Green is not always clean: Rising tide of greenwash brings risks for investors

Some companies have long sought to mislead the public about their commitments to sustainability, but greenwashing has become more widespread and sophisticated in recent years. Now, regulators and investors are fighting back.

The term “greenwashing” was coined in 1986 by American environmentalist Jay Westerveld, after a visit to a tropical resort. The hotel left notes in guest rooms asking them to “help us help the environment” by re-using towels, even as it was building new tourist bungalows over threatened coral reefs.

Greenwashing comes in a variety of shades. In 2010, the consultancy TerraChoice conducted a study of US retail companies, identifying “seven deadly sins” of green marketing. These included a lack of evidence for green claims; vagueness; irrelevance; outright lies; exaggerations; hidden trade-offs; and the “lesser of two evils” argument, which sees companies argue for the environmental benefits of fundamentally polluting products, such as cigarettes or crude oil.

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