World Scientific Publishing Co., Inc.

GREENWASHING:: A PROPOSAL TO RESTRICT ITS SPREAD

Author(s): DAVID MARKHAM, ANSHUMAN KHARE and TERRY BECKMAN
Source: Journal of Environmental Assessment Policy and Management , Vol. 16, No. 4
(December 2014), pp. 1-16
Published by: World Scientific Publishing Co., Inc.
Stable URL: https://www.jstor.org/stable/10.2307/enviassepolimana.16.4.02

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Journal of Environmental Assessment Policy and Management
Vol. 16, No. 4 (December 2014) 1450030 (16 pages)
© Imperial College Press
DOI: 10.1142/S1464333214500306

GREENWASHING: A PROPOSAL TO RESTRICT ITS SPREAD

DAVID MARKHAM, ANSHUMAN KHARE* and TERRY BECKMAN

Faculty of Business
Athabasca University, St. Albert, Alberta, Canada
*Anshuman.khare@athabasca.ca

Received 6 October 2013

Revised 7 January 2014
Accepted 23 June 2014
Published 1 December 2014

Recent years have seen a rapid rise in the number of firms publicly touting the environ-
mental merits of their products or their operational practices. This is driven by the changing
societal concern and public discourse around environmental issues. What was once an infre-
quent conversation has emerged as a moral obligation. While the number of “green” products
available in the market has grown, these conditions have also resulted in firms deliberately
misleading consumers about their environmental performance or the environmental benefits
of their products, a condition commonly known as “greenwashing.”
This paper will argue that the urgency to address our rapidly deteriorating environment
requires that tangible steps be taken to control incidents of greenwashing. It examines the
merits and drawbacks associated with government’s taking an active role in the regulation
of greenwashing and argues that the current regulatory instruments being used by gov-
ernments to address greenwashing are not likely to be successful in addressing the
problem. Finally, the paper proposes a new regulatory instrument where governments and
interested stakeholders work together to collect and disseminate information on sustainable
business practices and the impact of goods and service production on the environment.

Keywords: Sustainability; greenwashing; green products; environmental benefits.

Introduction
Recent years have seen a rapid rise in the number of firms publicly touting the
environmental merits of their products or their operational practices. Societal

*Corresponding author.

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D. Markham, A. Khare & T. Beckman

concern and public discourse around environmental issues, but most notably cli-
mate change and environmental conservation, has increased markedly over the
past 15 years. What was once an infrequent conversation has emerged as a moral
obligation. Savvy marketers have capitalised on this developing trend and, as a
result, the public has been bombarded with public communication from firms
extolling the virtues of the “greenness” of their products or services. The fact that
between 2009 and 2010 the number of “green” products available in the market
has grown by 73% is a testament to the public’s desire to take action through their
consumer habits to address environmental decline, the strength of the market for
environmentally friendly products, and the fact that so many firms are eager to
exploit opportunities within this market (TerraChoice, 2010a). At the same time,
these conditions have also resulted in firms deliberately misleading consumers
about their environmental performance or the environmental benefits of their
products, a condition commonly known as greenwashing. TerraChoice (2010b),
one of the leading North American authorities on greenwashing, has indicated that
of all products and services presented as being “greener” than their competitors,
approximately 95% of these claims contain an element of greenwashing.
The prevalence of greenwashing has important implications that make it a far
more serious matter of public concern than ordinary claims of false or misleading
advertising. Sustainability is a very serious contemporary challenge, and society’s
failure to reverse our current course could potentially endanger life on the planet.
Society has political and economic tools at its disposal that can positively impact
this situation, but society’s ability to successfully use these tools is seriously im-
pacted by instances of greenwashing that infiltrate the public domain and influence
the behaviours of consumers, business and governments. Greenwashing is enabled
by the credence properties of many products. It has been noted in the economics
literature (e.g., Dulleck et al., 2011) that goods with credence properties can lead to
inefficiencies in the market, such as under- and overtreatment and even market
breakdown. If the development and introduction of innovative, environmentally
sound products and services is important to the sustainability of society and the
world, then ways to prevent or mitigate concerns such as greenwashing (which
could cause the breakdown of the market for these products) is important. This
paper will argue that the urgency to address our rapidly deteriorating environment
requires that tangible steps are taken to control incidents of greenwashing. But what
would such control measures look like? A case can be made that control of
greenwashing is very much in the public interest and that governments should
implement regulatory and oversight measures to control the practice. This paper
will examine the merits and drawbacks associated with government’s taking an
active role in the regulation of greenwashing. The paper will argue that the current

