Could Corporate Transparency Be the Cure for Greenwashing?

Whether it’s the use of the color green in marketing materials, images of nature in advertisements, surface-level commitments to sustainability, a lack of reporting on environmental impact, or products claiming to be organic and natural — the sins of greenwashing are all around us. Coined in the 1980s, greenwashing is not new. However, increased criticism from consumers, investors, regulators, and sustainable companies has set the stage for a long overdue conversation on corporate transparency — and why it’s needed now more than ever. 

Through identifying common greenwashing practices, entrepreneurs can begin to address inconsistencies within their own companies and use that information to build corporate transparency and reduce the potential for greenwashing. 

Greenwashing — the practice of making misleading, unverifiable, irrelevant, or false claims — violates the core principles of corporate transparency and discredits the hard work of authentic sustainability practitioners who use business as a force for good.

As greenwashing practices increase and the ability to spot green messaging becomes more difficult, it creates significant economic barriers to sustainability along the supply chain, distracts consumers and investors from crucial environmental and social issues, and calls the integrity of the entire sustainable movement into question. 

This tainted version of sustainability allows companies to prey on consumers’ and investors’ desire to support environmentally-friendly brands. As profits continue to soar for companies who engage in deceptive marketing and advertising to promote their greener image, the true cost is paid by consumers, the economy, and ultimately, the planet.

While some companies intentionally engage in greenwashing, many do so by accident. One of the main traps of greenwashing is taking advantage of a company’s inexperience in the sustainable space. Environmental claims that are unverified, poorly defined, irrelevant, or offer a hidden trade-off are common missteps. Even companies with the best intentions can fall victim to greenwashing if they are not careful. 

In 2008, when I served as the CEO of Seventh Generation, I awoke to headlines no business leader wants to see. Our company was exposed as a greenwasher for falsely claiming that our products were free of toxic ingredients. This revelation challenged our honesty and transparency, and thereby threatened one of our most valuable assets: our reputation. As someone who spent their career promoting sustainability and radical transparency, it was a moment of reckoning for me. 

Simply put, the presence of the contaminant in our products was contrary to who we were and what we stood for. Seventh Generation had spent the prior six years diligently working to remove the contaminant, but our effort was not good enough. Not just because we hadn’t yet succeeded in removing it, but because our stakeholders were completely unaware. It wasn’t highlighted on our website or detailed in our earlier corporate responsibility report. In this, we failed. 

Yet as I look back, I am surprisingly thankful for the experience. It presented us with an opportunity, albeit a rather extreme one, to learn and apply new rules for transparency to avoid greenwashing in the future. I found that greater transparency is the first step toward taking greater responsibility for the world we are collectively creating, and therein lies the larger lesson about what it takes to be a transparent company. It is about disclosing not only the aspects you are proud of, but also the areas where you missed the mark. As consumer trust continues to wane, that kind of radical transparency is the kryptonite needed to combat unethical greenwashing practices.

Through the lens of corporate transparency, companies can avoid greenwashing by ensuring their environmental claims are factual, clearly defined, verified through third-party sources, and adhere to federal guidelines designed to safeguard the American economy. 

From a policy standpoint, I applaud the Federal Trade Commission and the U.S. Securities and Exchange Commission for developing solutions to address these gaps. In 1992, the FTC Green Guides were first issued in response to the growing threat of greenwashing, and continues to be a trusted resource to avoid making environmental claims that mislead consumers. New rules proposed by the SEC plan to crack down on unqualified claims, strengthen disclosure requirements, and ensure investor protection. Setting guidelines that incorporate transparency and accountability in the decision-making process is essential for a strong national economy.

As the CEO of American Sustainable Business Network, we support public policy and market solutions to address greenwashing from a holistic vantage point. The principles embedded in our solutions advocate for increasing verifiability through third-party validators. They also ensure the regulatory landscape remains stabilized through policy that is industry, sector, and size specific — that any solution must be inclusive of all stakeholders in the value chain, and that governance structures and leadership must be educated or trained in inclusive and sustainable reporting methods.

As we experience peak greenwashing, the role of the business community will be critical to reduce the spread of misinformation. Sustainable business leaders and those looking to minimize their environmental impact can begin by looking at your business operations. Ask yourself: Do our public commitments align with our business practices? What more do we need to learn about this issue before we claim to be part of the solution? Can we create shared principles, definitions, criteria, and methods for verification? What is the role of a private-public partnership in shaping the path forward?

Through radical transparency, we can begin to separate the green from greenwashing and ensure the real issues — climate change, clean water, plastic pollution — are being addressed by companies with the knowledge, products, accountability, and commitment to creating a more sustainable planet that benefits all.