The term greenwashing has become more important to understand than ever before.
This is because the UK competition watchdog, the Competition and Markets Authority (CMA), gave companies that were making misleading claims about their green credentials until the end of 2021 to stop the practice of greenwashing.
In fact, when the CMA looked into the green claims businesses were making in 2020, it found that over 40% could be misleading to consumers, and therefore, potentially break consumer law.
CMA found the greenwashing tactics used include vague claims and unclear language such as ‘eco’ or ‘sustainable’ or reference to ‘natural products’ without adequate explanation or evidence of the claims.
In fact, our own investigation into the green claims in the energy industry uncovered rife malpractice.
The practice of greenwashing – whether intentionally or not – has become such a concern that the government launched an investigation in the summer of 2021 into firms claiming to offer environmental benefits to customers, specifically consumer renewable electricity deals.
Clearly, important steps are being taken to address ‘greenwashing’.
In my opinion, it is not only good business sense to eliminate greenwashing from your company, but it is also the moral and ethical thing to do on our collective mission to protect the planet from climate change.
So, if you are looking to understand:
- The true meaning of greenwashing, and how greenwashing is manifesting in the energy market specifically;
- Who is at risk of greenwashing; and
- How to ensure you are not greenwashing – unintentionally or otherwise.
Then this blog is for you.
Let’s get started.
What is the meaning of greenwashing?
Essentially, greenwashing is when an organisation makes an unsubstantiated or misleading claim about the environmental benefits of a product, service, technology, or company practice, to capitalise on the demand for environmentally sound products and services.
In a nutshell, greenwashing practices can make a company appear to be more environmentally friendly than it truly is.
Now we’ve gained a general understanding of what greenwashing is, let’s look specifically at the issue of greenwashing in the energy industry.
Energy greenwashing is when a supplier claims to be (and publishes) green, or, 100% renewable, but in reality, it is supplying “dirty” energy. Essentially, making fossil fuel electricity seem clean.
Our own research into green claims in the energy market found that energy companies frequently promote their renewable tariffs under an eco-friendly banner using terms like ‘renewable’, ‘green’ and ‘low carbon’ interchangeably. But in reality, these products often incorporate energy from ‘dirty’ sources or combine renewable certificates with polluting sources of energy.
Trading renewable energy certificates can lead to greenwashing.
In addition, one of the most dangerous tactics firms are using to make green claims is paying to obtain certificates that, in essence, “offset” fossil fuels.
Here’s how this works:
For every renewable unit of electricity generated, by, for example a solar or wind park, energy regulator Ofgem issues a Renewable Energy Guarantee of Origin – also known as a REGO – to the organisation that owns the solar or wind park.
Note: You don’t get REGOs for smaller projects like roof mounted solar. This is covered by the Feed in Tariff.
In essence, a REGO is proof that the energy that’s been produced is ‘green’. Afterall, it is the requirement of all licensed electricity suppliers to disclose the fuel mix used to generate the electricity supplied to potential and existing customers.
And this is where the issue lies:
The owner of the solar or wind park, is permitted to sell the energy and the certificates separately.
This means that energy suppliers can buy certificates to make themselves look ‘green’ for rock bottom prices, without buying the power from the solar or wind park.
They can also buy REGOs from generators that burn imported biomass as this counts as renewable electricity under the current rules, too.
Essentially, unbundling REGOs from power could mean that the supplier of the green tariff is not actually purchasing renewable electricity, instead it is simply purchasing the certificate and combining it with polluting sources of energy but selling it as renewable.
Is greenwashing illegal?
Which brings us onto our next point…
It is entirely legal for organisations to sell, and for energy firms to buy, REGOs.
The central issue is that energy firms are not transparent in their Fuel Mix Disclosure (FMD) as the rules allow them to obfuscate their actual source of power. They are, let’s be honest, lying to their customers about the makeup of the energy they are selling.
Although there has long been no anti-greenwashing legislation in the UK, greenwashing is likely to violate regulation 5, which prohibits false and misleading commercial practices, or, Regulation 6, which prohibits commercial practices serving to hide or obfuscate material information, of the Consumer Protection from Unfair Trading Regulations 2008.
