How to avoid 5 common greenwashing traps

Sustainability

27. Jul 2022

Evan Farbstein Headshot

Evan Farbstein

Sustainability Writer

Headshot of Dr Alexander Schmidt

Alexander Schmidt, PhD

Head of Science and Climate Research

Greenwashing  – even when unintentional – can have severe consequences for businesses.

Evan Farbstein Headshot

Evan Farbstein

Sustainability Writer

Headshot of Dr Alexander Schmidt

Alexander Schmidt, PhD

Head of Science and Climate Research

More and more businesses are taking climate action. And by doing so, they’re not only doing their part to fight climate change: they’re earning significant business benefits as well, like enticing customers, improving their brand equity, and making it easier to attract and retain employees.

With these benefits comes the incentive to try to exploit them. This practice is called greenwashing: when organizations spread misinformation to give themselves an environmentally friendly public image and earn the associated rewards.

But not all greenwashing is done on purpose. Corporate sustainability is an evolving field, and the goalposts are constantly moving. Even businesses with the best intentions may find themselves unintentionally greenwashing.

Regardless of their intentions, though, businesses that engage in greenwashing will face three risks:

Risks faced by businesses that greenwash

  1. Financial risks, like government fines.

  2. Legal risks, like opening your business to lawsuits

  3. Reputational risks, like damages to brand equity

To help your business stay greenwashing-resistant, here are five traps businesses often fall into and how to avoid them.

The five most common greenwashing traps

1. Setting inadequate targets

It’s crucial to align targets with the latest science. The IPCC has determined that, to mitigate climate change’s most harmful effects, we will need to limit global warming to 1.5°C – not 2°C as was previously believed. 

To limit warming to 1.5°C, we will need to halve global emissions by 2030 and reach net zero by 2050.

Also vital to these targets is the phrase “net zero.” In the past, companies may have set “carbon neutral” targets. While these terms sound similar, there are important distinctions between them –  namely, that net zero focuses on reducing emissions first, instead of relying on offsets.

Any targets less ambitious than net zero by 2050 will not be on par with limiting warming to 1.5°C, and thus are not aligned with the latest science.

2. Ignoring what you can’t see

To set and achieve targets, companies need an accurate inventory of their full greenhouse gas emissions.

Around 90% of emissions occur in the value chain

Many companies may focus on the emissions that are more easily observed, like those from their electricity usage or vehicle fleet. But in doing so, they neglect the upstream and downstream emissions originating in their value chain – which on average account for around 90% of a business’s total emissions.

3. Low-quality data

There’s a management adage that states: “you can’t manage what you can’t measure.”

The same holds true for greenhouse gas emissions. Businesses should measure their emissions using the most accurate means possible to ensure they have a trustworthy launching-off point for their emissions reduction work. 

What this means, in practice, is that businesses should follow the GHGP-recommended hybrid approach when it comes to measuring their carbon emissions: using spend-based data to ensure that all emissions sources are accounted for, and supplementing the spend-based data with activity-based data where possible.

Inaccurate measurements lead to incomplete results

This pragmatic strategy ensures that no emissions slip through the cracks, while still being time-efficient enough to allow businesses to quickly take action.

Any reduction actions based on inaccurate measurements will yield incomplete results. By taking an accurate and comprehensive measurement of your business’s carbon footprint, you set your business up for impactful emissions reduction.

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4. Lack of transparency

For your emissions results to be verifiable, your business needs to provide the context in which it reports emissions. 

Emissions reports should include:

  • The time frame in which the emissions were measured
  • The legal entities or business units included in the calculations
  • A breakdown of emission sources; e.g., sub-categories in Scope 1, 2, and 3, with historical data on the same sources

5. Ineffective carbon offsets

Using ineffective offsets is one of the most common ways in which businesses unintentionally greenwash.

Offsetting is a largely unregulated industry, and it can be hard for businesses to verify that their offsets provider will actually achieve the removed emissions they claim they will. And 85% of offsets in the UN’s Clean Development Mechanism failed to reduce emissions. 

To ensure your business is actually removing the carbon you believe you are, steer clear of ineffective offsets and instead aim for high-quality climate investment

Climate investment quality should be evaluated on four metrics:

Metrics for evaluating climate investments

  1. Additionality – the climate investment will lead to a reduction of greenhouse gas emissions that would not have happened otherwise.

  2. Permanence – the climate investment will result in a quantifiable piece of carbon being kept out of the air for over 100 years.

  3. Double-counting – the same investment is not sold multiple times.

  4. Leakage – ensuring the investment will not lead to negative consequences elsewhere.

In summary

Greenwashing has many negative consequences for businesses, including legal, financial, and reputational risks.

But greenwashing isn’t always done intentionally. Often, companies risk suffering severe consequences simply by failing to set sufficiently ambitious targets, or by measuring their carbon footprint inaccurately.

By empowering your business with a comprehensive and accurate overview of your greenhouse gas emissions, you ensure that you have the information you need to address your full climate impact – thereby avoiding greenwashing while seizing business opportunities.

Make your company greenwashing-resistant

Real, verifiable climate action begins with comprehensive measurement. Normative’s carbon accounting engine provides industry-leading accuracy across your full carbon footprint.

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