The Australian Corporate Watchdog penalized an energy company for ‘greenwashing.’ In short, that means the company got fined because they exaggeratedly claimed about their environmentally friendly investments. Shorter said – the company lied.
Tlou Energy was fined $34,600.03 by the Australian Securities and Investment Commission for making statements that its electricity would be carbon-neutral and that its gas-to-power project would be “low emissions.” Tlou Energy said it did not break any rules but still agreed to pay the fine.
But, this is a good opportunity for us to learn what ‘greenwashing’ means and why it should be fined.
What’s greenwashing?
‘Greenwashing’ is an unfair practice of misrepresenting the extent to which some investment or a financial product is environment-friendly and sustainable. It is conveying a false impression or misleading information to the public that the company’s products are environmentally suitable.
Greenwashing is the use of unfounded claims to mislead consumers to believe that a company’s products are more environmentally friendly than they are. Or that they have a greater positive environmental impact than is actually the case.
Furthermore, greenwashing can occur when a company tries to emphasize the sustainable aspects of a product in order to obscure the company’s involvement in environmentally harmful practices. That is the worst.
Greenwashing from a long time ago
Linguistically, greenwashing is a play on the term “whitewashing,” which refers to the practice of concealing tradeoffs through the use of misleading labels and environmental imagery.
The term originated in the 1960s. At that time, the hotel industry created one of the most unashamed examples of greenwashing. They appealed to hotel guests to reuse their towels to save the environment. But! The truth is hotels saved on lower laundry costs.
What and why?
- People are becoming more aware of environmental problems. Some of them even refuse to use products that are not environmentally friendly. And here comes greenwashing as an attempt to capitalize on the growing demand for environmentally sound products.
- Greenwashing gives the impression that a company or its products are environmentally friendly.
- Some companies were accused of “greenwashing”. They aimed to capitalize on the socially responsible or ESG investing movement. They mislead the public in order to make a business appear more environmentally friendly than it is. Sometimes such accusations may be true, but sometimes they are not.
- That is why genuinely green products and the businesses that produce them always back up their claims with facts and details.
How does greenwashing function?
As we said, greenwashing is an attempt to (ab)use the growing demand for environmentally friendly made products. It may mean using consumers’ awareness for more natural, healthier, free of chemicals, recyclable, or less wasteful products.
Recently, some of the world’s largest carbon emitters, such as traditional energy companies, have tried to rebrand themselves as environmental champions. Greenwashing practices involve renaming some products, rebranding, or repackaging. Greenwashed products may give the impression that they are more natural, healthy, or chemical-free than competing brands.
How it’s done?
Companies have engaged in this unfair practice by touting their clean energy or pollution reduction efforts in press releases and commercials. In reality, the company’s commitment to green initiatives may be minimal. Greenwashing occurs when companies make unsupported allegations that their products are environmentally safe or provide some eco-friendly benefit.
Green marketing, which emphasizes the environmental benefits of the product and the company that makes it, can benefit eco-friendly products. A company’s green marketing activities may be false, but if discovered it may be accused of greenwashing and face penalties, negative press, and reputational damage.