CSR AND GREENWASHING (2024)

CSR AND GREENWASHING

ABSTRACT

Corporate social responsibility (CSR) is a corporate strategy that promotes long-term development by providing economic, social, and environmental benefits to all stakeholders. Greenwashing is a type of deceptive marketing in which a company or organization makes false or misleading claims about its environmental performance or products. Companies may engage in CSR to improve their reputation and brand image, to attract and retain customers and employees or to comply with government regulations these are some of the motivations for any company to do CSR activity.

Greenwashing is the practice of making false or misleading claims about the environmental benefits of a product, service, company, or organization.

CSR reporting is the process by which a firm discloses its CSR activities and performance to stakeholders, demonstrating its commitment to sustainability. Transparency is also extremely important for good CSR reporting. Transparency contributes to stakeholder trust and ensures that firms are held accountable for their CSR actions.[1]

Customers are becoming more interested in supporting businesses that are devoted to sustainability. Consumers, on the other hand, may be skeptical of greenwashing promises. A variety of laws and regulations govern various parts of CSR and greenwashing.

INTRODUCTION

Definitions and concepts of CSR and Greenwashing

Corporate Social Responsibility (CSR) is a management concept in which businesses incorporate social and environmental issues into their business operations and interactions with stakeholders. CSR is commonly defined as the process through which a firm achieves a balance of economic, environmental, and social imperatives ("Triple-Bottom-Line-Approach") while also meeting the expectations of shareholders and stakeholders.[2]

Greenwashing, also known as “green sheen” is the process of presenting a false impression or misleading information about how environmentally friendly a company's products are. Greenwashing is the practice of making unfounded claims in order to mislead consumers into believing that a company's products are more environmentally friendly or have a higher positive environmental impact than they actually do.

BACKGROUND

Historical Background and Evolution of CSR and Greenwashing

The term Corporate Social Responsibility was first used by American economist Howard Bowen in his book Social Responsibilities of the Businessman in 1953. As a result, Bowen is frequently referred to as the "Father of CSR."

The Committee for Economic Development introduced the concept of the ‘social contract' between corporations and society in 1971. This contract advanced the idea that firm’s function and exist due of public permission, and hence have an obligation to contribute to society's needs.[3]

On April 1, 2014, India became the first country to legally mandate corporate social responsibility. The new rules in Section 135 of India’s Companies Act make it mandatory for companies of a certain turnover and profitability to spend two percent of their average net profit for the past three years on CSR.[4]

The term originated in the 1960s, when the hotel industry devised one of the most blatant examples of greenwashing. They placed notices in hotel rooms asking guests to reuse their towels to save the environment. The hotels enjoyed the benefit of lower laundry costs.[5]

MOTIVATION FOR CSR

Companies may engage in CSR for a variety of reasons, including:

· To improve their reputation and brand image

· To attract and retain customers and employees

· To comply with government regulations

· To gain a competitive advantage

· To reduce their environmental impact and promote social good

A properly implemented CSR concept can provide a number of competitive advantages, including improved access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, an efficient human resource base, improved brand image and reputation, increased customer loyalty, and better decision making and risk management processes.[6]

GREENWASHING

The act of providing false or misleading assertions regarding the environmental benefits of a product or practice is known as Greenwashing. It can be a means for businesses to maintain or extend their polluting and damaging behaviors, all while manipulating the system or benefitting from well-intentioned, environmentally conscious consumers.

Several high-profile cases of greenwashing have made front-page news in the decades thereafter. Chevron developed its infamous People Do campaign in the 1980s, praising its work saving wildlife while continuing to spill oil in fragile environments and contribute to climate change.

In the early 2000s, the fossil fuel firm BP invented the term "carbon footprint" when it launched a calculator for consumers to measure their personal emissions, oblivious to the fact that its own emissions were among the highest on the globe.

Different forms and strategies of greenwashing

Greenwashing can still look like an hidden concept, and potentially illegal, Larsen notes, most greenwashing is subtler and includes more insidious forms of manipulation, like these common strategies:

Nature based imagery- It contains images on product such as trees, leaves, or animals- on product packaging and in advertisem*nts can imply sustainability, even if the company or product either actively harms the environment or takes no real steps to protect it. This strategy is commonly seen in packaged drinking water bottles which are the world’s biggest contributors of plastic waste.

Environmental buzzwords- These words have no legal weight like “natural” or “eco-friendly” and tell you very little about company’s specific sustainability practices. This language is intentionally vague enough to remain subjective and unregulated while still attempting to convince customers of a product’s benefits. For ex. A tissue product manufacturers and toilet paper brand like Charmin, a brand of company Procter & Gamble (P&G) creates a catchy marketing slogan- “Protect, Grow, and Restore” forests but the unsuspecting buyers do not know about that their supply chain includes pulp sourced from these forests only.

