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The Risks of Greenwashing and How It Negatively Affects our Supply Chain

Published on
August 24, 2023 at 11:30:00 AM PDT August 24, 2023 at 11:30:00 AM PDTth, August 24, 2023 at 11:30:00 AM PDT

Greenwashing, a term coined in the 1980s, refers to the practice of misleading consumers into believing that a company or product is environmentally friendly or sustainable when it may not be. It involves using marketing and advertising techniques to exaggerate or falsely claim the environmental benefits of a product or company.

Greenwashing can take various forms, such as using vague or misleading language, using green imagery without substantiating claims, or highlighting one small eco-friendly aspect while ignoring larger negative impacts. This deceptive practice aims to capitalize on the growing consumer demand for environmentally responsible products and services.

As the world becomes more environmentally conscious, many companies are trying to market themselves as "green" or "eco-friendly." While it's great that businesses are taking measures to reduce their impact on the environment, not all of these claims are legitimate. Some companies engage in "greenwashing," which is a marketing tactic used to deceive consumers and investors into thinking that their products or services are more environmentally friendly than they actually are.

While greenwashing may seem harmless on the surface, it can have serious consequences, especially for procurement and supply chain professionals. 

Damaged Reputation and Trust:

If a supplier claims to be environmentally-friendly but is found to be greenwashing, it will not only damage their reputation and cause loss of trust of the customers, but also the trust of stakeholders and investors in the industry. Businesses that are found to be dishonest about their sustainability initiatives are seen as unethical and unreliable.

This lack of trust can ultimately lead to lost business and decreased profits. Procurement and Supply Chain Professionals should be hesitant to align themselves with such suppliers, leading to a difficult purchasing process.

Reputational damage from greenwashing can have long-lasting effects on a company's bottom line. Negative publicity and backlash from consumers can result in decreased sales and loss of market share. In fact, one study showed that companies that were seen as practicing greenwashing saw a 1.34% drop in their customer satisfaction score — a drop that resulted in .032 units of change in net earnings and a .40 change in return on investment.

To avoid reputational damage caused by greenwashing, it is crucial for companies to be transparent and honest about their sustainability efforts. They should back up their environmental claims with concrete evidence and take meaningful actions towards reducing their environmental impact. Building trust with consumers through genuine sustainability practices will not only protect a company's reputation but also attract environmentally conscious consumers who value authenticity in corporate social responsibility efforts.

Inadequate Management of Supply Chain Risks:

Procurement and Supply Chain professionals, when making procurement decisions, often prioritize their company's goals in terms of sustainability. However, because many suppliers engage in greenwashing, it can be difficult for procurement professionals to know which businesses are truly environmentally friendly and which ones are not, allowing suppliers with a higher risk of environmental, social or governance issues to slip through into their supply chain.

To mitigate these risks, it is imperative that Procurement and Supply Chain create a target list of direct spend and indirect spend items they want to improve their sustainability efforts for, and for those various categories identify what third-party certifying agencies exists who can verify the factual environmental sustainability of the direct and indirect goods they plan to source.

For example, in the case of remanufactured printer cartridge supplies, two third-party certifying organizations that perform Life Cycle Assessments (LCA's) and the verify the Percent of Recycled-Content and the Closed-Loop processes for non-OEM cartridge manufacturers, is Aspire Sustainability and GreenCircle Certified

Increased Operating Costs:

Companies that engage in greenwashing often do so by spending more money on marketing and advertising than they do on environmentally-friendly practices. While this may seem like a smart business decision, it actually leads to increased operating costs in the long run. Procurement and Supply Chain professionals should seek out suppliers that have verifiable sustainability practices as they will have lower operating costs, which is savings that get passed down to their customers.

Not only can greenwashing ruin your reputation and batter your bottom line, but it can also set you up for litigation. The U.S. Federal Trade Commission (FTC) has many rules regarding environmental marketing claims that they strictly enforce through the FTC Act. In addition, private citizens can sue any company for false claims under state consumer fraud regulations, as was the case when citizens sued Kroger for advertising “reef-friendly” sunscreens. And once your company is embroiled in litigation, your reputation can be damaged even if you prevail. 

Decreased Efforts to Address the Challenges of Climate Change:

Due to the above-listed issues, companies with a high risk of environmental, social or governance issues often prevent successful sector-wide efforts to reduce global carbon emissions. This means that greenwashing not only harms individual companies but also poses a larger threat to the planet as a whole, as they aren't being as sustainable as they think they are.

By investing in sustainable practices and creating strong ESG strategies, companies not only contribute to a greener future but also gain a competitive advantage. Consumers are showing a preference for brands that align with their values and actively work towards minimizing their environmental footprint.

However, greenwashing can make it difficult to differentiate between genuine sustainability efforts and mere marketing claims. In this way, greenwashing practices erode trust not only in individual businesses but in ESG programs as a whole. This trust erosion not only devalues ESG programs but also causes public backlash against ESG strategies and models. Ultimately, this contributes to the watering-down of environmental activism, where people lose faith in their ability to make an impact on the health of the planet. It also undermines the efforts of companies that are genuinely trying to become more sustainable and reduce their environmental impact

ESG Made Easy with QIS!

Greenwashing in the business community is still a widespread phenomenon. However, it's important to keep in mind the negative impact that greenwashing can have on procurement and supply chain professionals. To mitigate the risk of greenwashing, these professionals should shift their focus to more credible, sustainability-based research instead of succumbing to the marketing gimmicks.

Procurement and Supply Chain professionals also have the ability to shape the industry with their purchasing decisions. By prioritizing procurement and partnering with genuine sustainable businesses, these professionals can create a brighter future for both their organizations and the planet.

At Quality Imaging Solutions LLC, we make meeting your ESG goals simple. We have our own suite of sustainability practices that we benchmark, and we offer clients important ways to keep track of their spending with sustainable partners such as using data classification, spend evaluation, and footprint analysis. In addition, we are a state and federally certified Woman-Owned Small Business (WOSB), a Woman-Owned Business Enterprise (WBE) and a Disadvantaged Small Business Enterprise (DBE). Our remanufactured printer cartridge supplies, manufactured by Clover Environmental Solutions North America, are also Green Circle Certified. Our certifications and commitment to a sustainable environment are more ways you can show your customers and stakeholders that you are, indeed, committed to your ESG goals. To find out more, simply contact us today!