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 Greenwashing: A Proposal to Restrict its Spread

regulatory instruments being used by governments to address greenwashing are not

likely to be successful in addressing the problem. Instead, the paper will propose a
new regulatory instrument where governments and interested stakeholders work
together to collect and disseminate information on sustainable business practices
and the impact of goods and service production on the environment.

How to Spot Greenwashing?

Given the fierce debate surrounding environmental issues in society today, there is
a strong tendency by those advocating for improved sustainability practices to
apply the term greenwashing as a label intended to discredit any and all com-
munication emanating from businesses. Given this habit, it is important to put
some boundaries around what is meant by the term so that examples of this
transgression may be more accurately identified.
Greenwashing may be defined as disinformation disseminated by an organi-
sation so as to present an environmentally responsible public image (Phyper and
MacLean, 2009). While this definition is simple enough, the environmental
marketing consulting firm TerraChoice has elaborated seven specific criteria,
which they call the 7 Sins of Greenwashing, to more precisely assist in detecting
instances of firm-based or product-based greenwashing (TerraChoice, 2010b).
These conditions include:

. Suggesting a product is “green” by referring to very narrow product attributes

without giving attention to other important environmental issues.
. Making environmental claims that cannot be validated by easily available
supporting information.
. Using vague terms, such as “green” or “all natural”. Industrial asbestos is an all-
natural product that would rarely be considered to be environmentally friendly.
. Making environmental claims that, while truthful, are unhelpful. For example,
Canada banned the use of chlorofluorocarbons (CFC’s) in 1997, but that hasn’t
stopped some products from being advertised as CFC-free.
. Giving the impression of a third-party environmental endorsement or certifica-
tion when, in fact, no such sanctioning exists.
. Making environmental claims that are true within the product category, but
distract the public from greater environmental impacts of the category. For
example, fuel-efficient sport-utility vehicles or trans-fat free potato chips.
. Making false environmental claims (TerraChoice, 2010a).

The most prominent allegations of greenwashing to date have focused on firms

that conduct mass-market advertising campaigns, but the term applies to any

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D. Markham, A. Khare & T. Beckman

representation undertaken by firms in any medium. For example, a study con-

ducted by Walker and Wan (2012) discovered numerous examples of green-
washing on company websites that describe firms sustainability actions, and even
in company sustainability reports.
While the definition provided by TerraChoice (2010a) usefully outlines specific
elements of greenwashing, because accusations of greenwashing are so pervasive
it is equally important to clarify what greenwashing is not. For example, it is
important to differentiate the concept of greenwashing from simple hypocrisy.
General Electric (GE) is often cited as a leading purveyor of greenwashing as the
result of its business strategy to enter the clean energy market, and resulting
Ecomagination publicity campaign. Ecomagination involves GE’s doubling of its
research and development investments to enable the development of cleaner
technologies, including solar energy, hybrid locomotives, low-emission aircraft
engines, fuel cells and water purification technologies, among other innovations
(McClenahen, 2005), and the firm has sought to gain public support for this work
through the development of an elaborate branding and publicity campaign. Critics
have accused Ecomagination of being a prime example of greenwashing because
of GE’s continued operation of its nuclear power division (Alter, 2007), and its
involvement in forcibly lobbying against new clean air requirements under the
U.S. Environmental Protection Act that were being considered by the U.S.
Congress (Furlow, 2009). While all of GE’s actions and business units may not be
consistent with this environmentally friendly branding and image, it should be
noted that GE’s actions as presented through its Ecomagination publicity cam-
paign have consistently been delivered upon by the company. GE has worked with
third-party environmental organisations to validate and report on its progress
in achieving the commitments that it has promised the public as part of the
Ecomagination campaign (Hart and Milstein, 2006).
It is also important to distinguish between greenwashing and what Walker and
Wan (2012) have termed green-highlighting. The latter term refers to publicity
campaigns where firms elaborate on sustainability practices that they are currently
enacting (substantive action) or are planning to enact in the future (symbolic
action). For example a recent publicity campaign launched by the Canadian
Association of Petroleum Producers featuring representatives of oil companies
testifying about their firms’ efforts to lower the environmental impact of Alberta
oil sands development was declared to be an example of greenwashing because
it represented “a huge publicity campaign to make the tar sands look better” (Kim,
2012). While critics of the oil sands may not appreciate the message and may have
a valid point that the advertisements are intended to detract attention from serious
environmental concerns associated with oil sands development, the ads truthfully

