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Authors Nikos Avlonas, President Centre for Sustainability and Excellence (CSE) North America
John Friedman, co-Founder Sustainable Business Network of Washington (SBNOW)
Green washing versus Sustainability
Nikos Avlonas, President - Centre for Sustainability and Excellence (CSE) – North America Avlonas@cse-net.org – www.cse-net.org John Friedman, co-Founder – Sustainable Business Network of Washington (SBNOW) email@example.com – www.sbnow.org Often green washing is not an outright attempt to be deceptive, but rather stems from failing to consider environmental impact measures with the same robust attention as is usually given to more established and familiar measures of business performance. Green washing – making exaggerated environmental claims in order to curry consumer favor is one of the banes of the sustainability community. When a company that has been lauded for its environmental performance is revealed to be engaging in environmentally dangerous practices it provide skeptics with the fodder they need. Even when the claims are found to be inflated (or impossible to substantiate), credibility is lost. For a business model based on the paradigm that transparency leads to credibility, trust and ultimately market advantage, these incidents can be devastating. For some companies the desire to appeal to ‘green’ consumers and to be perceived as a good corporate citizen is enough to encourage deliberately deceptive claims. These companies deserve the criticism and derision not only for their direct attempts to dupe the public, but also because they discredit the efforts of other, more responsible companies that are making credible efforts and achieving measureable results. Despite the perception, however, most companies do in fact embed ‘green’ practices within day to day operations and initiatives; therefore, on average, the primary causes for green washing has nothing to do with malfeasance or bad intent. They have to do with the fact that more often we see a fragmented approach to rolling out projects or activities – where one department may be donating towards reforestation while another is measuring energy consumptions and verifying their carbon footprint. Both initiatives are green, but do they reflect the core business? Is there substantial reasoning behind why these two departments have taken on these specific activities, and why they are completely independent of each other? How is this reasoning being justified and measured against the financial and non-financial performances of the organization? The old adage in business – that which is measured gets done – implies the converse as well; that things that are not measured (or are not measured well) often are prioritized lower. This can create a negative feedback loop which certainly has too often been the case for Sustainability.
The importance of Sustainability
How Sustainability is embedded within an organization influences the degree to which it is perceived as a good corporate citizen or green business. How do we embed Sustainability then? The first step is an understanding of what Sustainability is! Sustainability is a form of development that meets the needs of the present without compromising the ability of future generations to meet their own needs (1987, World Commission on Environment and Development). Successively, it is about identifying what it means for your organization strategically, outlining performance measures that will indicate levels of success in aligning strategy with Sustainability, and designing transparent communications channels to talk about achievements. Bottom line… Sustainability is an honest attempt to create positive social, environmental, and economic impacts through transparent organizational performance measures and communications. Where do we sometimes go wrong?
Responsibility for measuring sustainability results is too often relegated to junior staff, temporary employees or interns who may not have the necessary knowledge of the business to fully analyze information.
Green Marketing and Sustainability
What does this have to do with green washing? Everything. Because companies that would never consider having newer, temporary or inexperienced people produce their quarterly financial reports are completely comfortable with having them produce sustainability reports (sustainability performance measures). When these numbers fall short of standing up to scrutiny or are used to solely generating marketing or public relations materials, organizational reputation is at risk. Failing to recognize the potential dangers of this trend in organizations not only places reputation at risk but also places a chain of other dependent factors – employees, community, shareholders, partnering organizations – at risk as well! Go down the green wash, but don’t take the rest with you! If embedded effectively by qualified Sustainability Practitioners in collaboration with key decision makers, sustainability offers solutions to facilitate greater trust in business by applying fundamental principles to core business values and operations that will generate clear indications of how credible these claims are. As a result there is greater transparency between facts and claims, thus enabling consumers to see an alignment between the brand identity, product characteristics, and acclaimed ‘responsible’/ ‘good’ corporate citizenship initiatives.
Research showing the extent and power of Sustainability Reporting
New research conducted at the Centre for Sustainability and Excellence (CSE) confirms the hopes of many over the last 15 years, that issues of sustainability will become a normal consideration when doing business. With much hard work by non-governmental organizations, business and government, the global business community is starting to understand the urgency for including sustainability into their long term strategies, as well as report these strategies to their outside stakeholders. The following represents some of the findings of CSE: Sustainability reporting is now the norm with global companies reporting to stakeholders in various regions of the world, even though reporting in this fashion is still overwhelmingly voluntary Government regulation of sustainability issues is set to become the norm within the next five to ten years. Regulation of sustainability and corporate responsibility (CSR) in various regions of the world will now need to come together for the creation of more uniform frameworks Sustainability reporting frameworks, such as the GRI’s G3, will continue to add value to investors’ analysis as they highlight corporate sustainability strategy and vision, brand management, and environmental and social risk reduction. It is becoming more accepted that conventional financial reporting represents a less complete picture of a company’s performance
Research showing the extent and power of the 'Green' Market
Additionally, CSE research has shown that despite the economic crisis, consumers are still purchasing products and services from organizations that make green claims; however, there still a majority of consumers that believe businesses commit to environmental policies particularly for market gains, with a large percentage of consumers showing skepticism over claims (Green Marketing and Corporate Social Responsibility, Centre for Sustainability and Excellence; A.L.A.R.M, 2009).
We can see an alignment with other research as in Accenture’s recent survey on green marketing in 17 countries that concluded that 24 percent of consumers worldwide are affected by green marketing in their buying decisions.
Sustainability Reports … for Stakeholders Transparency
There is also growing evidence (through indices such as the Dow Jones Group Sustainability Index (DJGSI), the FTSE4 Good indices) that companies that embrace the essential qualities of sustainability generally outperform their passive counterparts. Companies that are considered leaders in environmental, social and governance (ESG) policies are also leading the pack in stock performance—by an average of 25 percent. In an analysis, conducted by the Goldman Sachs Investment Group, GS Sustain, of more than 120 ESG leaders, from 5 different industries—energy, metals and mining, food and beverage, pharmaceuticals and European media, companies in 4 of the sectors outperformed the MSCI world Index by an average of 25 percent, since August 2005. Therefore, professionals who are responsible for the design, management, and communication of Sustainability within a company, must also be qualified to produce annual sustainability reports. There is increasing demand for professionals with substantial knowledge of the terms and criteria centered on Green Business, Green Marketing, and Sustainability. Annual sustainability reports of organizations must represent an integration of sustainability within strategy and products/services, and ‘green’ activities for good corporate citizenship against the key dimensions -society, economy, and environment.
Third party assessment and Standards
And if that’s not enough, companies can also seek third party assessment, through a credible certifier or specialized consulting that can measure and verify the green characteristics of products (e.g. life cycle analysis and carbon footprint) or sustainability report credibility against Standards like GRI (Global Reporting Initiative.)
The competitive advantage of sustainability is the quality of ROI that emerges as products and services take on green characteristics and communications unite the brand’s core values with consumer passion, stakeholder awareness, and transparent annual reports. Value for money then does not remain stagnant upon the purchase by a consumer, but rather suspends its impacts to include all relationships formed around the brand – both financial and non-financial. Organizations that focus their vision on Sustainability and have a clear strategy which incorporates standards and models will enable the adoption of best practices, accelerate performance and ensure transparent communications.