The title of this post may seem alarmist, but it’s for good reason as we’ll see in a moment. Which before we can get to that - for the uninitiated: greenwashing is any false or misleading claim made by a company to bolster their eco and green bona fides with consumers. As one may suspect - false and misleading claims are nothing new to crowdfunding; but in regard to crowdfunding sustainability campaigns – it poses a particularly pernicious challenge for the following reasons: first, as shown by this 2016 study, the use of greenwashing correlates positively with funds raised. The second, also shown by that study, entrepreneurs that deploy this technique are more likely to take a hit to their long term brand image. And lastly, until recently the topic had gone largely ignored until this landmark study, published in May 2020, became the first on the subject - showing that nearly 3 in 4 of the campaigns studied were of medium to high risk of greenwashing. That alarmingly high finding brings us to the purpose of this post: to raise the profile of greenwashing in crowdfunding, offer an abridged analysis largely borrowed from the above sources, and provide tips for spotting greenwashing in practice in order to mitigate the risk it poses to campaigners and backers alike. Greenwashing poses a long-term risk not just to the entrepreneurs that launch these campaigns, but also to the global movement away from fossil fuels.
Signatories to the Paris Climate Accords have earmarked funds largely for the biggest corporations. This development has left many fearing a vacuum of resources for smaller, bootstrapped entrepreneurs who are pursuing innovative solutions to assist in this moment of crisis. In turn – these boxed out and bootstrapped entrepreneurs will be increasingly facing competition for financing in traditional avenues like banks, and in turn - it's highly likely that these entrepreneurs will see crowdfunding, which has long been heralded as the default go-to-market strategy of businesses of all stripes, as an attractive option for alternative financing. Keeping with this line of thought - its not unreasonable to foresee campaigners turning to greenwashing to raise more funds with backers; who, according to this Ipsos poll, are highly motivated by believing their behavior makes an environmental difference.
Given the above, as well as the fact that campaigns who engage in greenwashing are likely to take a hit to their brand in the event the project doesn’t live up to its green billing, or, worse, goes undelivered – will likely result in backers losing confidence in crowdfunded green tech and sustainability campaigns. This likelihood has ramifications that extend far beyond crowdfunding, and if left unchecked - greenwashing has the potential to subvert the sustainability movement at large, just as it begins to get off the ground in earnest.
Allow one to be unequivocal here – the only answer to greenwashing is government regulation. Without enacted regulation – platforms should exercise an abundance of caution to combat this scourge which has existential implications for humanity. Until then – campaigners and backers alike should be cognizant of the following tips, described as 'sins' from the source below, to put the kibosh on greenwash.
Sin of the Hidden Trade-Off
A claim suggesting that a product is green based on a narrow set of attributes without attention to other important environmental issues. Paper, for example, is not necessarily environmentally preferable because it comes from a sustainably harvested forest. Other examples are facial tissues or toilet tissue products that claim various percentages of post-consumer recycled content without providing evidence.
Sin of No Proof
An environmental claim not substantiated by easily accessible supporting information or by a reliable third-party certification.
Sin of Vagueness
A claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the consumer. All natural is an example. Arsenic, uranium, mercury ... are all naturally occurring, and poisonous. All natural isn't necessarily green.
Sin of Worshipping False Labels
A product that, through either words or images, gives the impression of third-party endorsement where no such endorsement exists; fake labels in other words.
Sin of Irrelevance
An environmental claim that may be truthful but is unimportant or unhelpful for consumers seeking environmentally preferable products. CFC-free is a common example, since it's a frequent claim despite the fact that CFC are banned by the Montreal Protocol.
Sin of Lesser of Two Evils
A claim that may be true within the product category but that risks distracting the consumer from the greater environmental impacts of the category as a whole. Examples include: organic cigarettes or fuel-efficient SUVs
Sin of Fibbing
Environmental claims that are simply false. Common examples are products falsely claiming to be ENERGY STAR certified or registered.
Source: TerraChoice, now UL