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 Greenwashing: A Proposal to Restrict its Spread

represent work that firms are currently undertaking and are better classified as
green-highlighting rather than greenwashing.
While this work to provide a framework around which to evaluate and critique
claims of greenwashing is important, it must also be recognised that there are
definite grey areas that make it very difficult for the public to judge for themselves
whether claims made by firms constitute greenwashing. Consider, for example,
public messaging around the aforementioned development of the Alberta oil sands.
While oil sands developers may make valid claims about the environmental
impacts of their business, these claims are based almost exclusively on the current
performance of oil sands operations or on the impacts of specific projects. As-
suming that these claims may be validated by supporting information, they do not
constitute greenwashing per se. Critics, however, suggest that a more rigorous
approach to presenting public information about major resource developments
would involve more forward-looking analysis that considers the cumulative
impacts of multiple developments over an extended time period (Grant et al.,
2013). These contextual differences on the most reputable way to analyse and
present information on the impacts of developments threaten to inject even greater
confusion into what is already a very murky subject.

Why do Firms Greenwash and Why is this a Matter of Public Interest?

As a first step in determining why greenwashing is a subject that merits heightened
attention, it is important to review why firms adopt greenwashing behaviours in
the first place. The leading driver of greenwashing results from pressure on
business to demonstrate conformity with societal expectations around environ-
mental sustainability and to constantly signal to influential and powerful external
stakeholders that progress is at hand with respect to green issues. As found by
Bansal and Roth (2000), companies have three primary motivations to be eco-
logically responsive to the market: competitiveness (which includes economic/
profit motivations), legitimacy and ecological responsibility. While being eco-
logically responsible is important, the other two factors can create significant
pressures to have eco-friendly products. It must be noted that these pressures
go far beyond the need for goods and service-producing firms to identify and
capitalise on new markets for green-friendly products. These institutional
stakeholders include:

. Financial institutions and stakeholders from the financial markets. Not only do
these stakeholders control firms’ ability to access capital, but many are now
equating sustainability practices with good management practices. This creates

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D. Markham, A. Khare & T. Beckman

significant coercive pressure to communicate a compelling sustainability nar-

rative at the risk of not being able to access capital (Ramus and Montiel, 2005).
These stakeholders would include organisations such as the Dow Jones Sus-
tainability Index that attempt to classify sustainable companies on the basis of
conformity against recognised sustainability criteria.
. Environmental Non-governmental Organisations (ENGOs) that monitor firms’
environmental performance, as well as the performance of their supply chains,
and, along with partners in the media, have a tendency to initiate name- and
shame campaigns against those whose commitment to sustainability is found
wanting.
. Peer companies that demonstrate commitment to leading sustainability practices
through tangible action. Once a visible competitor has committed to a specific
sustainability practice or innovation, it increases manager’s sensitivity to the
issue and creates a moral pressure for others to conform (Ramus and Montiel,
2005; Delmas and Toeffel, 2008).
. Industry associations who might mandate a certain level of demonstrated sus-
tainability commitment as a condition of membership (Delmas and Burbano,
2011). The Forest Products Association of Canada, for example, requires that all
of its members apply one of three forest management certification systems
available to producers in Canada as a condition of membership (Forest Products
Association of Canada, 2013).
. Environmental regulators. The perception of positive environmental perfor-
mance may assist firms in influencing the development of environmental laws or
regulations in their favour or, more realistically, dissuade regulators from taking
action on a certain environmental issue (Walker and Wan, 2012).

