Is Greenwashing a Necessary Evil?

This article was originally published in the Financial Times (FTfm) on 13 February.

Introduction

“Scratch any cynic,” the comedian George Carlin said, “and you’ll find a disappointed idealist.”

It’s hard not to respond cynically to the sheer speed with which corporations have embraced environmental responsibility.

The term greenwash has been around since the late 1980s, but the latest Greta Thunberg-inspired barrage of eco-friendly press releases has given the term a new and powerful currency. Scandals such as the Volkswagen diesel emissions fraud appears to illustrate a broad underlying reality — that companies are happy to flaunt their supposed green credentials even as they seek to game the system. Here, however, I would like to propose a more constructive interpretation of the phenomenon.

Behavioural Norms

A recent study by Stanford University looked at how behavioural norms alter over time. The results were published in the journal Psychological Science, where the authors found subjects were much more likely to adjust their own behaviour in response to seeing a significant number of others change theirs, even when this meant making a sacrifice. This is to say, we cling on to our old ways of doing things until it feels like there is enough momentum behind the new mode of action to justify change.

All of this may seem self-evident, but the findings of the study can be applied to the concept of greenwashing; rather than the cynical interpretation of corporate environmental evangelism, should we not see it as the first step in altering the normative landscape?

In order for people to make real changes, they need to be bombarded with messages that persuade them that others are changing. Of course, at a certain point this argument falls down — we need action as well as words — but there seems to be an awful lot of time and energy spent calling out alleged greenwashers that might more profitably be spent trying to address change more positively.

To put it another way, it feels like most people are heading in the right direction when it comes to global heating; the question is how much orthodoxy we demand from our fellow travellers, whether it is better to employ the carrot or the stick?

One path might be to foster an environment in which companies were able to admit their failures as well as trumpet their successes. Such is the urgency of the climate crisis, we need targets to be genuinely challenging and so we need to accept that companies may fail to meet these targets. Environmental reporting should be viewed in much the same light as the reporting of financial performance, and should be subjected to the same level of scrutiny and explication. The alternative, in which we continue to throw brickbats at those who dare to fail, will only drive conservatism and recidivism, deterring just the sort of risk-taking and innovation that we need to move to the next stage in the development of corporate responses to the climate crisis.

Consider the experience of the UN-backed Principles for Responsible Investment. This investor initiative, set up to raise environmental, social and governance standards in the asset management industry, placed one in 10 of its almost 2,000 signatories on a watchlist for failing to meet their targets last year.

Since then, it has reported that 88 of the 185 companies put on notice have improved their standards, while a further 42 will meet their standards by the end of the year. But 50 companies with more than USD1 trillion of assets under management have failed to improve, with many refusing even to meet the PRI, and will be delisted at the end of 2020.

The PRI has yet to disclose those that are on its watchlist, but the idea that in the current environment it is acceptable for a company not even to engage with the leading ESG body in its industry is clearly absurd. Cynics might point to this watchlist as evidence that the system is broken. But is it not in fact proof that the system is working, that bad behaviour is not thriving and expectations are growing more rigorous?

Conclusion

It is crucial that as an industry we find ways of hardwiring proactive environmental measures into the day-to-day operation of our businesses. Part of this process is the recognition that, at this still relatively early stage in the development of the low-carbon economy, we must work on the assumption that those who are not against us are with us.