From greenwashing to triple bottom lines, the good and the bad of the green moment in business
Environmental preservation has rapidly become a top priority for leaders and organizations all across the world. As humanity edges closer towards the United Nations’ 2030 deadline of reducing global carbon emissions, the anxiety of reducing one’s global carbon footprint is growing as well.
Natural disasters plague vulnerable communities on an increasingly regular basis. We’ve witnessed this in our own backyard this spring when the greater areas of Ottawa flooded, and NBC covered similar flooding in Venice earlier this month.
There has been an influx of research about environmental science and protective measures, internet campaigns and fundraisers for conservation organizations and clean-up projects, and several industries and economies are undergoing innovative and sustainable makeovers.
But how much are these industries willing to transform themselves in order to be recognized as green? Or are they parading a green facade in order to increase their own traffic?
The green menace
It’s possible that the corporations and organizations originally at the forefront of the sustainable revolution could actually be undermining their key supporters and consumers.
This is called greenwashing, and it’s an active concern for many consumers.
Ryan Katz-Rosene, a professor of political studies at the University of Ottawa, has conducted research in what he describes as environmental political economics.
“It’s presenting something as being sustainable when it’s either not or its actual sustainability credentials are fuzzy,” he says. “It’s being disingenuous about the environmental impacts of something, but it has also morphed into this broad term where it has come to mean, in practice, that a company is doing a little bit rather than a lot.”
“You could sum it up by basically saying, companies saying one thing and doing another,” agrees Patrick Callery, a professor of strategic management at Carleton University’s Sprott School of Business.
“As time goes on, we’re going to see firms that are oriented toward providing solutions for those customer demands for sustainable products and services in order to survive,” he says.
“So companies that are not green that attempt to tap into that demand through greenwashing are not providing the solution that they claim to be, and can damage the trend in terms of turning off consumers from the from the potentially very valuable solutions as consumers feel like they’ve been hoodwinked.”
Greenwashing presents itself in many forms, ranging in severity. In its most frightening form, it blurs the lines between dishonesty and fraud.
“We could separate the critical literature into two main areas of critique,” adds Katz-Rosene. “One is looking at actual material fraud, or material deception, where companies might actually fudge numbers or hide things. Like a cover-up, where there’s actual, material change. And then there’s a critique at more of what you could call a subjective level that’s more about criticizing the language.”
He provides the example of a corporation being secretive about the extent of an oil spill’s damage as the former. While it’s more condemning, this type of deception is hard to prove unless you have access to the numbers — which oftentimes is a difficult task. The subjective level, meanwhile, is hard-pressed to find tangible proof of dishonesty.
With growing consumer demand for transparency when it comes to sustainability, corporations are having to find new ways to measure and present their green efforts.
Defining and measuring sustainability
Sustainability is defined as the ability or potential to support and uphold something over a long period of time. The most widely referenced definition is from the 1987 Brundtland Report; “sustainable development is one that satisfies the needs of the present without adversely affecting the conditions for future generations.”
However, ‘sustainability’ is an ambiguous term, carrying different meanings depending on certain contexts. Corporate sustainability is just one of multiple subsections that can be further divided into the pillars of social, environmental, and economic sustainability.
Katz-Rosene believes that the context surrounding the environmental impacts of an entity is crucial.
“When we’re talking about sustainability, what are the underlying political dynamics, the social dynamics, the economic dynamics? So something that might on the surface seem ‘sustainable’ because it produces less greenhouse gases per unit of x, when you dig into it, the story is much more complicated.”
Developing criteria that define and regulate sustainability and its practices prevent any misconceptions or deceit that may be associated with the term, along with greenwashing.
There are various contrasting types of standards that each serve different functions and measure unique accomplishments. Kate Ruff, a professor at the Sprott School of Business, went into accounting with the intention of using it as a tool to measure corporate social reporting from a systems perspective.
“It’s about corporations having the most minimal environmental track record or legal standards or product safety standards,” she explains. “It’s about doing enough to be acceptable according to our global norms now, rather than changing the world for the better.”
She contends that a large number of corporations are actually doing just that — changing the world for the better. But while that’s important, what’s perhaps more important is that the corporate world no longer accepts subpar sustainability levels. World-changing is great, but a widespread culture of simply not making it worse could be even more impactful.