It is important to note that greenwashing is enabled by the credence properties of

many products. A credence property of a product is a characteristic that is un-
knowable and virtually undeterminable by the consumer even after purchase. For
example, a can of tuna can be claimed to contain no dolphin, but for most con-
sumers, they cannot actually determine this as a fact — they simply have to take
the producer’s word for it. When consumers need to trust the producer so ex-
plicitly, and there are benefits to be had for making claims about the environmental
qualities of a product, it could be tempting for some companies to lie about such
characteristics. As noted earlier, the presence of credence products, or products
with credence characteristics can cause inefficiencies in the market.
Given the importance of assuaging stakeholders on the firm’s commitment to
sustainability progress, many businesses are confronted with the fiscal reality that
there may be limits economically to how far firms are able to progress in pursuing

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 Greenwashing: A Proposal to Restrict its Spread

sustainability initiatives. After securing productivity or efficiency gains resulting

from the implementation of less capital intensive eco-efficiency measures, firms
may be hard pressed to attract additional private investment for more substantive
innovations or changes in operation that are neither easily scalable nor profitable in
the intermediate term (Alves, 2009). Should such conditions exist, greenwashing
becomes an important business consideration for two reasons. Firstly, a far shorter
time frame is required for a firm to alter its communications strategy around its
environmental performance than for a firm to actually change its environmental
performance (Delmas and Burbano, 2011). Secondly, when confronted with the
significant cost associated with transformational sustainability measures versus the
comparably low cost of enacting a green marketing campaign, many executives
would pragmatically opt for the latter option. Because of the attractiveness of the
greenwashing option, and its ease given the credence properties, it stands to reason
that so long as firms may choose this option as an alternative to more substantive
sustainability action, there stands to be far less progress in business’ addressing
important environmental concerns.
These conditions result in a misguided environment with respect to the vol-
untary disclosure of sustainability information. As would be expected, firms that
have poorer environmental records stand to be rewarded more by practicing
greenwashing. They would be able to satisfy the expectations of their institutional
stakeholders while avoiding the costs of implementing improved sustainability
practices. However, these conditions also influence good environmental actors to
restrict their communication about their environmental achievements because they
do not wish to run the risk of being accused of greenwashing (Lyon and Maxwell,
2011).
While the manipulation of key institutional stakeholders may be the primary
driver of greenwashing, it’s critical to consider the cumulative effect of false
greenwashing messaging on the public at large. If greenwashing practices continue
unabated, it is highly possible that consumers that are motivated to purchase green
products will become cynical if green claims are constantly exposed as being false.
This has important implications for the continued development of markets for
sustainable products. Not only would increased public cynicism have a detrimental
effect on demand for green consumer goods, it could also erode trust in the socially
responsible investment movement and negate an important opportunity to have
sustainability considerations blended with evaluations of investment attractiveness
(Delmas and Burbano, 2011).
Ironically, one final reason why heightened attention to greenwashing is jus-
tified would be to save business from itself. Studies have increasingly identified
strong positive correlations between firms that practice superior environmental

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D. Markham, A. Khare & T. Beckman

performance and profitability (Ambec and Lanoie, 2008). Correspondingly, a

strong negative correlation was detected when researchers compared instances of
greenwashing identified on the websites of 130 Canadian visibly polluting in-
dustrial firms with the firms’ Return on Assets (Walker and Wan, 2012). The
implication is that firms that choose to greenwash over investing in environmental
improvements are doing harm to their ability to profit.

