Sustainability is the development that meets the needs of the present without compromising the ability of future generations, ensuring a balance between economic growth, environmental stewardship, and social well-being.
Under this definition, it becomes essential for companies to apply a strategic approach to doing business, considering the impact they have on their surroundings and ensuring comprehensive and rigorous compliance with ESG (environmental, social, and governance) sustainability indicators. This is not only a good practice but also responds to the increasing demands and expectations of investors, regulators, and consumers, who increasingly value responsible, ethical, and transparent corporate management as a key to financial success.
However, we have already discussed companies that engage in or have engaged in practices that appear sustainable but are more about marketing than a genuine commitment to high standards of corporate responsibility. We are talking about greenwashing, which has become more common than expected, especially considering some companies’ eagerness to meet sustainability requirements by presenting a false image of the company and its products, without truly understanding the depth of what this entails.
Avoiding greenwashing is fundamental for maintaining the trust of stakeholders and promoting genuine sustainability.
How to Avoid Greenwashing
1. Leadership and commitment from Corporate Governance:
Strong governance (the ‘G’ in ESG) is a key and top-priority factor when developing a comprehensive sustainability strategy. It ensures the active involvement of company leaders and ensures that initiatives are developed from a strategic perspective with a long-term vision. Often, boards of directors and senior management fail to recognize the relevance of ESG-related risks, leading them to prioritize short-term actions that end up falling into the category of greenwashing. “Tone at the top” is a vital element in carrying out ethical, sustainable, and transparent practices. Corporate leaders must take their roles within the organization seriously, not only in decision-making and identifying ESG risks but also in communicating the company’s strategy and actions in this area, involving the entire operation toward a common goal. Companies with strong Governance (G) are in a more favorable position to support and execute their Environmental (E) and Social (S) practices effectively and coherently.
2. Promote a culture of corporate integrity:
Governance provides the framework to properly control and direct people, policies, and procedures within an organization to achieve its strategic objectives. It encompasses all actions that guide the company toward goal achievement by creating a culture rooted in responsibility, ethics, and transparency. It promotes core values such as diversity, equity, inclusion, and respect for human rights. Having a strong culture of integrity is the key to ensuring that an organization behaves ethically and avoids practices like greenwashing because it has values ingrained in the core of its business. This culture will guide its actions in support of the company’s success, involving one of its most important stakeholders: its internal audience. Building a culture of corporate integrity will require a collective effort promoted by top management, so that all employees are engaged with it and act in the common good rather than individual benefits. This will enable greater employee alignment with the business’s success, implementing defined sustainable practices where the focus is on how to achieve results rather than just the results themselves.
3. Monitor and measure sustainable actions:
Measuring ESG actions is directly in line with avoiding and preventing greenwashing. “What isn’t measured can’t be managed,” so without concrete and measurable data, making informed decisions and implementing effective improvements to advance real commitment to sustainability becomes difficult. Therefore, quantifying and qualifying the initiatives that companies are undertaking in the environmental, social, or economic aspects is crucial. Organizations should have experts responsible for executing, evaluating, and monitoring sustainability initiatives, setting clear objectives and goals, and measuring progress through data-driven management. This will help identify areas for improvement to adjust strategies and take corrective actions when necessary, ensuring that the initiatives and changes implemented are meaningful. Finally, it is essential for organizations to seek third-party certifications that validate the quality of their internal practices, allowing for comparisons with other companies, always focusing on continuous improvement.
In this way, we see how greenwashing affects corporate reputation through actions that are difficult to monitor, have short-term impacts, and are part of organizations that do not prioritize sustainability on their strategic agenda. Therefore, it is crucial to promote a genuine commitment to corporate sustainability, with leadership involved from Corporate Governance, promoting a culture of integrity, transparency, and continuous improvement through measurement and monitoring, where collective and long-term interests take precedence. Only then is it possible to avoid and prevent bad practices like greenwashing, which not only tarnish a company’s reputation but also lead them down a path that will never lead to success.