Spinifex is an opinion column open to all our readers. We require 700+ words on issues related to sustainability especially in the built environment and in business. Contact us to submit your column or for a more detailed brief.
The landscape of consumer expectations is shifting dramatically, with sustainability now at the forefront of purchasing decisions. GreenPrint’s 2021 Business of Sustainability Index highlights a compelling trend: 75 per cent of millennials and 64 per cent of Gen X are willing to pay a premium for environmentally friendly products.
See this recent article from Baker McKenzie Greenwashing – millions of reasons to avoid it and be alert (but not alarmed).
This shift has led many companies to engage in greenwashing, a misleading tactic where businesses overstate or falsely present their products, brand or operations as more environmentally friendly than they actually are. This strategy is fraught with risks and diminishing returns, especially in today’s climate of increased stakeholder activism and tighter regulatory enforcement.
The lure of greenwashing and the cost of getting it wrong
Companies often gravitate towards greenwashing in an attempt to tap into the growing market of environmentally conscious consumers. The intent is straightforward yet flawed: if consumers demand sustainability, let’s give them the appearance of it – regardless of the reality.
This approach, however, overlooks a crucial aspect of consumer behaviour. Today’s consumers are more informed, sceptical and willing to scrutinise claims than ever before. The immediate gains from greenwashing are vastly outweighed by the long-term repercussions of being caught in the act.
There are very real risks for those that get it wrong. Most notably, there are serious litigation risks attached to greenwashing, carbon neutrality and other ESG-related claims, but the consequences of greenwashing extend beyond regulatory fines and sanctions.
It can cause serious damage to brand reputation and consumer trust, which can be far more costly in the long run.
Regulators on the prowl
The rise of stakeholder activism means that consumers, investors and environmental groups are more empowered and willing to challenge misleading environmental claims.
As a result, the regulatory landscape in Australia is becoming increasingly hostile to greenwashing. With Australian Prudential Regulation Authority, Australian Securities and Investments Commission, the Clean Energy Regulator, and the Australian Consumer and Competition Commission all focusing on environmental claims, companies find themselves under the watchful eyes of not one, but several regulatory bodies.
This growing scrutiny leaves little room for error. Both ASIC and the ACCC have flagged they will be working together, as well as with the Clean Energy Regulator, as many of the companies they are targeting, operate across different sectors and a range of regulatory regimes.
ACCC’s greenwashing guidance: a roadmap for compliance
In July 2023, the ACCC published draft guidance “to improve the integrity of environmental and sustainability claims made by businesses and protect consumers from greenwashing”.
The draft guidance identifies eight actionable principles that businesses can follow to ensure their sustainability claims are accurate, truthful, verifiable and backed with solid evidence.
This initiative was in response to the ACCC’s recent greenwashing internet sweep, which saw 57 per cent of reviewed businesses making potentially misleading claims. This alarming figure represents a significant portion of the market, underscoring the urgency and responsibility for all companies to not only take notice, but to proactively engage in rectifying these practices.
Instead of treating the ACCC’s draft guidance as just another document to be shelved and forgotten, companies should actively use it as the basis of a greenwashing review.
A formal greenwashing review protects companies and consumer alike by assuring that:
- Claims made are accurate and truthful across all communication channels
- There’s valid evidence to back up your company’s claims
- Your company is not hiding or omitting important information
- Claims include explanations of any conditions or qualifications
- Claims are not broad or unqualified
- Language is clear, inclusive and easy-to-understand
- Visual elements and images are not ambiguous or misleading
- Your company is direct, open, transparent and SMART about its sustainability transition
Moving beyond greenwashing
As we move forward, the message to businesses is clear: greenwashing is no longer an option.
In the face of rising consumer awareness and regulatory scrutiny, the companies that will thrive are those that recognise the value of genuine sustainability efforts and transparent communication. Genuine commitment to environmental stewardship isn’t just about adhering to ACCC guidance and regulatory demands, it’s about embedding sustainability into the core of business operations.
By doing so, companies can build trust with their consumers, mitigate the risks associated with misleading claims and contribute to a more sustainable future.