To prevent greenwashing and other methods of sustainable dishonesty, there are several organizations that are dedicated to identifying and certifying businesses in environmentally-conscious practices and efforts. Those include B Corp, Iris+, the Global Recording Initiative (GRI) and the Global Impact Investors Network (GIIN).
There is no singular set of criteria for determining sustainability — a variety of certifications exist within the overarching objective of environmental preservation. However, some argue that a few of these methods don’t make a large enough impact on the end result.
It’s not easy being green
There are several organizations that are hesitant to adopt sustainable policies and practices due to fears of high estimated costs or short-term, ineffective results.
However, in an article by Harvard Business Review, authors Tensie Whelan and Carly Fink state that the myths of sustainable or eco-friendly business models and certifications being too costly having no long-term benefit have been busted.
According to the article, Michel Porter and Mark Kramer’s idea of “creating shared value” helps disprove criticisms. They argued that businesses can generate economic value by identifying and addressing social problems that intersect with their business.
But Callery asserts that conflicts are a possibility when corporations adjust their structure to go green, especially because it means consumers have to change their existing habits.
“Consumers are sometimes frustrated by a lack of availability of the types of products or opportunities available because of the nature of culturally, or socially, or civically ingrained institutions and infrastructure. So it’s very difficult for companies to extract themselves from the corporate structure.”
For Katz-Rosene, it all comes back to context. He provides the example of current efforts to make aviation more sustainable, which are understandably centred on making aircraft more fuel-efficient.
“Generally speaking, if you make aircraft more fuel-efficient you can reduce the impact,” he says. “But again, what’s the big picture? Are more people flying? Does a reduction in fuel costs make flying cheaper which increases demand?”
It’s called the Jevons Paradox, and there’s a pattern of similar phenomena throughout the history of sustainable innovation, tracing all the way back to the industrial revolution. It’s a perfect illustration of the importance of context in discussions of sustainability.
Although many businesses and organizations are disingenuous with their displays of sustainability, that doesn’t mean all hope is lost for real change. Many of these entities have the potential and resources to become trailblazers.
Consumers are becoming increasingly more informed and cautious when it comes to the sources and production of the goods they buy. More research is being conducted into the environmental ethics of these organizations, and lobbying always pushes them to do better.
Ruff points to an Ottawa business, Eco Equitable, that’s working to make a profit as well as a change.
“They have what’s called a triple bottom line, so they’re interested in making a profit but also making social improvements,” she says. “They train newcomer women how to sew, and then the things they sew are recycled fabric, such as the flags that are often strung up down the street for a particular fair or event, and they turn them into to really cool things, like yoga mats. So you’re removing fibre from the landfill, you’re training newcomers in a useful skill, and you’re giving them employment.”
Callery cites popular clothing brand Patagonia as another sustainable frontrunner.
“I would argue that another really important area is companies that are taking steps to influence patterns of consumption amongst consumers,” he says. “So looking to develop more sustainable versions of products that consumers take every day, and also helping change the consumer culture. I’ll give you the example of Patagonia, they make outdoor clothing but they instilled the sustainability values throughout the whole company culture. They’re providing opportunities to reduce the overall environmental impact of the whole value chain of that company.”
There has also been a structural shift in focus, from prioritizing investors and shareholders towards prioritizing the interests of consumers.
“The idea that a corporation exists for its shareholders has shifted to the idea that a corporation exists for its stakeholders,” adds Ruff. “So that’s a customer, the community a corporation operates in, and its employees.”
Thanks to this change, more corporate entities have been more social and environmentally conscious of their practices. She cites BlackRock as a notable example of this phenomenon.
Managing more than US$6 trillion, BlackRock is the world’s largest investor, and it is demanding that public company giants make sufficient contributions towards sustainability. In 2018, they announced that they would only be investing in companies that are both profitable and actively contributing to society.
This is a huge wake-up call for corporate entities: The New York Times called it a “watershed moment on Wall Street.”
Corporate sustainability is a double-sided coin. Greenwashing is unlikely to disappear any time soon. However as consumer demand grows, and leading corporations like BlackRock continue to pressure the corporate world into meeting higher sustainability standards, it seems there is a reason to hope for greener capitalism in a not-so-distant future.