- [Narrator] Sustainable, eco-conscious,
made from recycled materials.
Companies are using phrases like these
more and more frequently today.
Sales of consumer packaged goods advertising sustainability
in North America rose by over 30% in just five years,
reaching an estimated $268.9 billion in 2022.
And more than 60% of consumers say they'd pay more
for a product with sustainable packaging.
But underneath the flashy buzzwords,
companies can fall short of their eco-friendly promises.
Environmental activists say an ongoing legal battle with H&M
might highlight a big company's alleged greenwashing.
That's when companies mislead consumers with promises
of being more eco-friendly than they actually are.
In 2022, a class action lawsuit claimed
that the clothing retailer's Conscious Choice collection
advertised itself as sustainable,
but it was actually not made from sustainable
and environmentally friendly materials.
The case is still ongoing,
and H&M says it's taking these allegations very seriously,
is looking into them thoroughly,
and that its sustainability work
has never been about greenwashing.
Here's how a lack of transparency with consumers,
long timelines, and weak environmental goals
can all be signals of greenwashing.
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Greenwashing is when a company or organization
uses misleading advertising to market itself
as more environmentally friendly than it really is.
Sustainable ESG funds or investments
that consider environmental, social,
and corporate governance factors
have exploded over the past decade,
exceeding $350 billion in net assets in 2021.
- It's becoming increasingly profitable
for companies to be seen
as being beneficial to the environment.
Consumers are increasingly demanding sustainable products.
Investors want to invest in companies
that have lower carbon footprints.
- [Narrator] So why do people criticize greenwashing?
- When you buy from a company that is engaging
in greenwashing practices, you are encouraging
that behavior to continue.
Other companies will take note.
- [Narrator] Some companies say their sustainability efforts
are better than doing nothing, but critics would argue
greenwashing involves weak goals,
lack of transparency with consumers, and long timelines.
Take one common corporate environmental promise:
reducing carbon emissions.
One way companies say they reduce their emissions
is by purchasing carbon offsets.
A carbon offset is an action or activity
that balances the emission of carbon dioxide
or other greenhouse gases into the atmosphere.
It's a buyable, sellable, and tradable commodity.
In theory, when a company buys a carbon offset,
it finances an action that removes greenhouse gas emissions
from the air, like planting trees,
or building renewable energy projects.
This is supposed to balance the overall amount
of carbon dioxide a company puts into the atmosphere.
- Carbon offsets and carbon credits
have become an incredibly controversial mechanism
in the fight against climate change.
And activists and environmentalists claim,
and our reporting shows,
many of these projects are generating credits,
too many credits and not really reducing
or removing emissions that companies are paying for.
- [Narrator] Critics say carbon offset goals are weak,
and that companies aren't transparent with consumers
about how they'll achieve them.
While companies can claim they're putting money
towards carbon offsets, the offset's environmental impact
isn't always clear to consumers.
Plus, activists say companies have decades-long timelines
to reach their goals.
A company can promise to achieve zero emissions by 2050,
but if it doesn't have intermediary goals,
it's unclear when it will actually start reducing emissions.
And time is essential for reducing greenhouse gas emissions.
That's because the United Nations Paris Agreement
calls for global emissions to be reduced by 45% by 2030
in order to keep global temperatures from rising
by no more than 1.5 degrees Celsius.
So who is policing greenwashing companies?
- When a company does engage in greenwashing,
the negative outcomes for them are quite limited.
In the worst case, it might be a fine at this point.
- [Narrator] In 2022, Goldman Sachs's asset management arm
paid millions after violating SEC compliance rules
with ESG fund marketing.
Goldman neither admitted nor denied the SEC'S allegations,
but there's increased efforts by governments
to start cracking down on greenwashing companies.
In March, the European Union ruled out a series
of proposals, which would require companies
to back up their products' environmental claims
with scientific evidence.
These claims would then need to be independently verified.
This is part of a larger effort to make it easier
for consumers to choose sustainable products.
There are roughly 450 million people in the European Union.
Regulations adopted there often lead
to larger changes globally
since multinational companies prefer not to work
with different sets of rules around the world,
and there's movement in the US as well.
The Federal Trade Commission is discussing rules
that would regulate environmental marketing claims.
It also wants to penalize companies
for each time a product uses deceptive language.
And the SEC is proposing new disclosure
and naming and requirements for ESG funds.
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