Commentary on Government Efforts to Control Greenwashing

Recognising the growth in exaggerated environmental claims being made by
firms, the Government of Canada has taken recent action to address this condition.
The Competition Bureau has responsibility for the regulation of product or service
advertising, and has several legislative instruments at its disposal, including the
Competition Act, Consumer Packaging and Labelling Act, and Textiles Labelling
Act, that enable regulatory action against those found to be engaging in misleading
advertising claims. None of the Acts makes specific reference to misleading en-
vironmental claims, which is why, in 2008, the Competition Bureau published
Environmental Claims: A Guide for Industry and Advertisers to provide guidance
on how the agency would interpret instances of potential greenwashing. The
guidance document closely resembles the TerraChoice 7 Sins of Greenwashing
(TerraChoice, 2010b). For example it discourages firms from using vague claims
such as green, eco or environmentally friendly, and encourages firms to make
reference to established sustainability management systems, such as the Canadian
Standards Association or Forest Stewardship Council, to provide greater justifi-
cation to their environmental claims (Competition Bureau of Canada, 2008).
While the emergence of greenwashing has prompted the Competition Bureau to
take steps to clarify its perspective and inform business and the public about
misleading environmental claims, there is little evidence to suggest that the agency
has sought to use its powers of enforcement to aggressively confront firms en-
gaged in greenwashing. Since the issuance of the guidance document in 2008, the
agency has not sought to proceed with legal action against a firm that has acted in a
manner contrary to its guidance, so, at the present time, it is not known how
Canadian courts would interpret and adjudicate claims of greenwashing.
It appears as though Canada’s direction in addressing greenwashing is con-
sistent with that of other governments. Since 1992, the United States’ Federal
Trade Commission (FTC) has provided a framework, known as the Green Guides,
that address use of environmental terms in product or service advertising, and this
framework has been updated consistently since its inception to address emerging
issues with respect to the use of environmental terminology (Rodie, 2008). Unlike

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 Greenwashing: A Proposal to Restrict its Spread

Canada, however, the FTC has demonstrated greater litigiousness in pursuing false
claims of greenwashing. For example, in 2010 the FTC sought to impose civil
penalties against firms that have claimed that their products were biodegradable
when, in fact, the products did not decompose into elements found in nature within
a reasonably short period of time after their customary disposal (Boyd, 2010).
These actions aside, Delmas and Burbano (2011) have determined that enforce-
ment of greenwashing by the FTC has been limited, with 37 cases being pursued
from 1990 to 2000, and only 5 between 2000 and 2009.
A similar regulatory trend is apparent in Australia. In 2011 the Australian
Consumer Laws were reformed to bring the regulation of deceptive and misleading
advertising under the auspices of the Australian Competition and Consumer
Commission. The Australian laws differ from their Canadian and American
counterparts since they apply to “persons” as opposed to “corporations” and,
therefore, have the potential to be applied much more broadly. However, much
like their Canadian and American counterparts, Australia has only anecdotal
examples of government agencies taking action against greenwashing claims, and
on only one occasion have these actions resulted in civil action through the courts
(Adams and Nehme, 2011).
Generally speaking, the rules in place to address greenwashing appear to be
consistent in many jurisdictions throughout the world. While current consumer
protection and competition laws may be used to address misleading environmental
claims in advertising, these laws are limited to advertising and do not include other
promotional mediums where firms have been known to greenwash, such as public
statements, material posted on company websites or sustainability reports. Fur-
thermore, examples of these regulatory instruments being used successfully are
few and far between. Under these circumstances, it is understandable why the
practice of greenwashing has been able to grow to the extent that it has since
regulators have only rarely used the regulatory tools at their disposal to attempt to
quash the practice.
Given the lack of success to date in addressing greenwashing through gov-
ernments, it is worth considering if coercive government regulation is ultimately
the most effective way to address this problem. While governments have attempted
to modernise their oversight of greenwashing in recent years, this action has been
insufficient to stem the growth and pervasiveness of greenwashing.
One of the benefits of having government actively regulate greenwashing is the
fact that, through the use of its power to initiate legal action against firms that it
views to be in contravention of laws, it can attract significant attention to instances
of greenwashing in a most reputable way. While ENGOs have also attempted to
publicly identify and castigate firms that they believe are committing acts of

