What Is Greenwashing? Avoid Misleading Environmental Claims

Some businesses put in extra work to highlight their commitment to sustainability. They might label products as “environmentally friendly” or claim their materials are eco-conscious.

But what happens when these claims only tell part of the story, or, worse, simply aren’t true? This is what a couple of retail giants were charged with in 2022, when they made deceptive claims about their materials—specifically, labeling certain textiles as environmentally friendly “bamboo” when the fabrics were actually rayon, which is created via an industrial process involving toxic chemicals. In the end, the accused retailers agreed to pay out a combined $5.5 million in settlements.

This practice has a name—greenwashing—and it’s illegal. Greenwashing and its repercussions aren’t relevant to just one industry; it’s found in nearly all sectors. Read on to learn the Federal Trade Commission’s rules on environmental claims, the most common ways greenwashing shows up, and best practices to follow when it comes to marketing the sustainability of your own products.

What is greenwashing?

Greenwashing is when a business makes misleading environmental claims about its products or business practices. These false or misleading claims obscure the company’s true environmental impact. 

Why would a business resort to greenwashing? Often, it’s done to connect with customers and boost sales. A sustainability report from NIQ found 92% of customers prefer to purchase from sustainable brands when deciding what to buy, so it’s no wonder retailers want a slice of that pie. 

But as more cases of greenwashing are exposed, the public is losing trust in sustainability claims. According to a YouGov survey, 60% of consumers are skeptical about companies’ green claims and sustainability efforts. 

Greenwashing may not seem as harmful to the environment as other practices, but this muddying of information can lead to misinformed purchasing decisions that result in more environmental harm. Consumers who are misled by greenwashing may inadvertently support unsustainable practices they intended to avoid. 

For example, when a company advertises it uses biodegradable packaging, green-conscious customers may choose that specific brand and make an effort to compost the packaging properly. If the material isn’t actually accepted by customers’ local composting programs, however, then the customers will be contributing to environmental harm when they contaminate the rest of the recycling bin.

Common greenwashing practices 

• Using misleading labels or vague language
• Claiming false emission reductions
• Focusing on just one sustainability factor while ignoring others

Greenwashing commonly shows up in vague language or selective storytelling about sustainability. Here are specific practices and examples of how this usually occurs. 

Using misleading labels or vague language

Vague terms like “sustainable” or “eco-friendly” are common greenwashing culprits, as these terms are not legally defined and can end up misleading consumers. Some companies claim to be greener than they are before they implement sustainable practices, but claiming action before any practices are in place is still considered greenwashing. Good intentions have no environmental impact.

Claiming false emission reductions

Another common greenwashing practice involves touting greenhouse gas emissions reductions that aren’t true or are not anchored in a reliable carbon accounting method. For ecommerce founders, this could happen when you give customers a “carbon-neutral” shipping option but have no way of accurately quantifying their shipment’s carbon footprint or properly accounting for any offset initiatives.

The Federal Trade Commission’s (FTC’s) Green Guides state that “sellers should employ competent and reliable scientific and accounting methods to properly quantify claimed emission reductions and to ensure that they do not sell the same reduction more than one time.” Timing matters, too—businesses should not claim offsets if they haven’t happened yet. The Green Guides say businesses should “clearly and prominently disclose if the carbon offset represents emission reductions that will not occur for two years or longer.”

This issue also arises with how products are manufactured. A company might claim a product is made with 100% renewable energy or that they are operating a carbon neutral manufacturing facility. The FTC advises businesses that they should only make these claims if they can back them up with proof of using all renewable energy, or if they have purchased renewable energy certificates. It adds that “one way to minimize the risk of deception is to specify the renewable energy source (e.g., wind or solar energy).”

Focusing on just one sustainability factor while ignoring others

This greenwashing strategy involves highlighting one practice, material, or component that may be viewed as sustainable while conveniently leaving out additional information about your products or manufacturing processes that counteract any environmental benefit.

For instance, a company might share in its marketing that its food storage containers eliminate plastic waste because they’re reusable. However, the materials the containers are made from might leach chemicals into waterways during production. This contradiction defeats the positive impact the recyclable containers provide because, although you may be able to reuse them, their production process causes problems for the environment in another way.

Federal Trade Commission rules about greenwashing

• Make clear claims with appropriate disclosures
• Differentiate which parts of your product are sustainable
• Do not overstate claims
• Avoid comparative claims

The FTC implemented its set of rules in 1992 (with updates in 1996, 1998, and 2012) for the types of environmental marketing claims brands are permitted to make. These include the following requirements:

Make clear claims with appropriate disclosures

The FTC is specific about how environmental terms can be used. Their Green Guide defines common sustainability terms and what disclaimers are necessary for each. Regulated terms include “nontoxic,” “made with renewable energy,” “made with renewable materials,” and more. These terms may only be used in specific scenarios when mandated criteria are met.

For instance, the FTC says “recyclable” should have a qualifier for the claim if “recycling facilities are not available to a ‘substantial majority’ of consumers or communities where a product is sold.” In this instance, “substantial majority” means 60%.

