The Green Life, April 2005

“The ads are back,” announced Green Business Network founder Joel Makower in August 2004. He referred to the recent rise in frequency of corporate environmental image advertisements. Aimed at values-based consumers, socially responsible investors and public policy makers, the ads number as many as a half-dozen per issue in National Geographic, The Economist, Atlantic Monthly and other opinion-leading magazines. With lesser but likewise increasing visibility, the marketing blitz has advanced into newspaper and television markets nationwide. Not since the early 1990s – when the green consumerism emerged, and delegates to the United Nations Rio Earth Summit debated ratifying international environmental regulations – have companies so aggressively asserted their green credentials.

In this report we run a background check, investigating whether those credentials should be accepted. On the contrary, we find, they should in most cases be revoked, for rarely do they convey a company’s true identity.

AMERICA'S TEN WORST GREENWASHERS 1. Ford Motor Company 2. BP 3. United States Forest Service 4. ChevronTexaco 5. General Motors 6. Nuclear Energy Institute 7. Alliance of Automobile Manufacturers 8. TruGreen ChemLawn 9. Xcel Energy 10. National Ski Areas Association

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The complete report in PDF is annotated, and includes images of greenwash ads featured in the report as well as a list of online and print resources related to greenwash.

Introduction

Dealing in lies of omission, image ads belong to a business strategy known as greenwash, defined by the Oxford English Dictionary as “disinformation disseminated by an organization so as to present an environmentally responsible public image.”

In addition to image ads, greenwash encompasses misleading product labels such as “all natural,” “biodegradable” and other vague descriptions used entirely at the discretion of the manufacturer, as well as improper applications of terms, for example, “organic” and “free range,” which are meaningful regarding certain products but unreliable with others.

Greenwash also covers a range of public relations tactics: front groups feigning public support for hidden anti-environmental agendas; scientists-for-hire who vouch for industry-funded research; sustainability reports offering partial disclosure and spotty transparency; hollow mission statements and codes of conduct; contributions to innocuous nonprofits; community advisory panels that have access without influence; and sponsorship of Earth Day events, where local industry plays host to the peoplr it poisons.

The incentive for greenwash is obvious. Paraphrasing a Chevron executive who saw sales spike 10 percent during the company’s eco-friendly People Do marketing campaign, greenwash in all its forms serves a single purpose: “it pays.”

The Environmental Business Journal and Nutrition Business Journal report that the market for green goods and services in 2003 was $440 billion, or 4.3 percent of the U.S. economy, and is expanding twice as fast as GDP. Even companies without a share of the “Healthy Products, Healthy Planet” sector can profit from values-based consumers by building a reputation as goodly purveyors of necessary evils, like gasoline and computers.

Socially responsible investments, now totaling $2.16 trillion, grew 40 percent faster than all professionally managed investments between 1995 and 2003, according to the Social Investment Forum. The 2004 Cone Corporate Citizenship Study found that 70 percent of Americans view a company’s commitment to social issues as an important factor in their investment decisions.

Since the early 1990s, U.S. companies, both individually and collectively, have launched more than 200 voluntary environmental programs. In the public policy sphere, companies tout the merits of such programs to render cost-inducing regulations, from local ballot initiatives to federal legislation, superfluous.

Given the growth of the “Healthy Products, “Healthy Planet” sector and of socially responsible investing, along with the popularity of voluntary environmental programs, one might surmise that the concurrent rise of greenwash correlates directly with positive trends. Perhaps, as Gaylord Nelson, former Senator and founder of Earth Day, once said, “If corporations are moving to be green, that’s just fine…. [T]hey’ll just help spread environmental propaganda.”

But, in fact, greenwash has a stifling effect. In the lexicon of classical economics, it creates market distortions. Unless consumers have perfect information about products –not excluding their environmental costs – the market will not reflect their true preferences. Endowed with bigger marketing and public relations budgets, greenwashers shut the door on genuinely green business struggling to get a foothold in the marketplace. A few, notably organic food producers, have broken through, yet most, among them green-building contractors, renewable energy providers and organic apparel retailers, remain on the outside, obscured from potential customers.

By the same token, greenwash makes companies with strong financial performance but weak environmental performance more palatable to socially responsible mutual funds, some of which, as Paul Hawken pointed out in a recent report, take a facile approach to picking stocks. A poll by Investor Relations Magazine found that image ads have persuaded 42 percent of portfolio managers to consider investing in a company. Absent image ads, managers would be forced to dig deeper for companies that do well by doing good.

Bolstered by niche marketing inside the Beltway, voluntarism over the past decade has gained considerable political currency. However, after a trial period, it is apparent that self-regulation is no substitute for government mandates. Researchers studying voluntary environmental programs such as the chemical industry’s Responsible Care and the logging industry’s Sustainable Forestry Initiative have concluded that without concrete standards, independent oversight or the threat of enforcement, companies are not compelled to clean up their practices.

Thus greenwash is not part and parcel of environmental propaganda, boosting awareness of environmental problems in spite of its source. Instead, greenwash is itself an environmental problem, one that will persist, and likely worsen, until it no longer pays.

To flip the economic calculus of greenwash, so that its costs outweigh its benefits, consumers can refuse to buy from companies that they discover are out to fool them – whether through in-depth research or merely by turning the page from the image ads to the news. The same goes for investors, who should understand that companies are not always as they appear on paper. And policy makers must weigh the results of voluntarism more heavily than they do the guarantees of companies to go green of their own accord.

Together, consumers, investors and policy makers can demonstrate the power of accurate environmental information.

Notes on Methodology

As its title implies, this report does not account for all greenwashers, only the worst. The companies profiled herein were selected due to the discrepancies between their environmental rhetoric and the reality of their environmental performance. By these criteria, some environmental laggards did not make the list because, for lack of interest or fear of backlash, they do not bother with greenwash. On the other side of the coin, some leaders were chosen because, though in reality their environmental performance far outpaced that of their competitors, their rhetoric was still more extreme.

To each greenwasher we recommend steps to reconcile rhetoric with reality. The recommendations do not in general represent bold environmental reform, but are typically modest measures designed to convey a company’s true identity.