In environmental and social governance (ESG) parlance, greenwashing is the deliberate practice of making a company appear more sustainable (or green) than it really is.  An intentional cover, it is an exercise in public relations and moralized corporate marketing to appease today’s conscious investors and other stakeholders. Although it is a misleading and hypocritical exercise, it is not an uncommon one.
The Climate Bond Initiative, a not-for-profit UK-based initiative for supporting sustainable investments, reported that of the US$140 billion sustainable debt funds it tracked in 2020, only 21% were genuinely, certifiably green. The others were just labeled green, possessing very little in the way of environmental safeguards. In other words, they were greenwashed.
Simply put, greenwashing is a farcical representation of one’s environmental practices or the environmental attributes of a product or service.  Although greenwashing is not entirely a new phenomenon, its distinct emergence in recent years can be largely attributed to multinational corporations trying to respond to the growing environmental concerns among civil actors, governments, and other important stakeholders, including customers. 
To manage their risk and maintain rapport, companies always attempt to project themselves well. Greenwashing is one such attempt. However, greenwashing uses deception to achieve a company’s aim concerning its environmental record. Recently, many firms have been accused of greenwashing.
In March 2021, American oil major Chevron was accused of misleading consumers about its corporate efforts to reduce greenhouse gas emissions in a complaint filed with the U.S. Federal Trade Commission. 
Similarly, in January 2021, BlackRock, the largest asset manager in the world, was accused of holding investments worth US$85 billion in coal firms a year after pledging to sell most of its shares in coal producers. 
In a socially conscious world, companies cannot appear to be on the wrong side of the public’s environmental sentiment. Some will constantly attempt to shape the narrative.
Typically, excessive hyperbole related to environmental claims should be scrutinized for greenwashing. As well, spotting greenwashing is easier when it is a collective effort.
Greenwashing can be curtailed through a multistakeholder approach. For example, the stakeholders concerned may upload an advertisement to a shared platform so that other stakeholders from around the world can view and check the claims.  Experts in the group could flag inconsistencies, and people with local knowledge of some environmental violation may highlight ethical duplicity on the firm’s part.
Another potential investigative route is checking claims made in an advertisement against information available from news articles. Here, with a historical focus, artificial intelligence and machine learning tools can be used to scan vast sets of news articles and data points.
Companies serious about ESG could adopt practices such as strict internal reporting standards and supportive whistle-blower policies, among others.
Relying purely on metrics developed from primarily opaque methodologies will not help mitigate greenwashing. Typically, ratings agencies base ratings on their own proprietary methodologies. Sometimes, conflicting metrics occur, tempting some corporations to try to “game” the ratings system.  Greenwashing can be mitigated through more transparent systems for reporting corporate activities alone.
Tackling greenwashing requires a vigilant system that works collectively to track down and report unethical claims or environmental practices as companies may or may not choose ethical paths and transparent reporting standards.
Depending on the company, reports alone will not help solve the greenwashing phenomenon. A whole-of-society approach that is vigilant about claims, scrutinizes any suspicious claim or activity against whatever data or information is available, and helps benchmark a company against its industry competitors is required.
A company’s biggest risk is losing its reputation, which it will likely fear, especially in an age of socially conscious and empowered customers and investors.
At present, raising awareness about greenwashing and taking corrective actions are important. Stakeholders need reliable, transparent information to base their decisions on. Integrating ESG reports and interpretations into material financial and nonfinancial factors supports this objective. Doing so will greatly benefit efforts to reduce greenwashing.
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