Definition and Overview

Greenwashing (Green Sheen)

The practice of misleading consumers by falsely marketing products, policies, or corporate behaviors as environmentally responsible or sustainable.

Definition & Origin

“Greenwashing” refers to the strategic use of deceptive environmental messaging to appeal to sustainability-minded stakeholders, without meaningful environmental performance to support those claims.

The term was coined by environmentalist Jay Westerveld in 1986, in an essay critiquing the hospitality industry's habit of encouraging guests to reuse towels to "save the planet" while continuing to waste vast amounts of energy and water elsewhere. His critique highlighted how environmental concern was being exploited to cut operational costs and boost brand image, without systemic environmental reform.

Why Greenwashing Matters

Greenwashing undermines public trust, misguides consumer behavior, and distorts ESG markets. It allows companies to extract brand equity and investor capital under false pretenses, without committing to genuine sustainability.

As ESG disclosures and sustainability-linked investments grow, so do incentives to exaggerate, misrepresent, or fabricate environmental credentials.

  • Consumer deception: Misleads environmentally conscious consumers, diverting purchasing power from truly sustainable alternatives.
  • ESG dilution: Pollutes ESG datasets and undermines the credibility of sustainability reporting.
  • Reputational risk: Once exposed, greenwashing can cause long-term brand damage, shareholder backlash, and regulatory fines.
  • Regulatory exposure: False claims may trigger lawsuits, penalties, and compliance reviews—especially in jurisdictions tightening ESG oversight.

The Seven Sins of Greenwashing

Identified by TerraChoice Environmental Marketing, these are the most common tactics used to manipulate sustainability claims:

  1. Hidden Trade-off

    2. Promoting one "green" attribute (e.g., recycled packaging) while ignoring more harmful impacts (e.g., carbon-intensive manufacturing).

  2. No Proof

    3. Making environmental claims without credible third-party verification or public data.

  3. Vagueness

    4. Using broad, undefined language like “eco-friendly,” “green,” or “sustainable” with no concrete context or criteria.

  4. Worshiping False Labels

    5. Mimicking third-party certification marks or inventing fake ones to suggest independent endorsement.

  5. Irrelevance

    6. Claiming environmental benefits that are technically true but meaningless—such as “CFC-free” (CFCs are banned by law).

  6. Lesser of Two Evils

    7. Marketing a harmful product (e.g., “organic cigarettes”) as greener compared to worse alternatives.

  7. Fibbing

    8. Making blatantly false environmental claims, often subject to legal action.

Greenwashing undermines ESG integrity by inflating scores, corrupting benchmarks, and creating mispriced risk. Investors relying on ESG ratings, frameworks, and disclosures must increase their scrutiny of sustainability claims, engage in active due diligence, and demand data transparency from companies.

Greenwashing vs. Genuine ESG Strategy

Genuine ESG leaders:

  • Disclose full-scope emissions
  • Use verified standards like GRI, TCFD, or ISSB
  • Publish science-based climate targets
  • Invest in decarbonization and biodiversity restoration
  • Provide measurable, third-party reviewed results