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D. Markham, A. Khare & T. Beckman

greenwashing, this type of sanctioning does not carry the same forcefulness as
having the government initiate a legal proceeding against an offending firm.
Governments, however, are limited in their ability to successfully carry out
regulation of greenwashing, and this likely would continue to be the case even if
existing consumer protection legislation was amended to grant government reg-
ulators greater latitude to pursue greenwashing. Firstly, governments would likely
continue to struggle with the level of resourcing needed to dedicate toward the
enforcement and prosecution of those found to be in violation of laws as the result
of greenwashing. Indeed, Baksi and Bose (2007) show that government moni-
toring of such activities is very costly. Secondly, there is considerable ambiguity
around what constitutes green behaviour and the correct use of green adjectives.
Consider the FTC’s recent attempt to prosecute the U.S. retailer Kmart for la-
belling its house brand moist wipes and paper plates as biodegradable. An FTC
investigation discovered that these products when disposed of in a landfill did not
decompose within what the FTC considered to be a reasonably short time. Kmart
defended itself against the accusation by suggesting that the products would have
decomposed within a reasonable time had they been composted instead of dis-
posed in a landfill. This argument raises important doubts around whether reg-
ulators can define, much less regulate, around imprecise environmental terms
(Galbraith, 2009). Norway has taken steps to ban the use of the terms green, clean
and environmentally friendly in car advertisements for these very reasons (Welch,
2013). At the other end of the spectrum, this level of ambiguity could ultimately
result in the unintended consequence of decreasing reputable firms’ use of green
language in informing the public about the environmental merits of their products
or projects (Delmas and Burbano, 2011).

Alternatives to Government Regulation

Given the challenges that government will inevitably face in taming the green-
washing epidemic, it is important to consider plausible alternatives to regulation
that could effectively challenge or control incidents of greenwashing while, at the
same time, raising the level of public awareness around important sustainability
actions being undertaken by business. Concern about greenwashing has risen to the
extent that several organisations appear well positioned to assist in effecting change.
As was mentioned earlier, ENGOs are influential stakeholders among firms due
to their ability to generate considerable publicity around environmental issues, and
it’s reasonable to suggest that they could be equally influential in drawing attention
to instances of greenwashing. Greenpeace, one of the most prominent ENGOs, has
initiated a special web site Stopgreenwash.org to expose what it believes to be

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 Greenwashing: A Proposal to Restrict its Spread

incidents of greenwashing. While Greenpeace has articulated criteria based on its

