Navigating the Greenwashing Dilemma: Credibility versus Ambition

Is Greenwashing a form of fraud?

The ethical dilemma lies in the violation of honesty and integrity. Companies engaging in greenwashing mislead consumers by making false or exaggerated claims about the environmental benefits of their products or services. They exploit the growing demand for sustainable options, capitalising on consumers’ genuine desire to make environmentally responsible choices – but does this amount to fraud?

Greenwashing can take many forms:

Hidden Trade-offs: Emphasising one eco-friendly attribute while ignoring broader environmental concerns.
Lack of Proof or Certification: Making unverifiable claims without certification.
Vagueness: Using poorly defined terms that mislead consumers.
False Labels: Falsely suggesting third-party endorsements or evoking misleading imagery.
Irrelevance: Highlighting minor green aspects that do not significantly impact sustainability.
Lesser of Two Evils: Compared to less sustainable alternatives to appear environmentally friendly.
Falsehoods: Making outright untrue claims.

For something to be legally considered fraud, it typically involves intentional deception for financial gain, resulting in a loss for the victim, or in this case, a consumer or an investor. If greenwashing meets these criteria, it could be prosecuted as fraud in certain jurisdictions.

Greenwashing, though it may not always be illegal, is generally seen as unethical because it exploits consumer trust and hinders genuine efforts to address environmental issues. It is certainly not consistent with good corporate citizenship.

The Securities and Exchange Commission (“SEC”) recently ramped up its enforcement actions against greenwashing through its Climate and ESG Task Force, which targets companies making unsubstantiated environmental claims to attract investors. Closer to home the Advertising Regulatory Board (“ARB”) in South Africa recently found that TotalEnergies’ claims of being committed to sustainable development because of its partnership with South African National Parks were misleading and a violation of the Code of Advertising Practice. The ARB held that there is no discernible link between TotalEnergies' support of SANParks and a commitment to sustainable development, accordingly, this amounts to a misleading claim and is prohibited in terms of the Code of Advertising Conduct.

These enforcement efforts underline the growing scrutiny of corporate environmental claims and the significant legal risks associated with greenwashing in all of its forms. This is just one factor amongst many which have led to a new phenomenon known as” greenhushing”.

Striking the right balance is crucial. How can food and farming businesses achieve this while making bold, credible claims to drive the market demand for greener, healthier food?

Systemic change is needed to transition from our current high carbon, extractive, wasteful economy to one which is sustainable. Progressive brands making this change play an important role in the transition by helping accelerate much-needed behaviour change. If brands choose to stay quiet about their efforts toward more sustainable practices it will be harder for meaningful behaviour change to occur. Bold public commitments to sustainability (provided they are backed by substance) can drive peer companies to race toward the same progress so as not to be excluded from the market. More transparency from brands as to the changes they have made in their business practices also supports a shift in narrative, which in turn bolsters consumer sentiment and gives momentum to a general shift toward sustainable business. As more and more businesses disclose, for example, their waste management and how they have reduced their waste to landfill, it will become increasingly unacceptable in the market not to make this disclosure and consumers will expect this from business when making purchasing decisions.

How do you become part of the change and navigate the tension between saying nothing and saying things you shouldn’t say?”

Focus on action on key material impact areas: Instead of emphasising areas with minimal impact on a retailer’s greenhouse gas emissions such as plastic bags, prioritise sourcing of raw materials. Generally, the bolder the claim, the more likely is to be perceived as greenwashing. Conversely, the more specific your claim, the more likely an audience will engage and resonate with it.
Acknowledge what is in your direct control and what isn’t: develop a clear perspective on factors beyond direct control, including difficult debates over consumption and consumerism.
Be authentic: For example, talk about what regenerative agriculture means to you, in the context you are in, and about your vision.
Don’t wait for the perfect answer: Acknowledge that you will not have all the answers but share your journey to sustainable agriculture. Do not be silent on sustainability.
Be adaptive: We should recognise that systemic change is multifaceted and it can be messy and complicated. Your business should foster a culture of innovation and agility across all initiatives.

If you are concerned about your greenwashing risk, please reach out to the ENS Sustainability and Impact team. We can assist you in assessing and understanding your risk, ensure that your statements are backed by substance, manage any latent reputational risk, as well as support you on your journey to make fundamental changes to your business, ensuring you are part of the positive change underway in our economy.

Candace Lategan

Manager | Forensics Department

clategan@ENSafrica.com

Jessica Blumenthal

Executive | Banking and Finance

jblumenthal@ENSafrica.com