Carlo Alberto Calchera of ESSEC Business School, Asia-Pacific explores the shadows of greenwashing and brings light to the powerful argument for corporate responsibility.
Greenwashing: Do (and How Do) Companies Walk-the-Talk? by Carlo Alberto Calchera.
Greenwashing in the new millennium. As time goes on, and growing environmental concerns lead companies to adopt more inclusive environmentally responsible policies, more and more organizations are jumping on the green management bandwagon, though in various ways and with mixed results. Indeed, there is a strong difference between acting green, which entails non-negligible efforts and investments, and claiming to be green, known as greenwashing. So, a question arises: does greenwashing pay off? And if so, to what extent?
Greenwashing: how it works and the effects on the public perception of the company
A first and foremost query has to be clarified: what exactly is greenwashing, and what are its objectives? According to the Concise Oxford Dictionary, “[Greenwashing] consists of disinformation disseminated by an organization so as to present an environmentally responsible public image“.
In other words, greenwashing in the new millennium relies on deceptive marketing and advertisement actions aimed at persuading the public of the eco-sustainability and environmental friendliness of a company (or its products). As for its goals, greenwashing is ultimately aimed at improving the company’s perception and modifying customers’ purchase intentions. Currently, companies rely to an increasing extent on greenwashing to elicit in customers two very distinct, yet complementary feelings (Akturan, 2018):
- Push clients to prefer the purchase of “green” products.
- Convince clients that their products are undoubtedly the “greenest” available.
From a managerial and strategic perspective, the concept of greenwashing derives from a deceptive sort of unfaithful reputation management, whose goal is to hide deviant behavior, or downplay company misconducts. To obtain such an effect, organizations usually rely on three main features: confusion, fronting and posturing (Laufer, 2003).
This triadic approach aims at reducing and controlling available information to the general public about the company (confusion), casting doubts on the actual severity or importance of the underlying problem while downplaying the firm’s role (fronting), and convincing both internal and external stakeholders about the company’s ethical behaviors (posturing).
As for the practical implementation of greenwashing, companies usually rely on two types of greenwashing: “claim greenwashing” or “executional greenwashing” (Akturan, 2018). Claim greenwashing, as defined by Kangun, Carlson, and Groove, 1991, is the use of indefinite or arguable terms generating false claims and manipulating claims to exclude necessary information. Executional greenwashing, on the other hand, can be defined as the use of nature-evoking elements in advertisements to artificially enhance a brand’s ecological image (Parguel, Benoit-Moreau, and Russell, 2015).
A glaring example of this kind of greenwashing could be McDonald’s 2009 “Green Logo” initiative. To promote an eco-friendlier image across many of its European stores, the company simply changed the background color of its iconic logo from red to green, without however investing resources in improving its ecological footprint (Dunham, 2009), a policy that further inflamed activists’ protests against the American burger-behemoth.
To sum up, considering the increasing dose of attention that people put into Corporate Environmental Responsibility when making a purchase decision, companies who fail to rightfully obtain and communicate a strong environmental legitimacy might be doomed to perish (Berrone, Fosfuri, and Gelabert, 2015).
Corporate environmental legitimacy and signaling power: not all actions weigh the same
As an old saying goes “A done something is better than a perfect nothing“. However, in the particular and inflammable context of CER (Corporate Environmental Responsibility), this may not hold true. Indeed, thanks to the combined efforts of many environmental movements across the last decades, public sensitivity around such a topic has shifted dramatically, and in a not-so-distant future putting green claims to deeds will no longer be an option, but rather a must-do (Lyon and Maxwell, 2011, Berrone, Fosfuri, and Gelabert, 2015, et al.).
As evident from a wide body of studies and literature in the subject, and as viable and practical advice for professionals, “only genuinely green credentials are effective for acquiring social legitimacy” (Berrone, Fosfuri, and Gelabert, 2015). That is, in plainer terms: pretending to be and act green when you are not is way more dangerous than simply doing nothing. Indeed, faking a true effort in the sector of Corporate Environmental Responsibility in the age of information turns out to be harder than ever, and the risk of unexpected backfires on the company’s reputation is more than a distant specter. So, although it might sound counterintuitive, firms with shaky environmental footprints might be better off by doing nothing rather than pretending to do more than what they actually do.