own definition of greenwashing, the Greenpeace definition is much broader and
would include any advertisement from any corporation whose core business is
inherently polluting or unsustainable (Greenpeace, 2013). While such ENGO
projects might capture the attention of firms, it is doubtful that they’re equally
influential among members of the public that have grown accustomed to polemic,
anti-development arguments from ENGOs.
A similar approach would be to rely on market experts, or so-called market
mavens (Feick and Price, 1987), as they can guide consumers in purchases. While
market mavens can be very influential, and can diffuse market information, the
scope of their activities is somewhat limited to their own personal interests. The
breadth of products about which “green” claims can be made extend beyond, and
grow faster than even mavens can keep up with. Additionally, some of the cre-
dence properties of “green” products may be beyond the expertise of the mavens to
determine, thus they too will not truly know the truth of product claims.
A more promising opportunity may be the emergence of research partnerships
between academic institutions and marketing firms to promote public involvement
around greenwashing. Collaboration between the University of Oregon School of
Journalism and Communication and EnviroMedia Social Marketing has resulted in
the creation of the Greenwashing Index web site, which invites members of the public
to post, review and rate ads based on public perception of the environmental claims
made by advertisers (Swain, 2011). While the Greenwashing Index site is a useful
tool to understand public attitudes toward environmental claims made by advertisers,
the site will likely fail to contribute extensively to the control of greenwashing due to
a lack of rigor and consistency in the determination of its ratings.
A final alternative could be business adoption of codes of conduct or voluntary
certification of their advertising and promotional activity. Just as firms in many
industries have adopted voluntary management practices or have sought to certify
aspects of their operations under specific management practices such as, for ex-
ample, the ISO 14001 environmental management system, the same could po-
tentially be a realistic option for the control of greenwashing. Leaving aside the
issue of whether or not voluntary codes of conduct are sufficient to control the
behaviours of management, such actions would likely not resonate in the court of
public opinion. Critics such as Laufer (2003) have classified such schemes as
“fronting” and have criticised them on the basis that while they’re in place to
legitimise the environmental claims of business, the public has little information
on the credibility of those undertaking the certification and no input into the
determination of the audit criteria. Due to the increase in attention that acts of
greenwashing are receiving, a more substantive solution is likely in order.

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D. Markham, A. Khare & T. Beckman

How to Restrict the Growth of Greenwashing?

The preceding analysis has discussed the emergence of greenwashing and the fact
that the continued ascendency of the practice threatens to restrict or possibly dis-
incent the continued application of technologies or process improvements by
business that can contribute to sustainable development. Given the urgency to
address the fragile state of the environment, increased control over greenwashing
is in order. Furthermore, nudges (Thaler and Sunstein, 2009) may not have sig-
nificant enough outcomes soon enough to make a difference given this urgency.
Unfortunately, as can be seen by the rapid and large growth of greenwashing
(TerraChoice, 2010a), efforts to date to control greenwashing by governments,
ENGOs and other stakeholders, while well intended, have mostly been largely
fruitless. In order for society to gain traction in addressing the problem of
greenwashing it will be necessary to address the root cause of greenwashing,
specifically the confluence of pressure put on firms by influential institutional
stakeholders to publicly demonstrate their commitment to sustainable development
and the asymmetry of information about products as they have credence proper-
ties. It is proposed here that key institutional stakeholders would benefit more from
close collaboration in order to meet their information needs while minimising the
conditions that result in greenwashing.

What would such collaboration look like?

A starting point to contribute to this desired outcome would involve a change in
how government uses its coercive powers to prevent greenwashing. Rather than
seek to regulate greenwashing by punishing firms after incidents of greenwashing
have occurred, it would be far more productive for government to use its regu-
latory powers to compel firms to produce additional information on their efforts to
implement sustainable business practices. The determination of the information to
be requested from firms through this avenue should be achieved in close collab-
oration with the same stakeholders in the financial, ENGO, association and reg-
ulatory fields that have, to this point, exerted pressure on firms to disclose their
activities through the media or other public channels.
In particular, independent institutional stakeholders (e.g., ENGOs, universities,
associations) can work with appropriate governmental agencies (e.g., Canadian
General Standards Board, U.S. Environmental Protection Agency) to establish
standards and scales. Governments can then use their regulatory powers to man-
date the adherence to and publication of information about how company products
follow such standards.

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 Greenwashing: A Proposal to Restrict its Spread

It is hypothesised here that the type of information that could be requested

through such a regulatory instrument could be focused on addressing many of the
concerns around the public communication of environmental benefits that Terra-
Choice’s 7 Sins of Greenwashing have identified (TerraChoice, 2010b). Height-
ened public reporting in concrete, standardised forms, of the breadth of firms’
environmental footprints and that of their supply chains could eliminate most of
the ambiguity that results in accusations of greenwashing. Examples of the type of
data that could be requested under such an initiative include (but should not be
limited to):

. Complete information on product composition, including the materials required

to manufacture the product and the amount of waste by-products produced in the
manufacturing process.
. Information on the product’s life cycle, including product disposal.
. How production of the product or operation of the facility affects key envi-
ronmental variables (such as greenhouse gas emissions, water consumption, or
critical habitat protection).
. The amount of capital invested by firms in sustainability initiatives, and their
contribution to improved production processes.

