It’s not often that we cover the same topic back to back in our articles, however just as we published our latest thought piece on ESG greenwashing, we were dismayed to read in The Times that HSBC invested so called “sustainable bonds” in fossil fuels and other unsustainable practices.
For those who can not access the article behind the pay wall, City A.M. reports that “HSBC has allegdely pumped billions of follars into fossil fuels, deforestation and air travela and labelled it “sustainable finance”. The mind boggles.
While HSBC has commmited to contribute up to $1 trillion in sustainable finance and investment by 2030, one can not help but wonder how this made up part of their pathway towards sustainable finance. But then of course we are talking about an industry which is still supporting fossiel fuels to the tune of billions.
With the industry now awash with greenwashing fears, it certainly feels as though trust in ESG funds is at an all time low. The world is now in a heightened state of alert over ESG greenwashing – the practice of marketing products or services as environmentally friendly when they are not. It is anyone’s guess why any company would try and greenwash when the risk of getting caught and the reputational risk involved is astronomic.
So why are we still seeing companies greenwashing when it is such a damaging practice? According to The New York Times, the ‘green’ movement has become synonymous with corporate greed and social responsibility has taken a backseat to profit. Essentially, companies are taking advantage of people’s good intentions to deceive and exploit the planet.
The HSBC bond debacle is a classic case of companies using ‘ESG’ as a marketing tool, highlights how their products or services benefit the environment. They use this term to convince consumers that their products are environmentally friendly without alienating them with too much technical information. This is precisely what has been the case in the investment community, many of whom just do not have the data or technical knowledge to know whether a “sustainable bond” really is what it says it is – sustainable. This is why it’s absolutely vital we have the data to hold companies accountable – which is where our work at Permutable fits into the picture.
This conundrum is not just confined to the financial sector – but sadly is mirrored across every other sector too. Companies often claim to be eco-friendly but are actually just greenwashing their image. This may be a company shouting loud about how their product is carbon neutral because in reality all they have done is purchase low value carbon offsets or planted trees in the wrong place where they will probably die after a year or so. This kind of activity must stop.
Another examples is Starbucks who promoted its waste recycling program by donating coffee beans to local restaurants instead of paying for trash removal. This allowed them to appear eco-friendly while avoiding alienating costumers with an unpleasant task. However, this creative marketing tactic comes at a cost; deceiving customers leads to poor business decisions that negatively affect the environment.
Honest green companies offer technical explanations backed by robust data and strategies of how their actions benefit the environment without alienating customers. However, dishonest green companies use these explanations as a way to deceive consumers into believing their products are eco-friendly. For example, Nike uses ‘green’ as an adjective in their marketing material; they call themselves ‘green marketers’. But they are using this term in an intentionally deceptive way. It allows them to claim their shoes are green without alienating potential customers who don’t understand what they mean.
People have started to distinguish between honest and dishonest green companies- but there is still much work to be done in this area. Companies and their stakeholders must understand what ‘green’ means to their target audience if they want to convey ethical practices without alienating customers. They need to lead from the front and stop waiting for others to set an example.
There is also much work needed in educating consumers about the harms caused by greenwashing practices so we can hold companies to account, protect our environment and our way of life at the same time.