The Australian Competition & Consumer Commission (ACCC) recently released the results of its ‘internet sweeps’, reviewing the websites of nearly 250 companies for the validity of their sustainability claims. So Where are organisations going wrong with their green claims, and how can boards avoid falling into the ‘greenwashing trap’, asks BDO’s sustainability experts Aletta Boshoff and Ashley Bleeker.
While it has long warned against greenwashing, the ACCC announced an initiative to “identify misleading environmental and sustainability marketing claims and fake or misleading online business reviews” as part of its compliance and enforcement priorities last October. At the time, the ACCC declared it would target websites across consumer sectors like clothing, energy, food and drink, and household products. Additionally, it would examine third-party platforms for misleading reviews or failure to provide the appropriate disclosure of paid engagements with influencers.
Findings from the ACCC internet sweep
In publishing its report, Greenwashing by businesses in Australia, the ACCC revealed that over half (57%) of inspected websites had made concerning environmental claims. This could include using vague or unclear language, a lack of supporting evidence or detail of the plan for achieving environmental goals, and unclear use of trustmarks.
While the ACCC hasn’t named (or shamed) any organisations, it has confirmed that the 247 websites reviewed represent eight industries:
- Takeaway packaging
- Cosmetics and personal care
- Food and beverages
- Household and cleaning products
- Textiles, garments and shoes
- Electronics and home appliances
- Vehicles, and
The worst-performing sector, according to the report, was the cosmetics and personal care sector. Nearly three-quarters of reviewed websites in this category were found to make concerning environmental statements. This was closely followed by the textiles, garments and shoes, food and beverages and energy sectors, with more than 60% returning results of concern.
At the other end of the spectrum, 62% of websites in the vehicles sector did not raise concerns with their content, followed by electronics and home appliances (54%) and household and cleaning products (50%).
Concerning environmental claims by sector
Where are organisations going wrong with their green claims?
The ACCC report summarised its concerns in eight themes. These include using:
- Vague and unqualified claims – the most common occurrence found, which could consist of buzzwords like ‘green’, which have ambiguous meanings and provide little value to the customer in the decision-making process
- Lack of substance – minimal supporting information to back up the claims made of the product or service
- Absolute claims – suggesting something is, for example, not harmful to the environment, but without the supporting evidence
- Comparisons – comparing products or services with a competitor’s in a way that may provide little use or be misleading in the differences
- Exaggerated benefits or omissions of relevant information – providing unbalanced communication of utilised resources or investments
- Aspirational claims without substance – lacking the level of detail of how the organisation intends to achieve the sustainability claim made
- Third-party certifications – using certifications with a tenuous link to the product, or using the accreditation in a potentially misleading way
- Trustmark images – including the use of iconography that is easily confused as being a third-party certification or verification.
Why is avoiding greenwashing important?
The ACCC is not the only regulator in the market interested in this matter. The Australian Securities & Investments Commission (ASIC), Australian Securities Exchange (ASX) and Australian Prudential Regulation Authority (APRA) have also launched bids to stamp out greenwashing in recent times. In fact, ASIC recommends using the Taskforce for Climate-related Financial Disclosures framework to ensure quality disclosures.
But the risks of greenwashing are not just regulatory; they can be reputational too. And the impact of a reputational miss-step can be felt in many ways:
- Consumers are increasingly discerning in their buying behaviours when it comes to sustainable products and services. Ethical consumerism is on the rise. While the desire to market to the consciously minded might be appealing, vague or misleading statements can have a detrimental effect in the long term.
- What a company stands for plays a vital role in its employer brand, as people increasingly look to work for organisations that align with their personal values. By not communicating sustainability strategies or initiatives, organisations risk losing great employees or may find it challenging to attract new people.
- More than ever before, investors and suppliers look to work with organisations that espouse values and practices that align with their strategic ambitions, putting access to capital or markets at risk if corners are cut when backing up sustainability statements.
“Determining the difference between a company greenwashing and a company acting sustainably can seem like a grey area: the difference is in the detail. It is vital to be able to substantiate any sustainability statements made. This is where the environmental, social and governance (ESG) data becomes important, as well as having detailed plans to reach any future commitments. By measuring impacts and reporting using quantitative data, brands can prove to consumers that their words match their actions.” – Salim Biskri - National Leader, Retail
How to make sure you don’t fall into the greenwashing ‘trap’
The key to avoiding greenwashing is recognising that sustainability and climate disclosures are not driven by marketing or promotional activities. They are technical statements that help to convey the company’s position on its sustainability strategy and compliance with interested parties like investors, suppliers, employees and customers.
When communicating sustainability activities and disclosures, it’s critical to consider:
- Is the statement accurate and verifiable?
- If making future goals, do you have a plan on how to achieve them?
- Could the language used be deemed an exaggeration, ambiguous, or misleading?
Further, organisations should ensure they are investing in sustainable business practices that authentically align with their strategy before employing them as promotional tools.
This article was written by BDO’s Aletta Boshoff, Partner National Leader, IFRS & Corporate Reporting and Ashley Bleeker, Director, Corporate Reporting, ESG & Sustainability. It was first published on BDO’s website on 22 March 2023.