The Debate Over ‘Greenwashing’

Daniel Goleman is author of the international best-seller Emotional Intelligence and Optimal: How to Sustain Personal and Organizational Excellence Every Day. He is a regular contributor to Korn Ferry. 

This year, the Federal Trade Commission (FTC) revised its Green Guides – a set of standards designed to help marketers avoid misleading consumers through environmental claims. This effort is the federal government’s way of regulating greenwashing – the practice of conveying false or misleading information about a company’s environmental impact.

As the guidelines were revised, one of the big topics was recycling. The FTC sought to address a widespread issue in the world of sustainability – that in many places, goods labeled “recyclable” are almost always guaranteed to end up in a landfill.

Companies whose products depend on plastic production pushed back: If something can technically be recycled, can’t they label it accordingly? Does it matter how feasible it is?

But according to the FTC —and many climate advocates—it does matter. As the FTC points out, when the environmental costs of using recycled content outweigh the environmental benefits, to claim something is “Green, made with recycled content,” is actually deceptive. For something to be labeled recyclable, recycling facilities must be available “to at least sixty percent of the consumers or communities where a product is sold.” If access doesn't meet that standard, the FTC argues that companies are under an ethical imperative to emphasize a different message.

This debate—between possibility and reality—is a familiar one. We all know that just because something could be true, doesn’t mean it is or will be.

But guardrails on greenwashing don’t just benefit consumers – ultimately, they benefit businesses as well. In a study of more than 200 publicly traded large US firms, researchers found that consumers are increasingly aware of the gap between word and deed. The greater the distance between goals and actions, the greater the drop in customer-satisfaction levels. On average, companies perceived as greenwashing see a 1.34% drop in their American Customer Satisfaction Index (ACSI) score. Though this seems small, the economic implications are significant – every fractional loss on the ACSI equates to a marked change in earnings and ROI.

In the business world, an honest sense of purpose is becoming more and more of an imperative – to the point that (as researchers have observed) the more a consumer sees a company as hypocritical, the less they enjoy their experience with that company’s products.

But sustainability alone isn’t enough to capture the market. When a consumer perceives a product or service as either highly innovative or of superior quality, they are actually more lenient around their own ethics. This is why companies like Amazon and Apple continue to excel in the marketplace: Even if their carbon footprint is slow to improve, people love their innovation and ease of use.

For those companies truly committed to purpose, this is good information. While more than 80% of consumers would prefer to buy from sustainability-minded brands, at the end of the day, it’s safe to say that they want more than just a recycling symbol on their products – they want corporate transparency, products they love, things that excite them, and purchases they can depend upon.

This is what the most successful purpose-driven companies have known all along. Patagonia, the poster child for purpose-driven business, is the best example: The technology is advanced, the products hold up, and the company cares about something beyond the bottom line.

The debate over greenwashing is essential. But more essential is for companies to look towards securing three things at the same time: purpose, innovation, and user experience. If a company can come out of the gate with a product that is well designed, delights the customer, holds up and is also actually good for the environment, then they really have something. Co-written by Elizabeth Solomon

Click here to learn more about Daniel Goleman's Building Blocks of Emotional Intelligence.