Why we need precise language to tackle greenwashing

Choosing the right language to describe your business has much wider implications than you might expect, particularly when it comes to communicating sustainability credentials. 

In spite of increased appetite among consumers, investors and regulators for transparency around companies’ sustainability efforts and environmental impact, the vocabulary to communicate this remain vague, misunderstood or misused. 

Since 2021, the ‘Green Claims Code’ from the Competition and Markets Authority (CMA) has mandated that - among other conditions - environmental claims are clear, unambiguous and can be substantiated. But subsequent consumer research by the Advertising Standards Authority (ASA) found that there was ‘little consensus’ and significant confusion about what terms like ‘carbon neutral’ actually meant.

Carbon neutrality in question

The problem isn’t confined to ambiguous phrases like ‘green’, ‘climate-friendly’ or ‘better for the planet’. While a number of recent greenwashing charges have been made against brands for using such terms – like Persil’s claim to be ‘kinder on the planet’ or Alpro’s ‘good for the planet’ – others have challenged specific claims to be ‘carbon neutral’.

Shell’s campaign for its fuel membership programme claimed drivers would be achieving carbon neutrality. The ASA banned the advert, determining that it was not clear that ‘carbon neutrality’ was only achieved by Shell offsetting fuel purchases for specific memberships. The Dutch advertising watchdog ruled similarly.

The stakes for imprecise communication around sustainability are only increasing. This month, the European Parliament voted to outlaw claims of carbon neutrality based on carbon offsetting, reasoning that since the effectiveness of offsetting schemes isn’t clear, claiming to be carbon neutral on this basis could be misleading.

This effectively adds ‘carbon neutral’ to the growing list of phrases which companies should avoid to minimise their risk of accidentally greenwashing. 

Another benefit of moving to more precise language is that it incentivises more appropriate sustainability strategies; if companies can no longer claim to be carbon neutral through offsetting schemes, they will need to re-evaluate how to reduce their overall carbon footprint if they nonetheless want to report on their sustainability progress, whether to regulators, investors or consumers.

In contrast to ‘carbon neutrality’, aiming for ‘net zero’ commits companies to practical, first-hand emissions reduction. Whereas offsetting could enable a company to claim carbon neutrality without changing anything about their business practices or the carbon emissions they produce, a net zero strategy requires a company to make concrete changes, set targets and evidence progress.

Scrutiny on Scope 3

Other greenwashing cases highlight the importance of verifying sustainability claims against entire supply chains – Scope 3 emissions. 

Microsoft was accused of greenwashing when it was revealed its Scope 3 emissions rose by 22.7% each year, all the while claiming to be progressing towards ‘carbon neutrality’ by 2030.

The company had made reductions in direct emissions from fuel, energy and vehicles but had not applied similar measures to reduce emissions through its procurement practices across its supply chain.

Any claim about the overall environmental impact a company or product produces will be misleading if it fails to take into account scope 3 emissions, which accounts for around three-quarters of a company’s emissions on average.

Walmart has pledged to reach ‘zero emissions’ by 2040, but its action plan does not address Scope 3 emissions which account for 95% of its overall emissions, by its own admission.

The risk and impact of greenwashing as a result of companies omitting Wcope 3 from their environmental claims and reporting are even greater when we consider investment products which are marketed as sustainable in some way. 

Investment managers have complained that ‘incomplete disclosures’ by companies on carbon emissions are proving a challenge for designing sustainable investment funds which hold up against greenwashing scrutiny

Already the Financial Conduct Authority (FCA) has highlighted examples of funds which claim to be making a positive environmental impact but could not substantiate the claims with portfolio companies’ direct emissions profiles. 

With the FCA’s upcoming new rules on greenwashing specifying strict definitions for how sustainable investment products are described, it’s becoming crucial for more precision and transparency around a company’s supply chain emissions. This is particularly true for companies using terms like ‘carbon neutral’, ‘carbon negative’, ‘carbon zero’ and ‘carbon positive’, since these describe specific carbon footprints and should refer to all emissions, including Scope 3.

Greenwashing doesn’t occur only because a company is intentionally making claims it knows to be false. More and more, companies are being found guilty of greenwashing by using unclear language about their environmental impact. New regulatory guidelines and rulings should serve as a wakeup call to all businesses that it's time to make sure the sustainability language you use is precise enough that it can’t be interpreted in ways you didn’t intend.

Words: Hugo Kimber, CEO of Carbon Responsible