades now. Be sure to read labels carefully for any overly obvious statements.
Environmental Imagery
Businesses may employ trees, leaves, animals and other nature-oriented images to convince consumers that their brand is environmentally conscious. In addition to researching products, look up whether a company invests in sustainability initiatives. If it doesn’t, its green imagery is pure marketing.
Fake Endorsements
Products may contain labels that appear to be third-party endorsements or certifications. In reality, greenwashing companies make up third-party labels to lend more credibility to their products. If an endorsement label is branded with an unfamiliar organization, there’s a chance it was fabricated by the manufacturer.
What Companies Can Do to Avoid Greenwashing
There are various measures organizations can take to ensure they don’t unwittingly perform greenwashing.
Be Honest About Your Sustainability Efforts
Greenwashing comes down to whether an organization is willing to hold itself accountable and present a clear picture of its sustainability initiatives. Taking the high road is always the best way to avoid committing greenwashing, whether it’s intentional or unintentional.
“Being honest about how much of that power you’re consuming is coming from carbon sources is really the key to not greenwashing things,” Chris Noble, founder and CEO of Cirrus Nexus, told Built In. The company offers an AI-driven cloud management platform that allows users to track various information about their cloud service, including its carbon impact.
Assess and Measure Your Company’s Energy Use
Assess your company’s environmental footprint. For Chance, the most important part of this is measuring your company’s energy use and carbon emissions. That isn’t always the easiest thing to do, but there are some tangible ways tech companies can gain a better grasp of this information, including understanding emissions.
“Take a look at your business and understand what are the impacts of your business on the environment,” Alyssa Rade, chief sustainability officer at Sustain.Life, told Built In. “Do you produce a lot of waste? Do you consume a lot of energy? Do you do a lot of travel? Do you utilize toxic chemicals?”
Understand Your Company’s Scope 1, 2 and 3 Emissions
Emissions are classified by the U.S. government in three different groups: direct emissions (scope 1), indirect emissions (scope 2) and upstream and downstream emissions (scope 3).
Scope 1 includes direct carbon emissions from what a company owns (think the emissions associated with the fossil fuels burned by company cars). Scope 2 includes more indirect factors like the electricity (and the carbon emitted in its generation) needed for your physical office like keeping the lights on, running equipment, keeping the air conditioner going and so on.
Scope 3 items, though, are more nebulous and challenging because they involve the carbon generated from a company’s entire supply chain. Chance gave the example of a tech company that works with hardware, explaining scope 3 emissions would involve questions like, “Where did every single piece of your equipment come from? How was it built? How was it shipped? How is it stored? How is it delivered to the end customer? And acquainting energy usage and carbon emissions to each of that journey.”
Companies should make an effort to understand all three types of emissions. Not only do they aidl in the overall effort to avoid greenwashing, but they’re often required.
Because scope 3 is the most complicated, Chance recommended that companies work on figuring out their scope 3 emissions last because they will likely find “more and more nuances” regarding their emissions as they begin trying to quantify the first two.
Know Your Data Center’s Location
Companies should find out where the data centers they are using are located, Noble said, and get to know local conditions related to energy generation. Knowing this sort of information can not only help companies avoid greenwashing, but it also helps companies make more sustainable decisions.
“If you log into a cloud computer somewhere that’s being hosted by some cloud company, understand where that computer is being run,” Noble said. “Because it’s not some mythical thing that’s out in the ether — it’s actually physical hardware somewhere being run and that’s consuming electricity.”
Noble gave the example of a hypothetical company deciding between two data centers — one located in Ireland and the other in France. Perhaps the data center in Ireland comes out to $1 per hour to run a computer and gets its power from carbon-producing sources. Meanwhile, the data center in France might come out to $1.20 per hour and get its energy from carbonless sources. Despite the price difference, the company may lean toward the French data center, especially if it wants to be more transparent about its sustainability efforts.
Ensure You Can Access Your Cloud Data
Another challenge is that smaller tech companies rely on the big tech companies for cloud services, meaning they rely on them for information about their sustainability. The problem is that major cloud providers may not always be willing or able to provide this information. It might be better to consider alternatives to top tech players, including platforms like DigitalOcean and Linode. Without cloud data, it’s difficult for companies to gauge their environmental impact and be transparent with consumers.
“You’ve got your Google, your Amazon, your Microsoft and the folks who own the data center — of course they have access to incredible information and data about their own function and in many ways lead the way for the tech industry,” Rade said. “But if you are a small player, and you can’t even get them to tell you what your measured impact is from using their platform and for supporting your business, it’s really hard.”
Study the Local Conditions of Your Energy Sources
Energy sources are very regional, meaning there might not be much opportunity for carbonless energy in a specific area. Most of the wind generation in the United States is concentrated in the Central Plains and near the Great Lakes, for example. And there is very little solar generation in the northern central states like Montana, the Dakotas, Wyoming and Idaho.
In addition, the energy mix a company draws from changes throughout the day.
“For instance, in the middle of the day in Northern California, you’re getting a mix of nuclear, a little bit of hydro and coal and gas and oil,” said Noble. “But we also know that at night you get a lot more hydro in that mix because the hydropower that’s being produced in the Northwest is transferred at night. So your carbon footprint, your impact on carbon, changes throughout the day.”
