The Dirt on Greenwashing

Last month, Amazon founded The Climate Pledge, an environmental initiative to achieve carbon neutrality by 2040. In doing so, it noted that signatories were committing to meeting the Paris Agreement goals a decade ahead of its 2050 deadline. Amazon’s customers probably loved it; according to a Nielsen survey, more than 80% of consumers think companies should help the environment.

But when it comes to corporate environmental bragging, things aren’t always as they appear. According to the conservative Energy & Environment Legal Institute, for instance, Amazon’s announcement of The Climate Pledge was less than truthful. The nonprofit group, which promotes “free market environmentalism,” asked the SEC earlier this month to take action against Amazon for “making materially false and misleading claims and statements related to global climate change” in its press release launching The Climate Pledge.

In the Institute’s letter, director Steve Milloy raised a touchy subject in the environmental, social and governance (ESG) space for public companies. He accused Amazon of a cynical effort “to polish its public image,” and went on to say: “A charitable term for this is ‘greenwashing.’”

Generally speaking, greenwashing refers to companies touting token sustainability programs in lieu of taking meaningful action to address the environmental harm caused by their businesses. As pressure builds on companies to clean up their environmental acts, you can count on environmental advocates invoking the term more often. Examples appear to abound. Jennifer Skene of the National Resources Defense Counsel points to Proctor & Gamble boasting of its commitment to reducing annual emissions by 50%, while obscuring the fact that the particular emissions it plans to reduce (so-called “scope 1 and 2” emissions), account for just two percent of its total. The five largest fossil fuel companies spent $195 million on ads talking about addressing climate change, while shelling out $200 million to block government action on it.

Greenwashing allegations won’t be limited to just the companies themselves. Major institutional investors have talked a big game about wanting to see companies operating with a greater sense of social responsibility. It doesn’t go unnoticed when their proxy voting records on shareholder proposals don’t match up with their rhetoric.

Of course, there’s no guarantee that critics charging “greenwashing” will have entirely clean hands themselves. The Energy & Environment Legal Institute’s (EELI) objections to Amazon’s announcement of The Climate Pledge could be viewed as semantic in nature. The organization’s first argument as to why the SEC should sanction Amazon, for instance, is based on the headline of Amazon’s press release, which announced a “commitment to meet” the Paris Agreement. “Amazon cannot ‘meet’ the Paris Agreement,” the EELI argued, “because it is not a party to it.” Amazon likely intended to communicate, simply that it will meet the agreement’s guidelines.

Similarly, the EELI took issue with the fact that Amazon pledged to “make a difference” on climate change, when Amazon’s 44 million tons of annual carbon emissions are not substantial enough to make a difference, even if eliminated entirely. Here, Amazon almost certainly intended to communicate that it will do its part, rather than make an actual tangible difference in the worldwide reduction of carbon emissions.

The SEC will have to judge for itself whether those feel like good-faith arguments, and if so, what to do about them. Regardless, it’s clear that “greenwashing” is an important concept to be aware of, in order to properly assess issuers’ public commitments to the environment.

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