In recent months several companies have been exposed for participating in greenwashing. Some will have knowingly participated and others not so much.
In August 2021, Greta Thunberg called out the fashion industry for partaking in the phenomenon. It’s clear that some companies have been spending millions on campaigns to portray themselves as sustainable, ethical, and green, when the reality is far from that.
Who is at risk of greenwashing?
Let’s not dodge the obvious here – if you are a company that is participating in greenwashing, your entire reputation, brand and bottom-line is at risk.
Above all else, marketing strategies that mislead consumers into believing that a company cares for the environment, despite its actions, are risking the health and sustainability of our planet.
The rise of consumer capitalism means consumers are more cautious about buying into products or services that do not keep environmental issues front of mind.
Imagine claiming that your company has committed to green energy (and publicising this to the media) only to find that you’re buying fossil fuel energy or undermining the UKs support schemes like the Feed in Tariff. That’s a PR disaster waiting to happen for many companies.
What is an example of greenwashing?
Sadly, there are many examples of greenwashing in practice.
In fact, you may be surprised to hear that greenwashing is not a new phenomenon. The practice was first uncovered in the 1980s, but it is more recent, stakeholder awareness and tighter rules that have brought it into the spotlight.
Essentially, greenwashing is exploitation as companies prioritise the financial opportunities in appearing environmentally responsible, without actively making the changes necessary to actually be eco-conscious.
Largely, companies do not acknowledge the climate-related impact that their marketing choices can make.
An example of greenwashing in practice is when a company claims that its products help reduce a consumer’s carbon footprint, without providing info on how consuming its products contribute to carbon footprint reduction.
How to ensure you are not greenwashing.
As a reputable company and someone who is reading this post with interest, I think it’s safe to assume that you want to avoid falling foul to greenwashing.
So, let’s dive into arguably the most important aspect of this blog:
How to ensure you are not greenwashing – intentionally or otherwise.
Here are five ways you can protect your company against greenwashing, from today.
1. Investigate your electricity supplier’s true source of energy.
The first step to understanding where your energy comes from is to check your supplier’s Fuel Mix Disclosure (FMD) where they will give you the percentage mix of the fuels they use to supply you.
However, as we’ve already pointed out this isn’t sufficient on its own to ensure you are buying genuinely green energy.
The next step is to investigate the source of your supplier’s renewable energy. According to Directive (EU) 2018/2001, renewable energy refers to energy from renewable non-fossil sources, namely wind, solar (both solar thermal and solar photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas
Many companies are increasingly avoiding sources of energy that damage the environment like biomass, so it’s important to know if your supplier is using REGOs from biomass to cover some or all of their renewable claim under the FMD.
It is also possible that your supplier might be using European Guarantees of Origin or GoOs to cover some, or all, of the renewable claim. In recent years there has been a surge in suppliers buying GoOs as these can also be used to ‘greenwash’ energy supply but also because historically they have been less expensive than UK REGOs and worse still by using GoOs suppliers avoid some of their obligations to pay the mandatory support mechanisms all suppliers have to pay to support UK renewables like the Feed in Tariff.
By buying energy badged renewable but backed by GoOs you’re actually undermining the development of clean energy in the UK!
2. Hold yourself accountable for green practices in your supply network.
Ultimately, transparency in your supply chain is key to eliminating greenwashing. Typically, two thirds of a company’s emissions are scope 3 emissions.
Note: Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organisation, but that the organisation indirectly impacts in its value chain.
The fact is, if you are serious about sustainability, it’s likely a green supply network will be on your priority list. And the ideal scenario here would be to create a cascade of sustainable practices in your supply network. As your suppliers develop their understanding of sustainability issues, so too will their supply network – and so on.
As admirable as the idea is, there is no denying that it is hard to realise in practice. Afterall, it’s likely you are concerning yourself and your time with your own sustainability practices.
Even some of the world’s top brands with budget aplenty have been called out for violating sustainability standards. What’s more, notable supply chain violations have almost always involved first-tier suppliers, but the practices of lower-tier suppliers are almost always worse.
