Greenwashing: A Problem facing modern day sustainability.
“Greenwashing” refers to corporate efforts to portray a false picture of sustainability in terms of the quality of their products and services in relation to how they affect the environment. It’s a play on the term “whitewash,” which refers to the altering of facts in order to convey an inaccurate and biased presentation of the product. Greenwashing by organisations and businesses has hindered our campaign against climate change in a variety of ways. A firm can double count carbon credits or do nothing to reduce its carbon footprint while spending millions of dollars promoting that it does.
ESG adoption is meant to bridge the gap between businesses and the environment. However, we find many funds and corporations utilize ESG mainly to appear concerned about the environment and attract funding, motivated by the fact that the ESG industry has recently seen a substantial increase. According to a recent analysis by influencemap, 71% of 593 examined ESG funds were unable to determine whether they were aligned with the Paris Agreement global targets. In the same assessment, it was discovered that more than half (55 percent) of 130 “climate-oriented” funds had negative Paris alignment scores.
Greenwashing affects the carbon credit market negatively.
In recent years, we’ve seen cases of multinational companies engaging in greenwashing. As large companies go unpunished, smaller businesses become emboldened in the dishonourable act of cheating our environment. An industry particularly impacted by greenwashing is the carbon credit markets. The carbon credit market suffers from transparency issues, as there is no universal criteria or standardisation procedure to vet carbon credits. We find that it is a market rife with greenwashing. Companies can falsely claim their products are environmentally friendly by purchasing unvetted, substandard carbon credits. In some cases, double counting a carbon credit.
The carbon credit system was developed to alleviate and possibly reverse the negative impact that companies and businesses have on the environment. The failure of the carbon credit sector places major pressure on the efforts of governments and individuals to combat climate change. This lack of consistency and transparency is hurting our planet far more than we realize.
Recently, there has been more discussion about possible solutions to the greenwashing problem. In several of these conversations, international bodies such as the UN and World Economic Forum have mentioned the viability of blockchain technology in reshaping the sustainability landscape. It can help reduce greenwashing and let customers have access to truly sustainable products and services.
Here’s what Blockchain technology can do to help end greenwashing.
Governments and organisations are attempting to improve the understanding of ESG by utilising technology. Blockchain technology provides transparency as well as immutable and dependable data storage. Lack of transparency appears to be a major cause of greenwashing because neither investors nor consumers have any way of verifying statements about how ecologically sustainable a product is. Blockchain technology has the potential to significantly improve business and product transparency.
Smart contracts have the ability to significantly reduce and eliminate greenwashing. Smart contracts can aid in the standardisation of ESG reporting. These contracts, if used effectively, have the potential to stop the double-counting of carbon credits. Here we look at smart contracts and how they may affect our future.
Greenwashing can help make sustainability a reality. Although the process for achieving this may be initially flawed, it is a step in the right direction, and it can prove effective as it constitutes small steps towards a more sustainability-aware society. The adoption of blockchain solutions can help hasten this process, as large organisations using blockchain technology can observe their processes and detect areas in which they can be more ecologically sustainable. Creating a new standard of transparency can result in a mass migration of competitors, which can contribute to higher adoption of blockchain technology among ESG-focused enterprise businesses and organisations.