Products that lean on official-looking labels- Companies that produce plastic products often try to use consumer guilt by prominently featuring the recycling symbol or language like “please recycle” on the packaging. The logo may make someone feel like the choice is greener even if that type or mix of plastic is difficult to recycle in practice.[7]

CSR REPORTING AND TRANSPARENCY

CSR reporting is the practice of publicly disclosing an organization's performance on non-financial parameters, thereby providing transparency on the organization's impact on society and the environment. CSR performance reporting is often released on an annual basis and is entirely voluntary. Some authorities, however, require major organizations to publish their social and environmental performance, allowing investors and customers to judge the organization's non-financial implications.[8]

Three CSR reporting frameworks that are consistently rated highly by investors are the Carbon Disclosure Project (CDP), the Dow Jones Sustainability Index (DJSI) and the Global Reporting Initiative (GRI).

There are similarities and differences between these frameworks. The CDP focuses on GHG data, water and supply chain performance, to help organizations protect natural resources and mitigate climate change. Meanwhile, the GRI is more focused on the social, environmental and economic impact of organizations on their stakeholders.[9]

Providing sustainability disclosures using SASB Standards is a cost-effective way to provide decision-useful information to investors and puts companies in a prime position for implementing IFRS Sustainability Disclosure Standards.

CONSUMER PERCEPTION AND GREENWASHING

In recent decades, corporate communication has undergone significant changes. Companies must be accountable to a diverse set of stakeholders who are increasingly interested in non-financial information. Furthermore, the type and extent of information can have a substantial impact on the company's competitive advantage, particularly its credibility and reputation. Companies are now compelled to participate in corporate social responsibility (CSR) programs in order to respond to stakeholder and societal calls for action. However, some businesses participate in CSR projects solely to achieve or increase their degree of legitimacy. When businesses provide deceptive communication and subsequently attempt to influence the attitudes of their stakeholders, the phenomena known in the literature as "greenwashing" occurs.

Marketers of genuinely eco-friendly products must educate consumers about greenwashing, which can increase sales and expose fake claims by competitors. Collaboration among green companies in launching awareness campaigns can help consumers identify authentic products and prevent free-riding by fake green companies.

As a consumer, there are some steps you can take to help identify false or misleading environmental claims such as:

· Look for specific, verifiable information

· Check for third-party certification

· Consider the company’s overall environmental record

· Be cautious of green marketing campaigns

REGULATION AND LEGAL FRAMEWORK

There is no comprehensive government regulation of CSR or greenwashing in most countries. However, there are a number of laws and regulations that apply to specific aspects of CSR and greenwashing. For example, the Federal Trade Commission (FTC) in the United States has a number of regulations that prohibit deceptive marketing practices, including greenwashing.

In recent years, there has been a growing trend towards government regulation of CSR and greenwashing. For example, the European Union (EU) has adopted a number of directives and regulations that promote CSR and sustainable business practices. The EU has also adopted a number of regulations that specifically address greenwashing, such as the Green Claims Regulation.

Other countries are also developing regulations related to CSR and greenwashing. For example, China has adopted a number of regulations that promote CSR and sustainable business practices. China is also developing a Green Claims Regulation.

Case studies of legal actions against companies for greenwashing

There have been a number of legal actions against companies for greenwashing in recent years. Here are a few examples:

In 2019, the FTC reached a settlement with Volkswagen AG for $4.3 billion for greenwashing its diesel vehicles. The FTC alleged that Volkswagen had falsely advertised its diesel vehicles as being environmentally friendly when they actually emitted excessive levels of pollution.

In 2020, the FTC reached a settlement with Keurig Green Mountain for $5 million for greenwashing its K-Cups. The FTC alleged that Keurig had falsely advertised its K-Cups as being recyclable when they were actually difficult to recycle.

In 2021, the FTC reached a settlement with Whole Foods Market for $500,000 for greenwashing its salmon. The FTC alleged that Whole Foods had falsely advertised its salmon as being sustainable when it was actually caught in a way that harmed the environment.[10]

CSR AS A GREENWASHING TOOL

Companies may use CSR initiatives to mask their environmental and social irresponsibility by making misleading claims, engaging in token initiatives, and deflecting attention from negative impacts. For example, a firm may make charitable contributions to environmental organizations while continuing to pollute the environment. Alternatively, a firm may pretend to be dedicated to social justice while mistreating its employees.

Techniques that companies may employ to greenwash their image

· Companies use green imagery and language in marketing to appear environmentally friendly, even if their products or services are not.

· Companies may also sponsor environmental organizations, even if they are not credible or have a history of harming the environment.

· Obtaining environmental certifications can also create a false impression of environmental friendliness, as some certifications are not credible or are easy to obtain.

CONCLUSION

Corporate Social Responsibility (CSR) is a critical corporate strategy that incorporates economic, social, and environmental advantages for all stakeholders in order to achieve long-term sustainable development. Greenwashing, on the other hand, refers to misleading marketing practice in which businesses mislead consumers about the environmental aspects of their products or services. CSR motives span from boosting reputation to complying with rules, but greenwashing is frequently motivated by a desire to look environmentally responsible without verified efforts.

Transparency in CSR reporting is critical for building stakeholder trust and holding firms responsible for their activities. Consumers are more likely to support companies that are committed to sustainability, but they are also becoming more sophisticated, recognizing and avoiding greenwashing initiatives. Legal frameworks and laws, while evolving, currently vary around the globe.