Software to Hold “Greenwashers” Accountable

When a business uses "greenwashing," it's like painting over rotten wood. The rot is still there, underneath the paint. Similarly, pollution doesn't go away just because a company tells us it's not creating any. Photo: Petoo (c)

Greenwash (verb, \ˈgrēn-wȯsh\) – to market a product or service by promoting a deceptive or misleading perception of environmental responsibility.

It’s no secret that “going green” has become the next big thing in the corporate world. Riding the wave of consumers’ growing interest in environmental sustainability, companies are launching major ad campaigns to tout their green credentials. But many of their claims are misleading or downright false. The ads are compelling, but how are we to know who’s telling the truth? “Greenwashing” is eroding the credibility of well-intentioned green businesses and turning would-be green consumers into skeptics.

It’s reminiscent of the challenge to hold corporations accountable for their financial reporting. While the recent financial crisis highlighted the shortcomings of our markets and reporting structures, the United States business community is still a leader in financial accounting, reporting and ethics. Our system is sophisticated, consisting of a combination of generally accepted accounting principles (GAAP), fairly rigorous government oversight, a massive industry of accounting professionals and mature accounting software technologies that keep track of every last dollar.

We must develop the same infrastructure for environmental accounting. The development of Enterprise Carbon Accounting (ECA) software is well underway, with roughly 60 vendors bringing solutions to market. ECA software enables companies to track their carbon footprint and the footprint of their suppliers as well as the impact of customer use of their products. It’s a promising innovation that can help us manage corporate America’s environmental footprint, but it’s still at the early stages of adoption. We need a number of things to happen for the ECA market to mature and develop environmental accounting to the same level as financial accounting.

So what will it take to develop the ECA software market and have the infrastructure necessary to hold greenwashers accountable? We think there are five key requirements to get us there:

  • Clear government action on regulations;
  • Adoption of carbon accounting principles;
  • Expansion of “Scope 3” emissions accounting;
  • Better business incentives to go green; and
  • Demanding, informed consumers.

Clear Government Action on Regulations

If corporations are to be held accountable for green claims, we need orders from the top. But the U.S. has been relatively slow to pass laws with lasting environmental impacts. The Environmental Protection Agency (EPA) and Congress are at a stalemate in agreeing upon carbon emission regulations. Legislation often gets caught up in political gridlock – such as the American Clean Energy and Security Act, which would introduce an emissions trading plan not unlike Britain’s CRC Energy Efficiency Scheme. The bill passed the House in 2009 but has yet to be addressed by the Senate.

However, steps are being taken in the right direction – like the EPA’s Mandatory Greenhouse Gas Reporting Rule, which requires companies that emit 25,000 metric tons or more of greenhouse gases annually to disclose emissions information to the EPA. There’s also progress at the state level. California’s Global Warming Solutions Act of 2006 aims to reduce the state’s carbon emissions to 1990 levels by 2020. The increasing role of government-imposed transparency requirements over the coming years will be a major obstacle to greenwashing.

Adoption of Carbon Accounting Principles

We have GAAP and the International Financial Reporting Standards (IFRS) as standards for financial reporting; we need similar principles for environmental accounting. These principles make sure that each corporation is reporting apples-to-apples numbers. The current most widely used set of international carbon accounting standards, the Greenhouse Gas (GHG) Protocol, is still maturing. When a business is required to disclose its carbon footprint according to broadly accepted standards, regulators, investors and consumers will all be able to see who’s truly green and who’s just greenwashing. Companies like Dell, Apple, IBM, and Wal-Mart have already begun to adopt nascent carbon accounting principles.

As ECA and similar innovations arise, carbon accounting will become more widespread and lessen the potential for greenwashing. As more companies face requirements to track and disclose emissions, others will voluntarily do so as the process becomes more standardized and manageable. Once carbon accounting has been adopted by most businesses, disclosure of the company’s carbon footprint will be a prerequisite for businesses to make any sort of claims of environmental friendliness.

Expansion of “Scope 3” Emissions Accounting

Scope 3 emissions are indirect emissions resulting from a company’s actions, the sources of which are not owned by the company. An example is the carbon emitted by a company’s suppliers. Requiring Scope 3 in every carbon accounting report would prevent companies from cutting corners to artificially report a smaller carbon footprint. Take Dell’s report of its carbon “neutrality” for example.

