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Men in Suits
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Why is greenwashing detrimental to my company?

Greenwashing is nearly as ancient as climate action. People have been attempting to capitalize on the benefits of green business for as long as it has existed. It is now or never for corporations involved in greenwashing. Consumers are aware of it, governments are determined to prevent it, and investors are averse to it.

In a nutshell, don't greenwash; you'll get caught. Here are the specifics:

To begin, what exactly is greenwashing?

It is the modification or marketing of advertising efforts to make a product appear more ecologically friendly than it is - if it is environmentally friendly at all.

How do businesses do it?

Culprits employ a variety of strategies, including:

Leaving out a "trade-off" when saying that a product is environmentally favorable.

Making statements without providing evidence.

Keeping things ambiguous in the hopes that no one will challenge them.

Making positive claims that are unrelated to combating climate change and simply lying.

Companies can greenwash without realizing it, for example, if they haven't thoroughly examined a product's carbon footprint.

Why is greenwashing detrimental to my company?

Penalties are a broad term that encompasses far more than you might expect. While you may initially think of financial consequences, the full breadth of the matter may extend beyond that if you do not address it properly.

You will be fined. Leading global governments are taking greenwashing seriously enough to enact new legislation that allows for punishment for any corporation caught practicing it.

For example, while fines for greenwashing have been discussed for some time in the EU and the UK, both governments are increasingly determined to make them a reality, charging the same rate as any other infringement of consumer law. In the United Kingdom, it has been suggested that firms face penalties of 10% of their global revenue.

The danger of such sanctions was previously muffled by interminable standards, red tape, and general uncertainty. But, that wiggle area is fast decreasing, and firms that continue to profit from the climate disaster will pay the price. You will lose investment and maybe value.

Other challenges may come and go on investors' priority lists, but green ambitions will still be there in 2023. Several media sites, including Forbes, Investopedia, and Morgan Stanley, have already confirmed it.

As a result, any finding that your company has been greenwashing would almost certainly result in you losing favor with some of those critical investors. This type of problem can grow when prominent backers mistrust your organization of being untrustworthy, insensitive, and uninterested in modern commercial concerns.

You run the possibility of a public relations disaster.

When it gets out of hand, the reputational risk becomes a serious issue, and make no mistake: it only takes one revelation or accusation to get things started. Once launched, reputational hazards can seriously harm a company's reputation in a matter of days. Cleaning up this kind of mess costs money and requires extensive damage control, which is difficult when you're also losing sales and facing shareholder pressure.

Everything is on the board.

While greenwashing is a marketing/advertising trend, corporate executives bear ultimate accountability for it. The board of directors, which is in place to act in the best interests of shareholders, should be aware of the risks that greenwashing poses and have protections in place to prevent it from occurring. It's more critical than ever to get this properly.

Our Directors’ Institute- World council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.

Our ESG Expert certification will help you to amplify your understanding of corporate governance in a detailed manner paving a way for you to become a globally recognized ESG leader.

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