What is greenwashing

Greenwashing or climate-washing: what is it and how to identify it?

ESG Corporate social responsibility Transparency Climate action

Greenwashing – also referred to as climate-washing – is an increasingly widespread practice with which some companies mislead consumers into believing that they or their products are sustainable through misleading or false claims. It is important that conscious users know greenwashing definition in order to detect this practice – as a real green transition will only be achieved by entities that are truly committed to environmental care, renewables and the electrification and decarbonisation of the economy, with concrete, quantifiable and time-bound actions and measures.

qué es el greenwashing

In a simple and clear way, we can define the term greenwashing as a marketing strategy used by some companies claiming to be more environmentally friendly than they really are. It is a deceptive marketing practice that these entities use in their communications or advertising campaigns to try to clean up their business and improve their reputation – taking advantage of consumers' growing environmental awareness.

More and more often we hear about cases of greenwashing in the press; and it is especially concerning as we are increasingly suffering from it as users – affecting our decision making, most of the time without realising it. This is why it is so important to be aware of the concept and to learn how to identify this practice.

At Iberdrola, we are committed to socially responsible management of our activities, and transparency and honesty are fundamental values for this purpose. This transparency is critical in areas such as sustainability, climate action, respect for biodiversity, and the achievement of Sustainable Development Goals, which are fundamental pillars of our work for the energy transition.

Greenwashing definition 

The term greenwashing originated in the 1980s, and was coined by environmentalists who began to observe misleading commercial and communication practices in sectors such as hospitality; although it had some precedents such as the concept of "eco-pornography" as early as the beginning of the environmental movement in the 1960s. 

It is a combination of the words “green” and “washing”, referring to a "whitewashing" of a company's image, but in this case in an environmental context – where unsustainable actions are hidden or disguised under a green façade to clean up its business through misleading information. The term emerged as a response to marketing strategies that were seeking to capitalise on growing environmental awareness without a genuine commitment to sustainability.

Greenwashing examples in companies

There have been high-profile cases of greenwashed communication and advertising campaigns of large multinationals in sectors as varied as oil, fashion, cosmetics, mobile technology, decoration and fast food and coffee shop chains. 

Disinformation in these cases has been used in different ways by these companies: 

  • Through the promotion of a line of products as "ecofriendly", when they were the same as conventional products, without providing any evidence to support this differentiation.
  • Diverting attention by promoting a very small proportion of its business, which is not extrapolated to the rest of the company's activity. 
  • With beneficial claims or acknowledgements about a product for which the source was not provided.
  • With inspirational adjectives in the names and slogans and the informational part hidden in the small print.
  • Highlighting seemingly positive images or data, but actually irrelevant to the sustainability of the product in question.
  • With advertising campaigns that exaggerate sustainable efforts.

How to identify greenwashing

Sometimes it can be a challenge to unmask greenwashing, but in other cases it is relatively easy using a few simple checks to find out whether or not a company is truly environmentally conscious and engaged in the green transition. 

Questions to identify greenwashed information

  • Consistency of message. If we see a particular offer or product calling itself "green" or "sustainable", we should take a look at other products or services from the same company and the messages they advertise with, to see if there is consistency between their environmental message and their actual business practices.
  • Inconsistencies or vagueness. It is important to pay attention to the words used to sell something like "green". What exactly does this mean? Sudden changes in narrative, empty words or vague claims without tangible support are signs that could indicate greenwashing.
  • Third-party certifications. When someone ensures characteristics of a product or service, such as "renewable", "sustainable", "recycled", "ecological", "local", or through the use of prefixes such as "bio" or "eco", we must demand as consumers some kind of certification or reliable third-party seal of approval, which guarantees that these are not false eco-friendly adjectives. Appearance in sustainability indexes and reports is also valuable.
  • Sustainability policies. If we want to go deeper, every large company should have a public sustainability policy that we can investigate to see if they are being 100% honest about their commitments in their advertising. We may also be interested in their annual sustainability reports.

Iberdrola and sustainability

Impact of greenwashing

The impact of greenwashing ultimately extends beyond the misleading marketing tactics and the very damage to the environment that is done and hidden. As companies seek to capitalise on the social trend towards sustainability, consumer confidence can be eroded, even more so if they discover they have already been misled. 

This new scepticism towards those who try to sell us their good work for the planet can have very negative consequences, both for the companies in this sector as a whole and for public perception of corporate responsibility and environmental initiatives. As a result, it can have a negative impact on social support for those initiatives and activities that do seek a decarbonised, eco-friendly future in which we do not consume more resources than are available.

Consequences of greenwashing for business

The consequences of greenwashing can be very damaging for companies as a whole in the long term because it damages their credibility and reputation and negatively affects the industry. In addition to losing consumer confidence, companies trying to clean up their image with this type of campaign could face legal action and fines for misleading business practices. A brand's reputation can suffer irreparable damage – affecting customer or business partner loyalty and negatively impacting sales. This is why transparency and authenticity in sustainable efforts are essential to avoid such consequences.

Consequences of greenwashing for consumers

For consumers, falling into greenwashing traps can result in purchasing decisions based on false information. This not only affects customer satisfaction, but also undermines trust in companies and in sustainability messages in general. Consumers may feel misled and disappointed – leading to increased scepticism and a more rigorous search for information before supporting a company or product that claims to be sustainable and in line with their values.

Policies to protect against greenwashing

Businesses using greenwashing not only can face reputational damage, but they can also get into legal trouble. From this point of view, institutions in different territories have already taken action to discourage companies from the use of these misleading practices.

  • Two directives aimed at protecting consumers are being processed in the European Union. A regulation already approved by the European Parliament considers that promoting claims about the sustainable content of products without sufficient proof and approved certification by an officially recognised institution is considered an unfair commercial practice and therefore punishable. In particular, claims that rely on the supposedly neutral or positive effect on the environment, based on greenhouse gas offsetting practices, are prohibited. Businesses trying to clean up their image with such campaigns could face legal action and fines for misleading business practices.

  • In the UK, although there is currently no specific legislation against greenwashing, businesses falsely advertising products as "green" or sustainable can be caught by existing laws. Advertising and marketing materials, including claims relating to environmental friendliness, are subject to oversight by the Advertising Standards Authority (ASA). They must be subject, for example, to the Consumer Protection from Unfair Trading Regulations 2008, enforced by the Competition and Markets Authority (CMA), which prohibits unfair commercial practices, including false environmental claims. If a business is found guilty, it can face substantial fines. 

  • In the United States, the fight against greenwashing is addressed through various legal and regulatory measures including, among others: Federal Trade Commission (FTC) guidelines, state consumer protection laws, and sector-specific regulations, such as those led by the Environmental Protection Agency (EPA) or the Food and Drug Administration (FDA). Notably, in 2021 the Securities and Exchange Commission launched an Enforcement Task Force to identify climate and ESG misconduct –initially focused on greenwashing by identifying material gaps or misstatements in investor disclosure materials.