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Greenwashing is the term used to describe organisations misleading consumers about their environmentally friendly business practices or products.
This is because sustainable practices are seen as an admirable commitment, particularly for larger corporations. However, there have been cases where businesses use this matter to their advantage by deceiving consumers.
Consumers have the right to make informed decisions about the products they are purchasing and greenwashing interferes with this.
Greenwashing can be done deliberately and even accidentally, so it’s crucial for businesses to be aware of what greenwashing is and how to avoid it.
What Is Greenwashing?
Greenwashing occurs when businesses make false claims about how environmentally friendly and sustainable their products are. As consumers grow increasingly concerned about making ethical choices when buying, untrue statements about how environmentally friendly something can deceive consumers into purchasing a particular product.
| Example A clothing store claims a new line of t-shirts they released are made entirely from recycled materials. However, the t-shirts are made only from 10% recycled materials. Claiming they have been made completely from recycled materials constitutes greenwashing by the clothing store. |
What Is Greenwashing In Marketing?
Making false claims about the sustainable nature of a business’ practices or products can be used as a tactic to lure in consumers and potential investors. The rise of environmental concerns from the greater community has made sustainability an effective marketing strategy.
However, making these false claims for the purpose of making a profit is extremely unethical and should be avoided where possible. Businesses should only make these representations where they are entirely accurate.
How To Avoid Greenwashing
In order to avoid greenwashing, it’s important to be transparent and honest with your audience. If your business promotes environmental consciousness, communicate clearly with your consumers exactly what is meant by this so there are no misunderstanding or assumptions.
Other ways to avoid greenwashing include:
- Ensuring any images that are used for advertising don’t give a false impression of how environmentally friendly the product is
- Avoid the use of language that is broad or ambiguous, leading consumers to misunderstand what is actually meant by the statement
- Be clear and concise on any product information labels about the materials used, where it was made, sources it was derived from and manufacturing methods.
ASIC Guidelines On Greenwashing
In June 2022, the Australian Securities and Investments Commission (ASIC) released an official information sheet, detailing what greenwashing is and how to avoid making false claims that can be considered greenwashing.
The information sheet essentially prepares a list of guidelines for businesses who claim to engage in sustainable practices, so that they are being truthful and are not misrepresenting this to consumers.
According to the guidelines, businesses that claim to be environmentally friendly should:
- Explain exactly what they mean when using terms such as eco friendly and other environmental-related jargon
- For investors, sustainability should be explained extremely concisely to avoid misleading them
- All products should be labelled clearly and free from any ambiguity
What Does The ACCC Say About Greenwashing?
The ACCC has labelled greenwashing a breach of the Australian Consumer Law (ACL). This is because making claims that are not true about a product or businesses sustainability and environmental impacts gives consumers a false idea of what they are purchasing.
As a result, consumers are misled into buying something different to what they thought they were purchasing, amounting to misleading and false claims.
Misleading claims, false statements and deceptive conduct are all strictly prohibited by the ACL. This this extends to environmental and sustainability claims as well.
Therefore, not only is greenwashing extremely unethical, but it’s also against the law.
False Advertising Laws Australia
Under section 18 of the ACL, false or misleading claims are strictly prohibited. As we mentioned above, greenwashing deceives customers into believing something that is untrue about a product or a business.
| Example A cafe stating they donate 10% of every customer’s purchase to their local food bank and then not doing so is engaging in false advertising. |
| Example Another example of false advertising would be claiming a particular product is made entirely out of bamboo when there are other materials used to make the product as well. |
Greenwashing does something similar by not giving customers the full picture, leading consumers to believe something different about their business, engaging in hypocritical practices and even outright lying about their business in order to seem more socially aware to attract more business.
How Your Business Can Avoid Misleading And False Claims
Businesses can avoid misleading claims and false claims by actively making sure their customers are well informed about their business and the products or services it sells. This can be done by:
- Making sure all important information is stated clearly and on the product or website- avoid using fineprint
- Be reachable to answer any questions consumer may have about the products
- Use plain and simple language that is easy to understand, avoid using unnecessarily complicated terms
- Information should be located in a place that can be easily seen and accessed – don’t make consumers jump through hoops to get product information
What Are The Legal Consequences Of Greenwashing?
As greenwashing is outlawed by the ACL, legal consequences can apply for businesses that are found to have engaged in it. These consequences will likely depend on the severity of the offence however, fines and warnings are often issued to businesses that have been determined to greenwash.
Aside from the legal consequences of greenwashing, using greenwashing tactics can negatively impact your business’s reputation. Misleading customers breaks the trust you have with them and building back a business’ reputation is not an easy process.
It’s important to be upfront and honest with your audience from the very beginning to avoid such situations.
Examples Of Greenwashing
Greenwashing can be conducted in multiple forms. This can be in the form of:
- Misrepresenting the materials or manufacturing process of a product
- Claiming a product is hand-made when it is only partially made by hand and mostly by machine
- Fabricating how many emissions a particular product causes
- Using terms, colours and picture to invoke the idea something is environmentally friendly
Greenwashing Claims Against H&M
Recently, H&M found itself at the centre of greenwashing claims due to a tool on their website.
H&M’s website had a tool that let its users see the sustainability of a number of its products using the Higg Materials Sustainability Index. The tool gave certain products a sustainability rating based on factors such as the materials the clothing was made from or how it was manufactured, assessing its carbon footprint.
However, this tool was taken down as it was not showing a full and accurate depiction of how sustainable the garments actually were.
The H&M example reinforces the concept that businesses cannot simply choose which parts of their practices they would like to be transparent about. In order to avoid engaging in greenwashing, it’s important for businesses to be completely transparent about their products and business practices.
Australian Consumer Law Obligations
According to the ACL, consumers have the right to correct information about the products they are purchasing. As mentioned previously, greenwashing breaches the ACL.
It’s important for business owners to not only be aware of avoiding greenwashing but all their obligations under consumer protections. Overall, business owners need to actively protect the rights of consumers by:
- Making sure the products they are purchasing are safe to use
- There are no hidden fees or extra costs
- Consumers have no been misled or faced deceptive conduct regarding the information of a product
- There must be no faults to the product
- Be fit for the purpose it was intended for
You can read more about consumer rights and guarantees here.
How To Make Your Business More Sustainable
There are a number of ways to reduce your businesses carbon footprint and make it a more environmentally conscious brand. It is not necessary to make drastic changes, however, even the smallest changes can be a step towards building a more sustainable venture.
A few ways to make your business more sustainable can include:
- Using plastic free packaging
- Reduce waste
- Get solar energy panels for work spaces
- Allow employees to work remotely to cut down on travel
- Go virtual- stop using paper and start making the use of online documents
The practices you can and cannot implement will depend on your individual business, so review your current practices and see what can be improved!
Key Takeaways
Greenwashing is a serious matter that businesses should avoid at all costs, whether it’s deliberate or intentional. To summarise what we’ve discussed:
- Greenwashing is making false or misleading statements about how sustainable a businesses practices actually are
- There are different ways to engage in greenwashing, such as deliberately lying, not giving all the facts and being a hypocrite
- Greenwashing is a breach of Australian Consumer Law and as a result, it can have legal consequences
- Businesses claiming to be sustainable or environmentally friendly must be explicitly clear and transparent with their customers
- Generally speaking, businesses should communicate clearly with their audience in order to uphold their obligations under consumer laws
If you would like a consultation on greenwashing, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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