The FTC notes that brands must be as transparent and clear as possible about the qualifications or disclosures surrounding their products. The wording should be “clear, prominent, and understandable.” This means sticking to plain language, using sufficiently large type, and placing disclosures close to the statement, logo, or word that needs a disclaimer.

Differentiate which parts of your product are sustainable

As the FTC states, “Unless it is clear from the context, an environmental marketing claim should specify whether it refers to the product, the product’s packaging, a service, or just to a portion of the product, package, or service.” If your packaging is recyclable or compostable but your product isn’t (or vice versa), the FTC says you should clearly state this somewhere that’s easy to find. Also, disclose whether or not the entirety of a product is made of a recycled or certain type of material, or if just one part of it is.

Do not overstate claims

Any environmental benefits should be clear and understandable, according to the FTC. Marketing shouldn’t suggest the product is less harmful to the environment than it actually is. If a product has an environmental benefit that is “negligible,” it shouldn’t be included in marketing materials.

The FTC gives the hypothetical example of an “eco-smart gas-powered lawn mower.” The claim is the mower has improved fuel efficiency; the truth is, the efficiency has only increased by 1/10 of a percent. The FTC points out that while this is technically true, the difference is so minute, “it likely conveys the false impression that the manufacturer has significantly increased the mower’s fuel efficiency.” 

Avoid comparative claims

The FTC says to refrain from sharing any comparative claims either impossible to prove or spun in a way that makes them sound more important than they are. Also, avoid any vague claims or statements that the product is “environmentally preferable” or “better for the environment” compared to similar products, as these can’t be verified easily.

Principles for transparency 

• Use well-known certifications
• Publish a life cycle assessment
• Back up your claims
• Share your methodology
• Create visibility
• Admit to mistakes and shortcomings

Greenwashing can be intentional and malicious, or it can be unintentional, stemming from a lack of information. The latter is sometimes the case with smaller companies that don’t completely understand their supply chain, leading to inadvertent greenwashing. However, greenwashing is always illegal.

What if you do want to showcase the environmental responsibility your brand is proud of? Getting it right might seem complicated, but it’s not impossible. These principles for transparency can help guide your communication about your sustainability initiatives. 

Use well-known certifications

You may find that certifications are a helpful way to prove your claims and receive validation for your business’s sustainability efforts. While the most relevant certification will depend on the type of business you own, some of the most well-known and reputable certifications are B Corp, Fairtrade Certification, Oeko-Tex, USDA Organic, Forest Stewardship Council, and LEED certification.

Publish a life cycle assessment

A life cycle assessment (LCA) showcases a product’s impact on the environment from when materials are first sourced to when it no longer works and needs to be discarded. Having an assessment performed on your products will help you better understand where the most resources, energy, and materials are going, and what impact your product has after the end of its life.

These details offer insight into the sustainability claims you can and can’t make. There are numerous independent companies and contractors that offer this service, which you can find through ACLCA. 

Back up your claims

One of the core principles of transparency is to substantiate your environmental claims with hard data. Yoloha Yoga is one example of a sustainable business that shares these business practices on a separate webpage. 

Rather than simply noting that it’s “green” or “sustainable,” the company shares that it uses 100% recycled or recyclable cardboard and craft paper and never uses single-use plastic. It also shares that 95% of its warehouse waste is 100% recyclable cardboard. These concrete numbers paint a clearer picture of its efforts. A blog post on Yoloha Yoga’s site explains that although the brand would like its yoga mats to be made of 100% renewable materials, right now it sits at 83%.

Share your methodology

Publishing data on your environmental impact is a first step, but you may also need to show customers how you collected that data and what the methodology behind your calculations is. Household product company Blueland shows how it’s done with its annual impact report and supporting blog content. Its 2024 report states it diverted more than six million plastic containers from landfills thanks to its products. But customers might (and should) question how the company calculated that figure. To answer this question, Blueland published a detailed chart on its blog to illustrate its methodology.

Founder Sarah Paiji Yoo explains on an episode of the Shopify Master podcast that she set out to lead by example, showing customers the “receipts” they should be looking for from companies claiming to benefit the environment. Ideally, she notes that she wants Blueland to become a case study that proves business owners “can do the right thing and also build a very financially successful business.”

Create visibility

Make sure you understand your own business practice—and those of any production partners you use—well enough so you can accurately convey them to customers. For compostable stretch wrap company Great Wrap, that meant actually cutting out third-party production partners and creating its own manufacturing facility. “It’s hard to control another business’s operating practices as a customer,” co-founder Julia Kay says on an episode of Shopify Masters. “If you want to make a product that you have true control over what goes into it, it’s just going to be easier to set up a manufacturing facility.”

Admit to mistakes and shortcomings

Mistakes happen, but it’s essential to be transparent about them rather than greenwashing over them. For example, if your company’s ethos is about reducing waste, but you end up with excess or defective stock, be honest about it rather than silently disposing of goods. You may find that this can actually help—rather than hurt—your bottom line.

Protein brownie and nut butter company Elavi produced a batch of incorrectly sealed jars. Rather than throwing them out and keeping quiet about it, cofounder Michelle Razavi explains on Shopify Masters that she shared the mistake on social media, sold the product as “oopsie jars,” and brought in a month’s worth of sales in one week.