And it may be that you don’t even know who your lower-tier suppliers are, let alone what the fuel mix of their electricity supply is.
Ultimately, the wrongdoings of your supply network will expose you to big financial, social and environmental risks.
But there are several steps you can take to address your supply chain’s social and environmental responsibility – some of which multinational corporations have already put into place:
- Ensure supply chain transparency is included in your long-term sustainability goals, and, include lower-tier suppliers
- Make it necessary for your first-tier suppliers to establish their own long-term sustainability goals
- Task an individual with addressing greenwashing within your supply network.
Uncovering any wrongdoings in your supply network and promoting green practice will likely be essential to your environmental credentials.
3. Become a B Corp
A B Corp is a company which commits to create a positive impact on our society and the environment through their operations.
In short, B Corps are businesses that strive to do good in the world, beyond making profit. Examples of B Corps include Ben & Jerry’s and Patagonia, both famous for their sustainability credentials.
So why could becoming a B Corp be good for you?
Well, to achieve certification you must meet rigorous standards of social and environmental performance, accountability, and transparency.
If you are a company that takes its sustainability commitments seriously, becoming a B Corp will give you the certificate of transparency for your customers to see.
Becoming a B Corp is integral to our own ‘squeaky clean’ values and it was always something I aspired to when I started Squeaky. The recognition isn’t just key to our Squeaky clean values as a company, but our B Corp certification marked a big step towards our vision of accelerating the world’s transition to 100% clean energy.
If you are interested in becoming a certified B Corp, make your way over to the B Impact Assessment where you can measure your impact on your workers, community, environment, and customers.
4. Ignite and keep a close relationship with marketing and communications.
When the CMA announced they were cracking down on environmental and sustainability claims, the Advertising Standards Authority (ASA) entered the conversation and announced a series of inquiries.
It’s also worth noting that its sister-body – the Committee of Advertising Practice (CAP) has also teed up new guidance on environmental claims to advertisers.
And it’s for good reason; the scrutiny on environmental-based marketing claims has ramped up significantly.
The fact is, marketing and communications teams are the outwards voice of your brand. They gatekeep what your customer does and does not hear about your company. And whether it’s been your priority or not in the past, it means that now, you need to commit resource to and time to this key function.
And here’s why:
First and foremost, on issues regarding environmental claims, communications teams and marketers have the skill and a timely opportunity to translate often seemingly puzzling sustainability and environmental data, into claims that encourage and empower customers to shop their values.
Here’s an example:
In the lead up to COP 26, there have been a number of corporations making ‘net-zero’ claims, but a huge portion of people, and other businesses no less, cannot define the term. It is not just your responsibility to ensure the claims you make are clear, but you also have an opportunity to show you truly understand what your customer needs by demystifying sustainability jargon.
To achieve this ensure you have a clear line of communication with your counterparts in communications and spend time building an effective working relationship. It is critical that your marketing team is translating the reality of your impact on the climate and is making evidenced-based claims.
Let’s be clear – this is not a time to rely on eco-claims being ‘technically true’.
5. Consult compliance executives.
I think it would be fair to say that the UK has yet to truly show its hand on the sanctions for companies who lie to their customers about their green credentials.
However, we have seen positive signals of change.
And it’s worth noting that last June the UK government appointed a Green Technical Advisory Group (GTAG) to advise the government in establishing a green taxonomy to prevent incidents of greenwashing.
Besides, just because something is work in progress, does not mean it is any less important and, indeed, should certainly not inhibit companies from being proactive.
Plus, backlash from investors, customers and your supply network is surely enough of a threat?
Regulatory and legal action is coming and engaging compliance executives at this early stage will be a worthwhile move in helping prevent potentially fatal blows in the years to come.
Self-regulation should start now.
Conclusion on greenwashing.
Greenwashing is clearly a dangerous practice for your company, your customers, and our planet.
I hope this blog has provided you with an understanding of what greenwashing is and the risks it poses, as well as equipping you with actions you can take now to ensure you are not, yourself, getting tangled up in this dirty practice.