Are We Greenwashing? A shift to ‘True’ Sustainability Claims
Understanding Greenwashing
In March 2025, Active Super a profit-to-member superannuation fund, was fined $10.5 AUD for making misleading claims about its ESG investment practices. The fund claimed that it had excluded or restricted certain investments based on its ESG screening criteria. Though, it was later revealed that they had, in fact, invested in sectors (coal mining, gambling as well as oil and gas companies) that it had publicly claimed to have avoided. This practice of making false sustainability claims is what is known as ‘Greenwashing’.
The act of greenwashing is not always intentional. Though, it occurs when businesses make false claims about their sustainability practices. It involves misleading the public or stakeholders about an action or business operation as it relates to sustainability. Greenwashing is not only unethical, but it also undermines authentic sustainable developments. In this way, misleading investors and consumers who might genuinely be seeking to support, shop with and invest in environmentally friendly companies.
Forms of Greenwashing
The permeations of greenwashing are varied, with some more explicit and others harder to identify. Some of these forms include:
1. Unsupported Claims:
As organisations increasingly seek to boost their credibility by promoting seemingly ‘positive’ sustainability efforts, some end up making claims that are either inaccurate or assertions that lack sufficient evidence. In many cases, these statements include bold declarations about past achievements or future sustainability targets. While these announcements are not inherently problematic, they can be damaging when they are unrealistic or unsupported by verifiable data. This practice contributes to a distorted perception of environmental progress and falls short of meaningful commitment.
A notable example involves a multinational oil and gas company that marketed its proposed carbon capture project as a “major contribution to the UK’s move to net zero.” Though, further investigation revealed that the project had neither government approval nor internal funding, and was missing essential carbon storage licensing. These omissions rendered the company's sustainability claims highly questionable and illuminate the misleading nature of some corporate narratives.
2. Vagueness/ Misleading Eco Labels:
The use of buzzwords and superficially eco-friendly terms in branding and brand labelling, such as “green,” “conscious,” or “clean”, can create the impression that a product or service is environmentally responsible. Though, the ambiguity of such terms can often mask the true environmental impact. In some cases, vague or poorly defined sustainability claims act as a barrier to transparency, enabling companies to project a green image without implementing substantial changes to their products, practices, or supply chains.
In 2022, an investigation by the regulator Netherlands Authority for Consumers and Markets (ACM), found that a popular fashion brand was using sustainability wording such as “Conscious” and “Conscious Choice,” without further elucidating what the sustainability claim meant in practice. ACM also pointed out several occasions where the company gave the impression to its customers that sustainable materials and sustainable benefits from its products. The regulatory body stated that the retailer needed to as asses how it can '“communicate best to consumers the sustainability benefits of its products. ACM board member, Cateautje Hijmans van den Bergh, said:
“Consumers that wish to make sustainable choices must be able to have confidence in the veracity of the claims that businesses make on their products or websites. We are pleased to see that these companies have acknowledged that they should have informed consumers more clearly about the sustainability aspects of their products, and that they will adjust various sustainability claims and their substantiations. They will also take measures to inform their customers better in the future.”
3. Exaggerating Minor Improvements:
Some companies overstate the impact of relatively minor environmental changes, giving consumers the false impression that a product is significantly more sustainable than it truly is. In a more sinister case , a popular vehicle manufacturer admitted to installing software in vehicles that manipulated emissions tests, making their cars appear more environmentally friendly than they were. The company was fined $34.69 billion.
This case illustrates a particularly extreme form of greenwashing - where deliberate efforts to misrepresent environmental performance not only mislead consumers but also erode public trust in corporate sustainability claims.
4. Isolated Sustainability Claims:
Companies may highlight one positive environmental aspect, such as recyclable packaging or promote a specific product’s eco-friendly qualities while disregarding other or more harmful impacts, such as excessive carbon emissions or water pollution in production. A bottled water manufacturing company marketed its bottled water as pure and natural, emphasising the quality of the water. However, this focus ignored the environmental impacts associated with plastic production, waste, and the extraction of local water resources, which have significant ecological consequences. With many companies seeking to do more on the sustainability front, overstating one positive aspect while ‘sweeping’ the more undesirable aspects under the proverbial ‘rug’ can be more problematic.
Avoiding Greenwashing
Greenwashing can have severe consequences for businesses. These range from legal battles (based on the accuracy of claims), to fines and reputational damage. This not only has a negative financial impact on businesses but also on stakeholder trust. To maintain credibility, uphold genuine sustainability efforts, and to avoid greenwashing, businesses can consider the following strategies:
1. Transparency:
Businesses must be transparent in their sustainability claims and reporting. The intent should be to present an accurate depiction of their current sustainability efforts while outlining steps for improvement. A well-conducted materiality assessment ensures that sustainability reports outline real progress and areas that require further development. Transparency builds trust among stakeholders, including investors and consumers, and encourages companies to take a longer-term approach, looking for ways to continually improve.
2. Data-Driven Reporting:
Sustainability claims should be backed by verifiable data, leaving no room for vague, misleading or unsubstantiated statements and claims. Using concrete and robust metrics and data can enhances credibility and helps businesses to avoid deceptive practices that could be perceived as greenwashing.
3. External Audits:
Inviting a third-party auditor for ESG assessments is one of the most effective ways to prevent greenwashing. Independent audits provide an objective evaluation of sustainability practices, identify gaps, and offer expert recommendations for improvement. External audits not only enhances accountability but can also improve compliance with industry standards and best practices.
4. Monitoring and Evaluation:
Establishing a robust monitoring and evaluation system helps keep track of sustainability progress over time. Regular assessments ensure that businesses remain accountable for their commitments, make data-informed decisions, and systematically refine their sustainability strategies to align with evolving environmental and social expectations.
Conclusion
As sustainability continues to shape consumer choices and investment decisions, businesses face increasing pressure to demonstrate their (ESG) responsibility. However, while the temptation to engage in greenwashing may offer short-term visibility or competitive advantage, the long-term risks such as regulatory penalties, financial loss, and reputational damage far outweigh any perceived and immediate gains. Organisations should therefore prioritise transparency, evidence-based claims, and continuous accountability, built on verifiable data. As global awareness of sustainability and greenwashing grows, successful companies will be ones that embrace integrity, foster trust on their corporate sustainability journey, and communicate authentically and transparently with their customers and stakeholders.