This regional and temporal variation can make it very difficult to accurately quantify the greenness of a company’s energy sources, so organizations need to be careful when making claims about their sustainability. Having a deeper understanding of how local conditions affect energy sources can help companies make more precise claims about their environmental impact and efforts.
Set Realistic Sustainability Goals
Rade recommended that companies set small, realistic goals based on their situation. Going net-zero on carbon by 2030 or zero-waste in five years likely isn’t realistic for most companies, she pointed out. They might seem ambitious, but if they aren’t feasible, setting those as goals will invite greenwashing when they are (most likely) not met.
Starting small and realistic might be something as modest as committing to measure sustainability-related things, Rade said. With data in hand, a company could make realistic, tangible goals and share accurate, contextual information with stakeholders. Going waste-free in five years might not be realistic, but maybe reducing waste by 25 percent is.
Change Practices to Reduce Carbon Emissions
Chance recommended that companies start using technology that can help them reduce carbon emissions across the workspace. This can include tools or services like emissions-tracking software, or air travel carbon calculators, like the one offered by the UN’s International Civil Aviation Organization. It can also be something as direct as purchasing energy generated through carbonless means.
Rade suggested companies consider changing their more carbon-intensive practices. The interconnected issues of work location and travel is a key area to examine, she said.
“If you are a tech company, and you have a service or good that does not require an in-person environment — like it really is well suited to this distributed workforce — think about maintaining a remote-first policy and how to disincentivize individual modes of transit, like car use or even long-term flights,” she said. “[This] can have a really significant impact.”
Impose an Internal Cost on the Carbon You Generate
For a company to avoid greenwashing, it must be transparent about its carbon footprint. And, according to Noble, “to be transparent is to impose a cost.”
“Companies must impose (or have imposed) an internal cost of the amount of carbon they are causing to be produced,” he said. “If companies are held accountable for the amount of power that they’re using and there’s a cost to that, then companies will start changing it.”
This, in turn, helps address the issue of greenwashing “because it’s not about these offsets and transferring that carbon load to somebody else, it’s actually taking accountability for how much carbon you’re actually causing to be produced by your consumption,” Noble said.
Fully Understand the Terms You Are Using Before Making Sustainability Claims
While there are bad actors out there, from Rade’s perspective, a lot of tech companies — particularly startups — engage in greenwashing without realizing it. Instead, they are using what they might think is marketing jargon without knowing that some terms and claims actually have very specific, regulated meanings. She gave examples like “compostable,” “biodegradable” and “plastic free.”
“There have been companies that find themselves in lawsuits because they use these words with their marketing department, and maybe they honestly don’t have an in-house sustainability person,” she said. “They don’t have anybody there who knows that these words have a specific meaning. And that’s where I think a lot of companies do get into some trouble.”
She recommends companies read the Federal Trade Commission’s green guides and become familiar with the terms covered. The guides also offer tangible, real-world examples related to sustainability claims to give a better idea of what different terms and claims mean.
Be Specific When Communicating About Sustainability
When communicating about sustainability topics, make sure your company is specific to avoid greenwashing. Saying your product is made in a facility that is served by 30 percent wind-generated electricity might not sound as impressive on your website, Rade acknowledged, but it is far more transparent, which is key to avoiding greenwashing.
Rade specifically recommended companies provide “transparent contextualization of your strategy, your goals and having a regular reporting period.” This could come in the form of an annual report that a company posts publicly on its website, for example.
Not only is transparent, contextualizing communication on sustainability the right thing to do, but stakeholders want and value it, Rade said. It is especially important when a company falls short of their sustainability goals because the details of why are likely relevant.
Greenwashing vs. Brownwashing
Protecting the environment is usually a cause that consumers, clients and stakeholders can get behind. But what if stakeholders and investors aren’t supportive of genuine environmental practices? This scenario can lead organizations to commit what’s known as “brownwashing” — intentionally underreporting a company’s sustainability initiatives and efforts. It’s essentially the opposite of greenwashing.
While sustainable practices can earn a business a reputation for promoting the greater good, they can also be costly and worry stakeholders who are more concerned about the financial health of the company. As a result, organizations may downplay environmental efforts to appease major stakeholders and investors, even if they are investing in processes and initiatives making a real, positive impact on the environment.
Frequently Asked Questions
What is greenwashing with an example?
Greenwashing refers to falsely promoting the sustainability of products or processes when they offer little to no environmental benefits. A common example of greenwashing involves companies labeling products as “green” or “eco-friendly” without explaining how these products support the environment or providing concrete evidence.
Why is greenwashing bad?
Greenwashing can mislead consumers into thinking that they are buying products that help the environment. Not only can this lead consumers to make purchases that end up harming the environment, but it can also undermine the credibility of a brand.
What are the signs of greenwashing?
Common greenwashing tactics include displaying fake endorsements on products, using the color green or environmental imagery in branding, describing a product’s environmental impact with vague language and making irrelevant claims that have little meaning.
What is brownwashing?
Brownwashing is the opposite of greenwashing, referring to companies purposely underreporting their sustainability initiatives. Stakeholders and investors may be troubled by the costs associated with environmental efforts, so organizations may draw attention away from any sustainability projects to ease their stakeholders’ concerns.
