In today’s environmentally-conscious world, communicating a corporate message of sustainability can be incredibly beneficial to a brand. While a company should communicate its notable progress toward sustainability, it should be mindful of “greenwashing.” In our last couple posts, we have taken a look at specific instances of greenwashing here and here. Today we hope to give more examples and the define of greenwash.

Greenwash, as defined by the Oxford English Dictionary, is “disinformation disseminated by an organization, etc., so as to present an environmentally responsible public image.” The term greenwashing was coined by environmentalists to describe the deceitful efforts companies had undertaken to portray a good environmental image. Companies used to (and often still do) run ads after incidents like oil spills, plant explosions, or chemical dumping to appear environmentally conscious and reduce brand damage. The term originally was specific to these advertising efforts, but as companies have diversified efforts to appear environmentally virtuous, the definition of greenwashing has expanded. Now, everything from corporate reporting, distribution of educational information, and donations to non-profits or non-governmental organizations (NGOs) could be greenwashing. Nonetheless, the intent of greenwashing tactics for any of these activities is the same: to appear ecologically friendly.

Unfortunately, greenwash is in many ways a subjective term. People often cannot describe what a commercial containing greenwash looks like, but most know it when they see it. Websites like the Greenwashing Index, jointly promoted by EnviroMedia Social Marketing and The University of Oregon, allow users to upload, rate, and discuss the level of greenwash in each particular ad. Users can rate ads from one to five; one meaning they believe the ad is authentic, and five to denote that it’s “bogus.” Some examples users uploaded to the site include:

• Ortho ecosense Brand Outdoor Insect Killer–It says right on the bottle “not intended to imply environmental safety…” but the green spray nozzle, ecosense brand name, and green lettering on a nice light blue background sure do imply “green.”
• A print ad by Royal Dutch Shell showing flowers emanating from smoke stacks. This ad received an average rating of 4.6 from Greenwashing Index users. User ddickison of Charlston, South Carolina said, “Can’t read the fine print, but it’s difficult to imagine how any text can explain away the improbability of smokestacks emitting flowers.”
• A commercial for a Toyota Prius, which certainly evokes “feel good” emotions, is misleading in saying that the Prius is harmony between man, nature, and machine. Also misleading are the endless fields of flowers blooming and grass growing as the Prius drives by, as if to say that the car makes nature happy.  See for yourself:

Regardless of how guilty these companies are of greenwashing, the ads were selected by consumers as examples of greenwash. And in the end what really matters is whether or not the customer believes the company is being genuine. If an oil company spends a ridiculously small amount of money on developing renewable energy, but spends all its advertising budget on patting itself on the back, consumers are going to recognize that and add it to sites like the greenwashing index. A car company who puts a tremendous amount of money advertising its hybrid, but produces more pickup trucks in a month then hybrids in a year may not actually be the “greenest” car company on the planet. True green comes from actually being green, not just advertising green.

Most companies are getting “slightly less damaging to the environment” and “eco-friendly,” “green,” or “sustainable” confused. Many consumers are watching companies greenwash, and are beginning to respond negatively. Greenwashing can seriously damage a brand, and cause consumers to lose what little trust they have of companies. However, those who communicate a message of sustainability in a straightforward and effective manner are being rewarded. We’ll bring you more on the effects of greenwashing and why it’s so important next week. In the meantime, take a look at ads in your industry, and let us know if you spot vague or misleading claims.

While corporations have increasingly grown accustomed to examining the risks posed by climate change, these efforts have mainly been focused on energy and green house gases (GHG). Businesses, however, can no longer afford to overlook the additional risks of water scarcity and diminished water quality. To raise awareness about these risks and their effect on the bottom line, we’d like to go into details about the issues and then begin a dialog around the solutions.

The two key factors creating water scarcity are climate change and increased demand. Together they are applying previously unseen pressure on municipal, residential, and corporate water use.

climate change

Studies have shown an increase in the duration and intensity of droughts, as well as changes in precipitation patterns and snow pack caused by climate change.  Naturally, if we don’t have the rainfall and snow melt necessary to replenish our rivers and lakes, we will be forced to rely more on alternative sources such as groundwater. Unfortunately, rising sea levels threaten these freshwater reserves, especially along the eastern U.S. coast. An estimated 50 percent loss of freshwater supplies could occur in coastal communities from a combination of over pumping groundwater, growing population, and rising sea levels.

increased demand

Our water supply will be put under additional strain due to an increase in population and global demand. The U.S. Census Bureau forecasts global population climbing to 9 billion people by 2040, further fueling the need for water simply for food, sanitation and drinking. As populations expand and become wealthier, the demand for agriculture increases. As the leading water-consuming industry, agriculture currently accounts for 70 percent of the world’s annual freshwater consumption, and up to 90 percent in the developing world. Adding to the world’s water demand is the growing wealth of developing nations. As their wealth grows, their citizens increasingly prefer the taste of meat. Beef is a particularly sought after and surprisingly water intensive item. One pound of beef takes 1,500 gallons of water to produce, making it one of the most water intensive food products.