Providing information in this form can help to reduce misleading claims. That is,
rather than a company being able to claim that its product is “green” or “eco-
friendly”, there would be a set of facts about the product’s characteristics. The
credence properties would then no longer be opaque, and thus consumers of the
product would be able to make their own determination of how environmentally
friendly (or not) the product is. For example a standardised scale for the biode-
gradable-ness of a product is much more meaningful than simply stating that
something is biodegradable; and it allows for a true comparison of that charac-
teristic across multiple products.
Beyond a product level comparison, the collection of this information could
result in improvements to the way institutional stakeholders and members of the
public evaluate how firms are addressing challenges associated with sustain-
ability. It presents an opportunity for institutional stakeholders to more accurately
assess and appraise levels of commitment to sustainability. For the investment
community, this would allow them to properly assess the strengths of manage-
ment in balancing the competing priorities of maintaining profitability while
wisely investing capital to allow the firm to be successful in addressing the
challenges and opportunities resulting from increased environmental awareness.
That is, investors can more accurately and confidently assess how companies are

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D. Markham, A. Khare & T. Beckman

meeting all three of the responsibilities of a triple bottom line framework (i.e.,
financial, environmental and social responsibilities). For governments, it would
allow them to more precisely assess the strength of their respective regulatory
frameworks in contributing to a more effective societal approach to sustainability.
At present, due to instances of greenwashing by firms, all stakeholders are
receiving an incomplete and misleading picture of firms’ attempts to address
sustainability concerns.
To leverage this collection of new, more complete and transparent information,
it is recommended that further collaboration be considered to produce consistent
evaluations of how firms are addressing the sustainability challenge. While the
collection of new information on sustainability performance is an important first
step, aggregation and dissemination of this information in a credible way may
assist in creating an environment where firms are held to account for their per-
formance and are incented to aggressively improve their commitment to sustain-
ability. The coalition of investment interests, governments, associations and
ENGOs can elaborate clear criteria that, when disseminated broadly, could allow
the public to assess the firms that are contributing to progress versus the firms that
are lagging. It would further benefit businesses and the public by creating one
dedicated and authoritative source for information on sustainability performance,
as opposed to the scattered and diverse critics of business practices that comment
on sustainability issues today.

Conclusion
Greenwashing has emerged as a response by businesses to demands by key in-
stitutional stakeholders to supply greater public commentary on their sustainability
performance. Due to the immense potential costs of not being viewed as being
committed to sustainable business practices, firms have demonstrated the tendency
to exaggerate the level of their actions and commitment. As many environmental
characteristics of products have credence good properties, greenwashing is en-
abled and made readily possible. This practice has the potential to restrict con-
tinued progress by business in applying sustainable business practices as
consumers cannot easily determine the accuracy of claims, and will contribute to
the erosion of markets for environmentally-friendly products.
Given the importance of continuing to make progress in addressing the envi-
ronmental impacts of business, the inclination is to have governments assume
greater responsibility for overseeing and regulating against greenwashing. Gov-
ernment has struggled with this responsibility to date and, it has been argued, is
poorly positioned to make progress in addressing this issue through the regulatory

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 Greenwashing: A Proposal to Restrict its Spread

instruments it is currently using. Instead a new approach is in order that addresses

the root causes of greenwashing. Greenwashing has been allowed to flourish
because an information vacuum on relevant business sustainability information has
persisted. A more productive regulatory approach would seek to create a collab-
oration of government and independent stakeholders to determine desired sus-
tainability information. This information could then be disseminated to industry
and the public, and the government mandate its use. This approach to the deter-
mination of relevant information and its dissemination to the public can assist in
creating a climate where business is challenged to take tangible action to address
how it operates.

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