Executive need to listen

ARTICLE | May 30, 2023 

Don’t greenwash by accident

Businesses may be making false ESG claims without realizing it

By Elisha Harrington, Workflow contributor

The other day, I picked up a water bottle with a label dwarfing the brand’s logo, which proclaimed that the product was carbon neutral. It was emblazoned with a QR code that pointed me to a webpage explaining the brand’s commitment to sustainability. At the very bottom of the page, in tiny print, the company admitted that only a single part of the bottle—the cap—was produced using carbon-neutral methods. The bottle was not carbon neutral after all.

My experience with the water bottle is an example of greenwashing, or the practice of making false or misleading claims about sustainability.

Businesses may greenwash, but not all greenwashing is that obvious—nor is it necessarily malicious, or even intentional. In fact, some organizations might be engaging in greenwashing without even realizing it, unwittingly risking regulatory penalties, fines, and lost revenue. Without the right ESG strategy—and the technology to implement it—organizations risk making sustainability promises they can’t keep.

Regulatory bodies around the world have begun to seek out and penalize greenwashing. The U.S. Securities and Exchange Commission (SEC) has charged several companies, including Brazilian mining company Vale S.A. and Kansas-based Compass Minerals International, with making misleading statements about their ESG efforts. Australian regulators recently launched the country’s first court proceeding against a company for alleged greenwashing and claimed many more have likely participated in the practice. And the European Union (EU) recently adopted a Green Claims Directive, which takes aim at greenwashing explicitly by providing clearer guidelines on how companies should prove their environmental claims and establishing ground rules for independently verifying businesses’ ESG claims.

Currently, many regulatory bodies, such as the EU, are slated to require organizations to disclose their greenhouse gas emissions on a tiered system: Scope 1 comprises emissions directly produced by the organization’s operations; Scope 2 covers indirect emissions from purchasing oil, gas, and other forms of energy; and Scope 3 consists of any emissions produced throughout the organization’s supply chain.

Tracking Scope 1 and 2 emissions may seem easy enough, but in reality, it’s a complex challenge that many companies struggle with. All too often, vital information is collected manually and stored in systems that can’t communicate. Technology can help break down these barriers within organizations. By their nature, however, Scope 3 emissions are often much more difficult to account for.

Supply chain emissions are on average 11 times higher than operational emissions; they make up over 90% of an organization’s total greenhouse gas emissions, according to the 2020 CDP Global Supply Chain Report. That total includes not only a company’s direct suppliers, but also the vendors in suppliers’ own supply chains as well. To capture such a high volume of data, and to affirm its veracity, is a massive and expensive undertaking. 

That’s one of the reasons why requirements to disclose Scope 3 emissions have sometimes been controversial. When the SEC released its proposed climate change disclosure guidelines, for example, the regulator received a record-breaking 15,000 comments on the new directive. 

But companies that do not or cannot gather this data also cannot definitively avoid greenwashing. How can they claim to be carbon neutral if they don’t know their suppliers’ carbon emissions?

Even companies that don’t have a large supplier network might be unintentionally greenwashing. Regardless of the organization’s size, measuring and tracking greenhouse gas emissions is extremely difficult. Fewer than 10% of organizations report being able to comprehensively and accurately measure their total greenhouse gas emissions, according to a survey from Boston Consulting Group

Here are two questions confronting both executives and regulators: If a company claims to be carbon neutral but has only an approximate idea of its own carbon footprint—let alone that of its suppliers—is it possible to know how carbon neutral it actually is? And what are the liabilities and potential consequences?

To avoid such unintentional greenwashing, companies need better visibility into their systems and their supply chains. Fortunately, there are steps organizations can take to more accurately measure their ESG efforts.

Organizations can start by establishing explicit structures, standards, and objectives around ESG. In other words, what do they want to achieve? What story do they want to tell with their data? What do they want to be able to tell their customers and shareholders? That’s step one.

Next, they need to digitize and centralize data analytics and reporting. Too often, companies are already gathering much of the data they need, but it’s distributed across teams, locations, and departments. Further, it takes a lot of resources and time to consolidate the data to gain a full and accurate picture. To break down those silos, businesses must invest in platforms and ESG Management systems that can consolidate their data. From there, they can start to streamline processes around data gathering and reporting through automation, which can help shape business decisions that reduce their impact on the environment.

This is an issue that people really care about. Building a sustainable business is a long process, and it pays to be transparent. The water bottle might not be sustainable today, but it could be sustainable tomorrow—and it’s important to bring customers along on that journey.


Organisations need responsible AI

Related articles

Purpose drives profit
Purpose drives profit

In tough times, companies do better when they do good. 

ESG strategy: How to get your board on board
ESG strategy: How to get your board on board

A conversation with NYU Stern Center for Sustainable Business director and professor Tensie Whelan 

Framework frenzy
Framework frenzy

ESG reporting is a hot mess of overlapping frameworks and standards. Thankfully, help is on the way.


Prior to ServiceNow, I worked for PwC and was responsible for key strategic technology solutions for ASEANZ working directly with PwC leadership and a portfolio of ventures including a strategic partnership with CSIRO. I worked with the Queensland Government focused on innovation that addressed water quality monitoring, coral reef health monitoring for the Great Barrier Reef. I was responsible for a range of software solutions covering analytics and blockchain as well as engagements such as sustainable food systems, sustainable cities and energy efficiency.

Loading spinner