Columns

Greenwashing: Cautions for Brands & Retailers

Sustainability is confusing. There is no common authority, focus, language, standard or measurement that is agreed on, making it difficult to create strategies. Retailers and brands, unclear on these new marketing standards, run the risk of making mistakes and alienating customers with false advertising claims, called “greenwashing.”

A recent Retail Marketing Society webinar, Bill D’Arienzo, founder and chief brand officer of WDA Brand Marketing Strategies, guided attendees through the principles and pitfalls that surround this issue. He offered this warning: when images and copy are utilized to claim sustainable achievements and metrics that turn out to be misleading, deceptive or excessive, the offending brand or retailer finds that, once exposed, the unhappy result is to further alienate customers.

“An outcome of greenwashing is that consumers get confused,” explained D’Arienzo. “Once they are confused, you get cognitive dissonance. When you get cognitive dissonance in consumption, you get a backing away; you get disengagement.”

Greenwashing typically occurs when companies, people or governments overstate or misrepresent their climate credentials. The term has morphed in the past year to also include issues when organizations overhype their ESG (Environmental, Social and Governance) commitments. This could be the result of 1) intent to misrepresent; 2) failing to keep up with local market law and regulations or 3) excessive promises that can’t readily be substantiated.

Monitoring Sustainability Claims

So how are sustainability claims monitored? D’Arienzo pointed out that, currently, monitoring is a major problem. Changing Markets Foundation has found that fashion certification schemes are “acting as a smokescreen” for the industry’s environmental impact. The report found that several of the biggest certification schemes – including the Ellen MacArthur Foundation (EMF), WRAP and the Sustainable Apparel Coalition’s Higg Index – actually enabled greenwashing.

Here in the U.S., the Federal Trade Commission (FTC) view is that, in order to make a claim of environmental benefit, marketers must have analyzed trade-offs resulting from that benefit. The FTC takes the position that “before a general claim of environmental benefit is made, the marketer must be ready to prove that there is no negative environmental impact created during the product’s life cycle.”

The Federal Trade Commission’s Green Guides are designed to help marketers avoid making environmental claims that mislead consumers. The guidance they provide includes: 1) general principles that apply to all environmental marketing claims; 2) how consumers are likely to interpret particular claims and how marketers can substantiate these claims and 3) how marketers can qualify their claims to avoid deceiving consumers.

Proposed New European Union Regulations

For those doing business in Europe, new European Union regulations are scheduled to come out in January 2023. These regulations will also apply to any American company doing business in Europe. Under these regulations, brands will be prohibited from making an environmental claim related to future environmental performance without clear commitments and targets.

For global brands, the adoption of these rules will bind both members and non-members doing business in the EU. January 2023 is targeted as the adoption date. Importantly, once adopted and transposed into the Member States’ national legislation, consumers will be entitled to remedies in the event of breaches, in particular through the collective redress procedure under the Representative Actions Directive. D’Arienzo predicts that the FTC and the U.S. Securities and Exchange Commission (SEC) are going to be looking for guidance from what the EU does.

D’Arienzo offered this advice for companies to steer clear of reputational risk:

  • Set up an internal watchdog committee made up of marketing, sales and supply systems that reviews from the perspective of their functionalities the possibilities of exposure.
  • Be very clear about the relationship between your brand DNA and your marketing material. Stay true to your brand identity. If you deal in archetypes and if you can identify the very essence of your neurological identity as a brand, do so and extract the values of that identity and use those as guideposts in your marketing messaging and advertising communications.
  • Look at the whole sourcing out in the market — not only the leadership like Eileen Fisher, but also those who have been brought to task, i.e. those companies that have been sued.

 

Retail Marketing Society

(201)692-8087

www.retailmarketingsociety.org

retailmarketingsoci@retailmarketingsociety.org