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Brain circuits

How to identify greenwashing

Published 13 July 2021 in Brain circuits • 9 min read

It seems everyone is talking the talk on sustainability these days, but are they walking the walk? Some companies actually spend more resources on looking green than their actual environmental footprint. There are things you can look for to identify greenwashing in your clients and maybe it’s worth examining your own company to ensure you aren’t unintentionally failing in your commitment to sustainable action.

If we cannot trust the announcements made about sustainability, we cannot undertake the two central tasks of assessing any company: (1) how does it compare to competitors, and (2) is it improving over time? Here is a checklist of questions you can ask and things you can look for to discern whether a company is true to its stated green commitment:

  • Does the CEO have a strong record on sustainability? If not a clear track record, does the leadership talk about their sustainable initiatives in higher-level strategies and white papers? If the CEO isn’t leading the charge on this, it is unlikely employees will follow.
  • Does the company’s purpose encompass long-term sustainable goals? If the company’s purpose isn’t crafted around sustainable objectives, it is unlikely the firm will be moving towards a greener future. There should be a willingness to transform the business model if necessary.
  • Has the company integrated its sustainability and strategy functions? Sustainability goals should be embedded into every facet of the firm’s operation to have a credible outcome. A good example can be seen in Schneider Electric, where the Chief Sustainability Officer is also the Chief Strategy Officer. Another option is to elevate the Chief Sustainability Officer to an Executive Committee Function.
  • What is their historical performance? Has the company done what they committed to in the past? Have they delivered also what is difficult?
  • Do they systemically track the key non-financial data such as CO2 emissions?
  • Do their bonus systems to key managers include a sustainability component to incentivize progress?
  • Do they publish their operational measures into ESG reporting and evaluations for scrutiny by potential investors?

After making sure your own company can answer these questions, start looking at your partners and vendors. This will become even more important as you move forward with your green goals.

Authors

Knut Hanaaes - IMD Professor

Knut Haanaes

Lundin Chair Professor of Sustainability at IMD

He was until recently the Dean of the Global Leadership Institute at the World Economic Forum. At IMD he teaches in many of the key programs, including the MBA, EMBA and other executive programs. He is Program Co-Director of the Leading Sustainable Business Transformation program. His research interests are related to strategy, digital transformation and sustainability.

Frédéric Dalsace

Professor of Marketing and Strategy at IMD

Prior to IMD, he spent 16 years as a Professor at HEC Paris, where he held the Social Business / Enterprise and Poverty Chair presided by Nobel Laureate Prof. Muhammad Yunus. Prior to his academic life, Frédéric accumulated more than 10 years of experience in the business world, both with industrial companies (Michelin and CarnaudMetalbox), and as a strategy consultant with McKinsey & Company. He is Co-Program Director of the Leading Customer – Centric Strategies program.

James Henderson

James Henderson

Professor of Strategic Management at IMD

James E. Henderson is Professor of Strategic Management at IMD. Prior to joining IMD, he was an Associate Professor of Strategic Management at Babson College and Babson School of Executive Education, based in Boston, MA. He is Program Co-director of the Leading Sustainable Business Transformation program.

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