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Greenwashing happens when businesses claim that their products or services are more environmentally friendly than they are. Entrepreneurs and consumers should be aware of financial greenwashing and how it can affect them. But why is financial greenwashing bad, and how can it be avoided? It can come at a detriment to investors when you are provided with misleading information about a company's products or services as a means of boosting your investor confidence. Here are a few insightful tips, from verifying environmental claims made by other companies to investing in efforts that will boost your environmental, social, and governance ratings to help you avoid financial greenwashing.
Financial Greenwashing and How to Avoid It
Research and Verify Environmental Claims Made by Other Companies
Greenwashing is terrible because it can lead to unethical and unsustainable business practices.
One tip for avoiding greenwashing is to conduct thorough research on the environmental claims being made by companies and look for independent verification of these claims. Additionally, you should be wary of vague or overly general statements about a company's commitment to sustainability, as companies often use these to greenwash their products or services.
By being aware of these issues and avoiding them, you can help promote ethical and sustainable business practices in your life and the wider community.
- Natalia Brzezinska, Marketing & Outreach Manager, US Visa Photo
Redefine Sustainability Often
One tip for avoiding financial greenwashing is to redefine sustainability regularly. Green technology and standards, like all technology and laws, change constantly.
What was once the industry standard for a sustainable business practice may not be the same within just a few years. Always strive to improve your sustainability policies to match those on the cutting edge of new advances.
- Kevin Callahan, Co-Founder & CEO, Flatline Van Co.
Hire an Environmental Business Law Attorney
Any time someone takes something that matters deeply to a lot of people and uses it to make a quick buck, it will lead to a lot of heartache and anger down the road. If you invest in a product that you think is environmentally beneficial or sound and turns out to be damaging to the environment, you could pay dearly for it. That's true even if you were deceived. That's what makes it so bad. Innocent people often have to shoulder the blame when something like that happens.
The way to avoid it is to double-check everything. Get an attorney involved (preferably one who specializes in environmental business law) and get an environmental scientist (or two) to dig into the product and see whether it is everything the seller says it is. You never want to be blamed for damaging the environment. That's a stain you may never get rid of.
- Trevor Ford, Head of Growth, Yotta
Do Not Use Vague Sustainability-Related Statements
Financial greenwashing reduces global decarbonization significantly. Investors with good money, which could have been put to good use in projects that have a significant impact against climate change, are tricked into funding projects with little to no effect on climate change. This is a mega waste of resources. The way you avoid financial greenwashing is by not using vague sustainability-related statements. Always provide clarifying information for every jargon used to avoid misleading investors.
- Lydia Mwangi, Content Writer, Barbell Jobs
Invest in Efforts That Will Boost Your ESG Practices
Financial greenwashing is unethical because you're exaggerating facts or using misleading information about your company or financial products' ESG scores. When you can't deliver on what you promised or what you said you've been doing doesn't show, you'll be caught eventually. Deception can ruin your public image, and you'll lose investors. Avoid financial greenwashing by investing in efforts that will boost your ESG practices. If you say your products and practices are environmentally friendly, ensure that you live by them.
- Aidan Kang, CEO, House of Debt