The Threat of Greenwashing and the Need for Substantive Regulation

Since the 1980s, corporations have recognized the market response to environmentally friendly and sustainable products. Consumer response led to a modern wave of companies advertising their products as “sustainable” often with little regard for the substance of these claims. This became known as “greenwashing”: the practice of making unwarranted or overblown claims of sustainability and environmental friendliness to gain market share (Dahl 2010). Over the past few years, a growing form of greenwashing has been through carbon offset and net-zero commitments by corporations who are financing renewable energy projects (Black 2021). Not only are most of these claims unsubstantiated, but the rapid expansion of corporate-financed projects in developing countries has led to unethical treatment of local communities and harm to the livelihood of already impoverished peoples (Black 2021; Huesca-Perez 2016). When erected without consulting the people living near the site, renewable energy projects can disrupt agriculture, farming, and increase the price of basic goods without actually providing wealth to the community (Burnett 2016). This harm has eroded trust between citizens of developing countries and their own state governments as well as foreign investors, creating additional obstacles to renewable energy development. On the other side of such cases, companies then claim the carbon offset, “green” image, and American consumers remain unaware of the victims to these projects. Other examples of greenwashing include the Malaysia Palm Oil Council’s claim that palm farms “help our planet breathe”, despite being linked to deforestation and increased carbon emissions (Dahl 2010). Or Shell’s advertisements which claimed that oil drilling contributes to a “sustainable” future (Dahl 2010). Research suggests that consumers are responsive to these claims. They have better opinions towards environmentally friendly companies and are willing to pay more for “sustainable” products (CGS 2020). As a result, greenwashing leads citizens to make choices which harm the environment more than they realize. With clear scientific consensus that the U.S. must reduce its emissions, the effects of greenwashing are deceptive and harmful to climate progress. Current policy is incapable of effectively preventing false environmental marketing, and a stronger regulatory framework must be put in place if the U.S. is to effectively hold corporations accountable and allow citizens to make informed decisions.

Recognizing the growth, and potential harm of unregulated environmental marketing, a task force of attorneys general put together the Green Report in the 1980s, calling for the federal regulation of these advertisements. In response, the Federal Trade Commission (FTC) released the FTC Guidelines for the Use of Environmental Marketing Claims, known as the “Green Guides’’. Which outline the use of terms such as “recyclable” and “biodegradable” (Federal Trade Commission, 2020). Updated most recently in 2012, the Green Guides remain the most significant policy framework for environmental marketing in the U.S. Yet, these guidelines are not federally enforced or binding. Instead, the guard against false environmental advertising has been reliant on state regulations. Subsequently, the practice of greenwashing has continued to grow in the U.S. and the American public continues to be misled by false environmental claims (Dahl 2020; CGS 2020).

The Green Guides set standards and best practices for some environmental claims, but lack enough depth and an enforcement mechanism to prevent harm. For example, the Green Guides define biodegradable products as those which would fully decompose within one year of usual disposal (Green Guides 2019). However, since the 2012 update, studies suggest that lifecycle carbon costs of biodegradable plastics can often exceed any benefit they offer. Producing biodegradable plastics can sometimes be more carbon intensive than normal plastic production, and most still require industrial recycling processes in order to fully break down (Oakes 2019). Consequently, the actual benefit of a biodegradable product may not be as large as consumers are led to believe thanks to the outdated standards of the Green Guides. Additionally, the modern focus on reducing carbon emissions has led many companies to adopt bold claims of becoming carbon neutral and net-zero.

One report found that over 400 of the world’s largest 2,000 companies have made net-zero emissions commitments. However, the quality of these claims varies widely, with only 20% meeting the UN’s minimum standards for effective net-zero commitments. Most proposals lack necessary details of how the corporation would use offsets, meet interim goals, and fail to provide long-term plans (Black 2021). Combined with the mounting pressure for corporations to “green” their image, this has led many companies to finance sustainability projects. Particularly, renewable energy projects are being rapidly put together in developing countries to offset corporate carbon emissions. However, these often come at the expense of local communities. These projects are frequently done without consulting the people living on the project site. This has led to the seizure of land and destruction of crop lands, and fishing grounds, harming the livelihood of local populations. In some cases, these projects have led to violence against the communities hosting the renewable energy sites such as those on Mexico’s Isthmus of Tehauntepec. Here, local activists were murdered, beaten, threatened and arrested for opposing wind and hydroelectric megaprojects which would be imposed on their crop land and fishing grounds (Lakhani 2020; Bloomer 2018; Martinez-Mendoza 2021; USAID 2019). Even when complete, only a small percentage of profit goes to the community, and oftentimes no substantive benefits are received for the lost food production and land (Burnett 2021; Martinez-Mendoza 2021). The result is that the communities already predicted to face the worst consequences of climate change are left without the means to bear the additional health risks and food scarcity (Kasotia). This problem is not limited to the communities already affected by renewable projects.

The Green Guides may serve as a starting point, but they are not strong enough, precise enough, or broad enough to protect consumers and our environment. In order to ethically meet its climate objectives, the U.S. needs more robust environmental marketing regulation, and better policies for foreign investment of renewable energy projects. To accomplish this, a national framework should be developed under the FTC and EPA, building off their partnership over the Green Guides. This new regulation must go further than the Guides to create enforceable, uniform standards for environmental terms like “net-zero,” “sustainably-sourced,” and “carbon-free.” Additionally, wiih nearly a decade since the last updates, the new policy should also address updated scientific consensus around terms like “biodegradable,” “bioplastics,” and other materials which may actually do more harm than good (Feinstein 2013). A new framework should also reflect a broader view of how companies use claims and what they include in them. This kind of policy already exists in other parts of the world, such as under the United Kingdom’s Green Claims Code. This regulatory framework requires corporate claims to not omit relevant information and to consider the full lifecycle of the product (Competition and Markets Authority 2021). New regulation should also address how companies go about backing up their claims of carbon offsets and net-zero emissions. Unless renewable energy infrastructure is developed ethically, community opposition will only increase. This will create unnecessary obstacles to renewable energy development.

The FTC has announced it will review the Green Guides in 2022, a process which could take years to complete before updates are made (Regulatory Review Schedule 2021). This may be the most important opportunity to update regulations of environmental marketing, and bring attention to the harm of greenwashing. However, until these guidelines become enforceable, federal law, they will remain insufficient. And rather than relying on the Green Guides, it is time to pass substantive marketing regulation to protect consumers and prevent greenwashing from slowing climate action.

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