Given what has been exposed so far, a doubt is raised: which actions are more effective in generating and communicating a coherent sustainable company image, and why should companies invest in it? To answer the second query, it is enough to say that once obtained legitimacy, a firm becomes more competitive by gaining better access to resources, attracting more skilled employees, and often enjoying superior exchange conditions with partners (Oliver 1991; Stern, Pfeffer and Salancik 1978). Therefore, obtaining across-the-board legitimacy proves to be a strategic and managerial priority for organizations.
As for the possible ways to obtain legitimacy, deeds and policies that require high investments, or that are in any other way costly to imitate should generate environmental legitimacy (Certo, 2003). Indeed, in the eyes of public opinion, the commitment of a great extent of resources (such as the registration of environmental patents) signals a strong willingness by a company to improve its Corporate Environmental Sustainability efforts. However, as highlighted above, the effects of these actions also depend on the firm’s image across the general public, especially if the company is under intense scrutiny by environmental NGOs. In a simple man’s words: consumers expect companies to put their money where their words are.
When greenwashing backfires: asymmetry in positive and negative effects of greenwashing and the role of environmental NGOs
One of the most commonly heard proverbs in the Public Relations world is that there is no such thing as bad publicity, meaning that as long as people talk about your company, there is nothing to lose but everything to gain. However, much like what was said before, bad publicity proves to be worse than no publicity at all. Indeed, as a result of a common cognitive bias (Lange and Washburn, 2012; Kahneman, 2011), people are generally more sensitive to threatening or negative events rather than to positive happenings. Therefore, clients tend to remember and evoke more easily bad feelings and link them with a specific person, event or company. Otherwise said, consumers usually don’t focus on good examples, rather on bad ones, and thus, firms should pay very close attention to these sunk costs of bad publicity.
One recent scandal, above all, may exemplify this overall tendency: the 2015 Volkswagen emission scandal. In 2015, the German automotive group was found guilty of rigging emissions tests for roughly 12 million of its vehicles, effectively misleading consumers’ associations and international regulatory bodies. Besides the direct costs borne by Volkswagen (roughly 3 billion USD in fines and settlements), the effects of this scandal went far beyond previsions, as Volkswagen’s corporate image took a big hit and the German brand lost a great part of its consumers’ loyalty and trust. As reported by the Financial Times (FT.com, 2015), the combined sales of the Volkswagen group fell by around 20% all across its biggest markets (UK, Europe, and the US) in the sequent financial year. Moreover, in the months following the scandal, many environmental NGOs weighted in and started to closely monitor the brand’s past and present actions, thus effectively echoing and increasing the reach of the scandal.
In fact, studies show (in particular, Berrone, Fosfuri, and Gelabert, 2015) that environmental NGOs are more likely to report and spread negative news about a company than exalting positive examples; in other words, NGOs appear to be very effective in confronting and challenging companies for their environmental misconducts, while are relatively less incisive at praising good environmental actions. Under this new light, a better proverb might be: there is indeed bad publicity. And it’s more resilient than it looks.
Tying up the loose ends: how effective is Greenwashing in the modern world?
Despite what some may maintain, corporate responsibility is here to stay. It is not a buzz word, a momentary trend, a cheap trick to obtain social acceptance. Rather, it is a pivotal guideline necessary to respond and adapt to the challenges that the new millennium poses to companies all across the globe; corporate sustainability can – and should – represent a competitive advantage in today and tomorrow’s market.
Society at large now requires companies to make true and quantifiable efforts in promoting and enacting a culture of environmental awareness and green sustainability but, despite its noble roots, this pressure has triggered some companies to take part in a vast scale manipulation of the public opinion aimed at gaining an undeserved reputation for being green, also known as greenwashing.
However, as it’s evident from the vast corpus of studies in the matter, not all environmental actions and policies are effective, and some of them might even be detrimental, especially when companies fall back on greenwashing. Such cosmetic strategies do not appeal to the 2020’s men and women, and more often than not companies bragging about their “eco-friendliness” without substantial proof of their claims fall victim to their own deceit and are doomed to fail in the long-term game.
Only companies that act transparently, and “walk the talk” with their green policies will succeed in this ever more resourceful world. Or, in the words of the celebrated William Shakespeare, “No legacy is so rich, as honesty“.
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