water scarcity and the risks to business

Many companies today have an understanding of their carbon footprint, but very few know their water footprint. Even fewer know the water footprint of their supply chain and take into consideration the potential risks posed by water scarcity. Think about all the points where your business requires water. Now, what would you do if you faced water shortages or even a complete lack of clean water? The potential risks for businesses fall into three main categories:

• Physical Risks
• Regulatory Risks
• Brand Equity Erosion

physical risks

There are several physical risks associated with water scarcity, including unexpected shortages, poor water quality, and balancing supply and demand. Products ranging from beverages to metals to silicon chips require tremendous amounts water. Intel and Texas Instruments used 11 billion gallons of purified water for the cleaning silicon wafers and cooling the equipment in 2007 alone. Most of that production took place in Asia where water scarcity is already a problem. A JPMorgan study estimated that a water-related shutdown of a silicon chip production facility could result in a loss of up to 200 million dollars per quarter.

Let’s use a hypothetical example. You run an apparel company, and the areas where the majority of the world’s cotton is grown are experiencing droughts; several problems may arise. The price of cotton could rise, the amount of cotton you can source may be limited, or your main source of cotton may no longer be available because farmers can’t plant their crop. What happens to your company if it can no longer find enough cotton, or to your profit margins if the price of cotton rises dramatically? Cotton as a crop is highly susceptible to water shortages and yet most of the production occurs in water scarce regions of the world: China, U.S. (primarily Texas and California), India, and Pakistan. If the governments in countries where cotton production occurs, decide they need the water for food production instead, your company will have suffered the next type of water related risk.

regulatory risks

Regulatory risks can occur anytime there is a greater public need for water and a particular sector is utilizing too much of the resource.  California has faced a record drought this year and Gov. Schwarzenegger has said that if companies in California don’t conserve water voluntarily, they could face mandatory rationing.  The drought in California could mean an economic loss of $3.5 billion in 2009 alone.  Los Angeles Mayor Antonio Villaraigosa said,”Water shortages are becoming permanent realities.” As a result, he has accelerated water use restrictions as part of a twenty-year water plan.

Half way around the world, Coca-Cola is struggling to maintain its water-rights contracts. In Kerala, India, both Coca-Cola and Pepsi Co temporarily lost their licenses to use groundwater at their bottling plants when the local wells and hand pumps went dry. The Central Ground Water Board of India found that not only was Coca-Cola extracting a tremendous amount of water, but they were also causing ecological imbalances. Coca-Cola maintains that they were not the cause of groundwater depletion. However, the local government in Kerala decided that appeasing its local citizenry was more important than the contract they had with the global beverage giants. Local outrage has been expressed in many communities with bottling plants, and has led many citizens to boycott Coca-Cola altogether, causing damage to the brand and sales.

brand equity erosion

Coca-Cola’s actions in India have caused them to lose not only water rights, but also the customers upon whom they rely.  In an attempt to avoid other water related incidents, Coca-Cola has embarked on an ambitious partnership with the WWF (World Wildlife Fund) to improve its water efficiency 20 percent by 2012, hopefully saving 50 billion liters of water. Coca-Cola is making strides to improve the sustainability of their supply chain and institute water stewardship programs, with over $20 million invested in the partnership so far, but damage to their reputation has been profound and expensive.

create an action plan

The economic incentives for companies to evaluate their water inputs and outputs are clear; the plan to mitigate water related risks is not.  Fortunately, Ceres and the Pacific Institute have authored a study on water scarcity and have recommended businesses take the following steps to create a corporate action plan for water:

1. Measure the company’s water footprint (i.e., water use and waste water discharge) throughout its value chain.
2. Assess the physical, regulatory and reputational risks associated with its water footprint, and seek to align findings with the company’s energy and climate risk assessments.
3. Engage key stakeholders (e.g., local communities, NGOs, government bodies, suppliers, employees) as a part of the water risk assessment, long-term planning, and implementation activities.
4. Integrate water issues into strategic business planning and governance.
5. Disclose and communicate water performance and associated risks.

Once a corporate action plan is in place, there are benefits from the newly gained knowledge beyond mitigating risk.  There are profits to be had in efficiency and innovation.  The tech titan IBM achieved savings of $3 million for a single production plant while increasing output by 33 percent.  They achieved this through a 27 percent reduction in water purchases, $1 million in savings from water treatment reduction, and $1.5 million in energy savings, without incurring any capital costs.  Taking water efficiency measures can also improve a company’s public image, as well as its relationships with the communities in which it operates.

What has your company done to evaluate its water-related risks? Please share your own efforts and results. We want this to be a forum in which we can learn from each other and build on best practices.