Is ‘greenwashing’ commonplace in sourcing and procurement?

Greenwashing is a term that was originally coined by activist Jay Westerveld, when it was realised that hotels purporting to be ‘saving the environment’ with their practices were merely urging guests to reuse their towels. In actual fact, while such organisations were claiming environmental concerns had spurred their actions, the real focus was on saving laundry costs - but the climate-skewed PR was beneficial, nonetheless. 

“It’s a dangerous form of misleading marketing that distracts from the challenging reality of the climate and biodiversity crises,” says Nick Underdown, Head of Communications and Campaigns at OpenSeas.

He adds: “There are multiple different types of greenwashing and, while there is no formal typology for establishing different categories, various attempts have been made, such as the ‘Seven Sins’ of greenwashing, which include: hidden trade-offs; worshipping false labels; vagueness; lack of proof; irrelevance; lesser of two evils; and outright fibbing.”

As individuals become more environmentally conscious, companies have quickly realised the profitability gap in the market, in which ‘green’ products can be sold at a slightly higher price so they appeal to the environmentally-conscious consumer. Similarly, organisations can boost their brand image by shaping themselves as environmentally conscious - even if they’re not. 

However, despite many organisations taking their commitments to sustainability seriously, Ted Pardee, Chief Revenue Officer (CRO) at Premise, explains that there are still many that would rather “invest their resources into marketing their product as 'green', instead of using those resources to develop a product sustainably to cut cost and in turn, maximise profit.” 

Underdown adds: “Unfortunately, greenwashing is rife within many sectors.  Our organisation, Open Seas, focuses on the seafood supply chain and its related fishing, processing and retail businesses. Greenwashing is such a common practice that the words ‘sustainable’ and ‘responsible’ are used routinely to describe many seafood products, despite the continued overfishing and marine habitat damage caused by some fishing practices. 

“A recent survey of over 300 UK supply chain managers by the Chartered Institute of Procurement and Supply (CIPS) found that 19% didn’t know how sustainable their own products were, whilst almost 50% didn’t believe their organisation was being sufficiently transparent with consumers, clients and regulators about sustainability. 5% of supply chain managers also felt that their businesses were actively misleading clients or customers about sustainability. A sad indictment on the current state of play.”

Nevertheless, on a more positive note, Underdown believes that “sustainability is, thankfully, becoming a big deal in both public and private sector procurement”.

“More and more, ethical leadership within a boardroom is taking root, alongside the fact that ‘being seen to be green’ helps companies to sell their goods and services. Not only is sustainability increasingly driving consumer behaviour, there is a raft of new industry guidance and regulations that are pushing sustainability up the agenda.”

How can procurement functions ensure that their operations are actually sustainable?

There is no doubt that trying to ensure your organisation is actually sustainable is a challenge, particularly when most organisations have to balance a number of spinning plates simultaneously ‒ and each one represents a different set of challenges. 

Underdown explains that a good starting point is to ensure you have solid information and a thorough understanding of your supply chain. “Unless you understand what you are buying and who you are buying from, you cannot easily make a claim about the product you sell,” says Underdown. 

He adds: “Talk to your suppliers, build a checklist of questions and a process for verifying any claims you make. A key principle is transparency. If a business commits to fully transparent declarations about their sourcing, then it makes it harder for them to greenwash and consumers will respect that.”

Making sustainable procurement mainstream

Although organisations could take the approach of ensuring sustainability managers have sufficient standing to have the casting vote in sourcing and procurement decisions, Underdown believes that mainstream is the way forward.

“All companies should have strong environmental policies and their employees at all levels should be empowered to implement them,” he said. 

But mainstream sustainability is an approach that requires top-down support. Underdown adds: “Mainstreaming sustainable procurement needs strategic direction and buy-in across the business. By committing to transparency, completing a full life cycle assessment of what you are sourcing and understanding your supplier’s suppliers’ suppliers, you can be sure to make any claims with confidence.”

Adding to Uderdown’s comments, Pardee says: “Taking advantage of the opportunities created by the need to tackle the world's social and environmental problems is likely to be ‘disruptive’ in many industries. If handled poorly, disruptions have the potential to destroy successful firms. If handled well, they can lead to sustained competitive advantage. Understanding this will help companies make a case for investing in sustainability as an essential strategic response in the face of accelerating change.”

The consequences of greenwashing

Damage to consumer trust 

Currently, many organisations are able to make sustainability claims without backing them up with evidence, essentially benefitting from the false image they are cultivating. In the long-term, though, “the reputational risks for such business practices are huge,” says Underdown. And these risks will only increase as consumers become wiser.

He adds: “If your brand relies upon a reputation for sustainability, then it could irreparably damage consumer trust in your business. Some studies indicate that younger and older generations in particular think a company’s green credentials are important. By greenwashing, either deliberately or accidentally, companies risk alienating future customers and shrinking their market base.”

Agreeing with Underdown, Pardee adds: “Reduced credibility is the most significant consequence of being caught greenwashing. A good reputation is an invaluable asset for all. Companies must ensure that the products they choose to outsource are actually 'green' or environmentally friendly if they plan to make that claim and want to maintain a positive brand image. 

Damage to broader efforts to solve environmental challenges

By conducting greenwashing activities, organisations can also impact broader efforts to solve environmental challenges within the industry. 

Underdown says: “If a sector leader claims to be taking leadership in terms of reducing its environmental impacts, it just serves to distract media and public attention from issues within that sector and reduce consumer awareness of perhaps the more sustainable activities of real market innovators.”

Can an organisation participate in greenwashing activities without their knowledge?

While an organisation can participate in greenwashing without their knowledge, Pardee believes that they should still be held accountable for the damages caused.  

He says: “Many organisations outsource (whether that be products or services), and the companies they outsource from can be intentionally misleading. Historically, businesses have been able to assume that natural and social capital were ‘free’—or at least, not something that they were responsible for. Going forward, natural and social capital will likely be ‘expensive’, in the sense that they cannot be taken for granted.”

Agreeing with Pardee, Underdown believes that organisations participating in greenwashing activities without their knowledge is common. “Supply chains are complex, and the large size of many companies means that the communication between their procurement and comms teams are likely to be imperfect. It will be tempting for some companies to make sweeping, company-wide claims, despite persistent problems for certain brands or products within its purview.

“Some organisations place a high degree of trust in eco-certification schemes, which then create a good faith justification for making sustainability claims. The trouble is, some of these schemes are flawed and do not guarantee sustainability. Unfortunately, all businesses need to be aware of the risks of greenwashing, even within certification bodies.”