Defining Greenwashing: Superficial Environmental Claims

 

Greenwashing refers to the practice of misleading consumers with unsubstantiated or exaggerated environmental benefits. The term originated in 1986, coined by environmentalist Jay Westerveld, who criticized hotels for promoting towel reuse to "save the planet" while disregarding their substantial energy consumption.

Its effectiveness stems from consumer psychology: a desire for ethical purchases. According to Nielsen's 2025 Global Sustainability Report, 81% of consumers adjust behaviours to lessen environmental impact, yet only 10% fully trust corporate claims. Ambiguous terms like "eco-friendly" or "carbon neutral" proliferate without verification. Legitimate claims require third-party certifications such as B Corp, GOTS (Global Organic Textile Standard), or Fair Trade, alongside transparent lifecycle assessments from sourcing to disposal.

Economically, the incentive is clear: the global green consumer market reached $532 billion in 2025 and is projected to double by 2030. For instance, H&M's "Conscious Collection" markets recycled materials, but 2025 supply chain audits revealed reliance on coal powered factories and water intensive cotton (Fashion Revolution Index). Critically, companies often obscure Scope 3 emissions, indirect impacts like supply chains, which constitute 75 to 90% of total footprints (World Resources Institute). ExxonMobil's "net zero by 2050" pledge, for example, coexists with lobbying against climate regulations.

Historical Evolution: From Early Tactics to Modern Proliferation

Greenwashing has paralleled corporate responses to environmental awareness. Following Earth Day 1970, Chevron's "People Do" campaign depicted pristine nature, glossing over its drilling impacts.

The 1990s saw "CFC-free" product rebranding amid ozone concerns. In the 2000s, BP's "Beyond Petroleum" initiative featured a green logo and minor renewable investments, yet renewables comprised less than 5% of spending by 2010 (Carbon Disclosure Project). The 2015 Volkswagen "Clean Diesel" scandal involved emissions test manipulation, resulting in vehicles emitting 40 times legal NOx limits and over $33 billion in fines.

Post-COP26 (2021), over 3,500 companies pledged net-zero (Net Zero Tracker, January 2026), but only 5% possess credible transition plans (Influence Map). In India, Patanjali faced lawsuits for heavy metals in "herbal" products (2023-2025), while Adani Green's renewable expansions contrast with coal projects, prompting SEBI scrutiny of green bonds.

From an economics perspective, this reflects Akerlof's "market for lemons," where information asymmetry enables low-cost signalling. Game theory frames it as a prisoner's dilemma: firms greenwash to capture market share, yielding a Nash equilibrium of minimal genuine investment.

Notable Cases: Evidence of Corporate Misrepresentation

These examples illustrate greenwashing's consequences:

● H&M: The "Conscious" line claims sustainability, but the 2025 Fashion Revolution Index rates supply chain transparency as "We Do Not Know." H&M incinerated 12 tons of unsold clothing in 2017, with ongoing EU investigations.

●Coca-Cola: Under "World Without Waste," it produces 3.2 million tons of plastic annually (Ellen MacArthur Foundation, 2026), more than competitors combined. A 2023 UK ad ban highlighted misleading recycling claims, as only 9% of bottles are recycled into new ones.

●Shell: Its "more trees than we use" campaign was debunked by WWF for negligible CO2 absorption against 1.2 billion tons emitted yearly. A 2024 Dutch court mandated 45% emissions cuts by 2030, rejecting offsets.

●Nestlé: "Pure Life" water is sourced from "protected" areas, yet extraction totals 2.1 trillion litters annually from water-stressed regions (Profit Watch, 2026). RSPO-certified palm oil links persist to deforestation.

●Tesla: While pioneering EVs, past Bitcoin mining and coal-dependent Giga factories in China temper its green image.

In India, Tata's "green steel" claims clash with Jharkhand pollution fines (2025), and Reliance JioMart's "eco-packaging" uses non-recyclables (ASCI rulings, 2026).

Drivers of Greenwashing: Economics, Psychology, and Regulation

Economic Incentives

Sustainability premiums yield 20-35% price uplifts (McKinsey, 2026), but genuine transitions raise capital expenditures by 15% (Deloitte). Shareholder primacy prioritizes short-term profits over long-term goals, stifling endogenous growth in true green innovation.

Psychological Factors

Confirmation bias favours positive signals, while moral licensing allows "green" purchases to offset unrelated excesses. Social proof amplifies this via influencers.

Regulatory Shortcomings

The U.S. FTC Green Guides (updated 2012) are voluntary. The EU's 2024 Green Claims Directive requires substantiation. India's ASCI guidelines and Consumer Protection Act 2019 have addressed 278 cases (2020-2026), but enforcement remains inconsistent. Robust regulations can alter the payoff matrix in game-theoretic terms.

A Practical Guide to Identifying Greenwashing

Employ these strategies for due diligence:

● Demand Data: Review CDP or SBTi emissions reports covering Scopes 1-3; use WWF's Water Risk Filter.

● Assess Full Lifecycle: Tools like the Higg Index (apparel) or Carbon Trust (food) evaluate beyond packaging.

● Validate Certifications: Confirm B Corp, GOTS, or FSC via official databases; reject self-awarded labels.

●Research Violations: Search "[brand] greenwashing" alongside NGO reports (Greenpeace, Client Earth); apps like Good On You or Think Dirty aid quick checks.

● Scrutinize Offsets: Avoid dubious credits (e.g., Verra controversies, 2026); apply EPA calculators.

● Seek Accountability: Genuine leaders, like Patagonia’s "Don't Buy This Jacket" campaign, acknowledge limitations and demonstrate progress.

Stay Smart ! Stay Satark !

Blog by:- Sachin