A Cautionary Tale: The Case of Greenwashing
FS-UNEP Centre / 14 March 2023
  • Share

  • 4341

  • 0

  • Print
Project Coordinator
María José Valverde works at the Frankfurt School-UNEP Collaborating Centre as a Project Coordinator and has a background in economics and public policy. She is currently involved in topics related to climate finance and policy, biodiversity and adaptation. She holds a Dual Master’s in Economics and Public Policy from the Paris Institute of Political Studies (Sciences Po) and the University of Tokyo, as well as a Dual Bachelor’s in Economics and Social Sciences from the Paris Institute of Political Studies (Sciences Po) and the University of British Columbia.

To Author's Page

More Blog Posts
Beyond adaptation: Addressing loss and damage in the face of climate change
The barriers and drivers for the ramp-up of Power-to-X in non-OECD Countries
The future you want is out there and it's called public transport

It is an inescapable reality that climate change has come knocking on our front door – and those on the frontlines battling the impacts of climate change can tell us that some have experienced this call earlier than others. However, it is undeniable that this is the issue of our (and future) generation(s). In fact, it is now evident that climate change, sustainability and ESG criteria (Environmental, Social and Governance) have become trending topics across countries, sectors, industries and even political parties, given that societal perceptions and consumer demands for better accountability have changed.

For instance, ESG-focused institutional investment is predicted to increase by 84% in 2026. In emerging markets, ESG-linked debt issuance tripled to $190 billion in 2021. In the private sector, increasingly, more companies are aiming to incorporate ESG considerations in strategies and portfolios. And in education, students have shifted towards choosing careers in sustainability, as educators claim “the sustainability job market is booming”. Needless to say, an increasing number of people want to become part of the “climate solution” – and this is excellent news for all of us. However, what should be of concern and merits supervision is whether these trends and new interests in sustainability are truly driving structural changes towards low-emission and climate-resilient development in different sectors and contexts – or if they are just easily purchasable initiatives with limited impact.

The concept of greenwashing and competence greenwashing

In the last couple of years, governments, international organisations and regulatory bodies have heeded calls for tighter regulations and disclosure requirements from consumers, activists and scientists to adhere to the Paris Agreement and the Sustainable Development Goals. This has resulted in an increasing number of climate and biodiversity disclosure frameworks, sustainability initiatives and guidelines to which financial institutions, banks, companies, asset managers, insurers and other relevant actors need to adhere. This regulatory and consumer pressure has translated into a desperate search for ESG and sustainable finance experts to build internal capacities and comply with these requirements.

In general, this is a move in the right direction: market signals are changing and producing results, with societal norms now dictating that it is no longer acceptable not to act against the biggest issue of our time. However, this is also a double-edged sword: in trying to quench this thirst for appealing to a more demanding consumer base, to comply with new regulatory and disclosure standards and take advantage of growing returns from investing in the sustainable finance sector, the race for sustainability can quickly turn into shallow climate results, with low-quality standards. Thus, greenwashing.

Greenwashing is generally understood as providing consumers misleading or false information on a company’s activities, actions, products and policies regarding their environmental impact, claiming they are “environmentally friendly” when they are not. This can also apply to professional competencies, as Prof. Dr. Kim Schumacher posits, when individuals practice “competence greenwashing” by claiming ESG and sustainability expertise with no material academic or professional backing.

As we transition towards more sustainable financial, regulatory and business models, we are increasingly in the look for expertise to aid in internalising the “new normal” and translating it into efficient and effective policies, regulations, strategies and mappings. However, the demand is exceeding the supply of expertise. In worst-case scenarios, marketing professionals simply add “ESG” to their position titles, without relevant professional or academic experience, as Prof. Dr. Schumacher suggests. This is dangerous and irresponsible.

If we seek real results in the coming years, companies publishing climate strategies and consulting firms providing guidance on these topics need to include scientific experts (i.e. with backgrounds in planetary science, ecology, biodiversity, etc.) in their main discussion and decision-making tables. This will ensure that these strategies and related advisory are cemented on real science, which is crucial to produce a tangible positive impact.

Our role in preventing a cautionary tale

As working professionals, researchers, professors, students and others looking into becoming part of the climate solution in one of Europe’s leading business schools, there is a special need for caution. We need to continue working towards a smooth transition in the finance sector and the real economy, hand in hand with environmental science expertise, for a true alignment with the goals of the Paris Agreement.

We are rapidly approaching the limits of some of our planet’s tipping points. Climate change, ocean acidification, global nutrient cycles, biodiversity loss, freshwater use and land system change, for instance, are increasingly worrying scientists. These changes indicate that we are moving towards an unprecedented planetary state. As such, we need to act quickly – and we can start by making career, business and strategy decisions founded on science and not on trends. This way, we will avoid being a cautionary tale for generations to come.