The practice of greenwashing can be seen right across business sectors. But why do businesses greenwash and what are the drivers and mechanisms they employ? In this blog we will look at some of these drivers.
When it comes to greenwashing, regulation in markets underpins, and is a crucial determinant, of the practice all over the globe. The lack of penalties for greenwashing allows businesses to mislead consumers and creates an incentive to do it without direct consequences or risk.
Individual countries have bodies that monitor greenwashing, including the Federal Trade Commission (FTC) in the US, the Advertising Standards Authority (ASA) in the UK and the Canadian Standards Association (CSA) to highlight a few.
Pressure and brand reputation damage from the media, activist groups, researchers, and non-governmental organisations are influences for firms, organisations and governments that greenwash. The power of social media and information sharing has enabled brands and organisations to be called out and shamed by activists, in turn influencing organisational environmental behaviour.
Studies have identified the location that companies undertake greenwashing matters. It was found that organisations were more prone to greenwash, depending on where the headquarters are based. They concluded that being isolated from the rest of the world, and having less active scrutiny from the media, was a crucial driver in the likelihood of greenwashing.
Large corporations are major targets for campaign groups, in particular, oil companies, due to their detrimental impact on climate change and the natural environment. It is estimated that since 1965 twenty fossil fuel companies have been responsible for thirty-five per cent of methane and all energy-related carbon dioxide.
Consequently, the marketing and environmental claims of these energy giants are subject to scrutiny at every level. Trencher and Asuka (2022) found that from 2009-2020, clean energy claims and climate targets of major energy giants were “dominated by pledges rather than concrete actions” (p1).
This is further supported by leaked Shell employee email exchanges in September 2022. Execs were urged to never “imply, suggest or leave it open for possible misinterpretation that (net zero) is a Shell goal or target” and the company’s net zero pathway was “nothing to do with its business plans”. This evidence generated significant public backlash and media interest due to Shell claiming to be the UK’s renewable energy future.
Activist groups can often have an impact way beyond organisational behaviour, influencing national policy and regulations. In 2022, new legislation in France was passed to ban fossil fuel advertising (Greenpeace, 2021) after years of campaigning from a range of NGOs.
Climate change icons such as Greta Thunberg and David Attenborough have raised awareness of environmental issues through various social and media platforms. This has inspired a generation of activists whose views are more robust and more passionate about conserving the environment than ever.
(Source: Sarah Silbiger/Getty Images)
Market External Drivers
Competitive pressure, investor and consumer demand are all variables which can make a firm more likely to greenwash. Studies have shown that firms tend to copy organisations within a similar sector that they perceive to be more credible. In an environmental context, companies fear lagging behind competitors in markets and therefore are more likely to positively communicate but actually have bad environmental performance.
A firm’s characteristics play a considerable role in greenwashing due to the complexities, and strategic objectives firms are pursuing. Characteristics such as industry, type of business, profitability, supply chain and lifecycle stage have a substantial influence on the firm’s perspective on green marketing, the costs and implications of any strategic actions, and the external pressures it can withstand.
Consumer goods and products are more likely to be scrutinised than business-to-business firms. Consumer protection law and advertising standards authorities around the globe have due care and responsibility to protect the consumer from being misled and keep a sharp eye on misleading claims. Publicly traded businesses also have more influence from investors who demand a certain level of environmental performance and strategic behaviour. More prominent, well-known brands and firms with a history of environmental performance will likely get significant media and activist attention.
Furthermore, some firms are willing to ignore regulation and withstand the costs and implications of penalisation, weathering the storm of media and activist outrage. This can be in the form of paying lawyers or the settlement of cases.
Organisational inertia exists when a firm’s culture and structure delay and hinder strategic change. Employees usually resist change as it affects routines and previous policies. The prevalence of organisational inertia is higher in larger, older organisations than in new ones as they have been trading much longer and the culture has been embedded for years.
Organisational inertia can explain the lag between new CEO’s/managers sustainability pledges and green talk and the actual time it takes for the organisation to begin to change its behaviour.
Communication is key to enabling a product or service to be advertised and marketed with accurate claims and so without effective internal communication greenwashing can occur. For example if internal transfers of knowledge are resisted by employees poor organisational behaviours, including less innovation, can occur.
The ability of marketing and public relation departments to understand the product or service in detail whilst taking into account the complete life cycle of a product/service can be challenging if there is no effective communication between departments, such as research and development, product packaging and logistics.
Another driver of greenwash behaviour is that firms with sustainable and socially desirable goals and communication can lead to positive organisational outcomes internally. Studies have shown that these goals can help increase job satisfaction, employee trust and psychological health. Therefore, helping the firm achieve its desired strategic outcomes which incentivise greenwashing.
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Floom Creative helps businesses to understand the bigger picture, identify and improve the impact their business has and implement strategies which create purposeful, ethical narratives that inspire action and tackle environmental degradation.
Li, M., Trencher, G. and Asuka, J., 2022. The clean energy claims of BP, Chevron, ExxonMobil and Shell: A mismatch between discourse, actions and investments. PloS one, 17(2), p.e0263596.
Greenpeace Ban Fossil Fuel Advertising and Sponsorships. Available at: 2021 https://act.greenpeace.org/page/85501/petition/1
Delmas, M. A., & Burbano, V. C. (2011). The drivers of greenwashing. California Management Review, 54(1), 64-87.
Lyon, T.P. and Montgomery, A.W., 2015. The means and end of greenwash. Organization & Environment, 28(2), pp.223-249.
Delmas, M.A. and Montes‐Sancho, M.J., 2010. Voluntary agreements to improve environmental quality: Symbolic and substantive cooperation. Strategic Management Journal, 31(6), pp.575-601.
Robertson, J.L. and Barling, J., 2013. Greening organizations through leaders’ influence on employees’ pro‐environmental behaviors. Journal of organizational behavior, 34(2), pp.176-194.