In 2008 Dell claimed to have become “carbon neutral,” but estimates had neglected to account for Scope 3 emissions. Intentional or not, Dell was grossly under-reporting its carbon footprint and claiming false credit for distorted reports — a form of greenwashing. With a rigid set of carbon accounting standards, including Scope 3 disclosure, this never would have occurred. In the GHG Protocol, tracking Scope 3 emissions is currently optional. As more companies voluntarily track Scope 3, though, it’s only a matter of time before it’s required and fully incorporated into ECA software – making it nearly impossible to “pull a Dell.”

Scope 3 disclosure requirements will also force wider adoption of comprehensive carbon accounting among related businesses. A viral effect will spread adoption, killing the potential for greenwashing throughout the supply chain. To disclose its Scope 3 emissions, a company often must ask suppliers to track their emissions. With Scope 3 requirements, these suppliers will have to request the same of their own suppliers — and so on. With carbon accounting requirements and a standardized Scope 3-inclusive reporting scheme, the number of businesses with full emissions records will explode — dealing a critical blow to greenwashing potential in the process.

Better Business Incentives to Go Green

Sustainable business practices are more often than not motivated by revenue generation or inherent cost savings. As these incentives increase, truly beneficial green actions will take hold and the need for greenwashing will fade. For example, nearly one-third of small businesses face energy costs as their largest expense. They have an economic incentive to trim these costs, reducing their waste and carbon footprint. When it becomes easier to identify cost-saving opportunities, as with the use of a mature ECA software system, carbon footprints will shrink naturally.

Government incentives are also cost-saving opportunities for businesses with environmental responsibility. Tax incentives are awarded for using hybrid or green diesel for transportation, for example. A global survey this year by workspace solutions provider Regus concluded that 63% of U.S. companies need more tax breaks to accelerate green investments. The government will likely expand financial incentives for green businesses as environmental stewardship becomes more of a national priority. Similar to compliance capabilities in other software systems, ECA software could develop to alert users to new opportunities to take advantage of government incentives. When a cap-and-trade scheme or similar system is finally implemented, the economic incentives will skyrocket, further spreading carbon accounting practices and edging out potential greenwashers.

Demanding, Informed Consumers

As green buyers become more savvy, greenwashers will no longer be able to conceal fraudulent claims. This year’s third annual environmental consumer behavior survey by the National Geographic Society and GlobeScan polled consumers in 17  countries, determining that they perceived greenwashing as the biggest obstacle to environmental improvement. Consumers are demanding product sustainability information before believing the green hype. Wal-Mart plans to use supplier-provided carbon accounting information to start a system of product labels for customer reference. As detailed sustainability information develops into the new norm, claims of green marketing will fizzle without hard evidence. Greenwashers will obtain ECA software to comply and the resulting transparency will effectively destroy false marketing potential.

Hunter Richards, Accounting Market Analyst,

What are your thoughts? Are we missing a critical new weapon against greenwashing? Let us know in the comments.

Hunter Richards
Accounting Market Analyst, Software Advice

Blue Planet Green Living (Home Page)

Hunter Richards’ article was first posted here:

Fee and Dividend – A Better Plan to Reduce CO2

The Fee and Dividend approach would reduce emissions in a more sensible way than Cap and Trade according to some experts. Photo: © Snap Happy -

For many years, the words global warming meant little to me. I was quick to dismiss climate change as a hoax or a natural phenomenon and continue to live as I always have. Then, one day, I heard someone on the radio ask, “Whether it’s man-made or a natural occurrence, shouldn’t we be doing something about it?” This comment stuck in my mind, and through a number of events, my thinking slowly changed.

In the fall of 2007, I returned to college after my daughter was born. I enrolled in an Environmental Science class, primarily because I needed to take a science class and didn’t want to take a lab. I had no idea the impact this class would have on my way of thinking and my life’s journey.

Whether global warming is caused by people or is a natural occurence, we don't have time to wait. Photo: © christopher waters -

My college textbook discussed global climate change and CO2 emissions. It stated, “[A]tmospheric CO2 concentration [is] now at [the] highest level in at least 400,000 years, and likely the highest in the last 20 million years. Moreover, [CO2 levels are] increasing faster today than at any time in at least 20,000 years” (Withgott & Brennan, 2007, Essential Environment: The Science Behind the Stories). These numbers, as well as others, got my attention. It became clear to me that we were messing up our planet, and something had to be done about it, although I wasn’t sure what, just yet.

According to the National Academies, prior to the Industrial Revolution, CO2 emissions generated through natural processes were in balance with the amount of CO2 absorbed by plants and “carbon sinks” on the earth’s surface. The National Academies went on to state, “[M]odel simulations for temperature change during the past century only match the observed temperature increase when greenhouse gas increases and other human causes are included.” So, increased temperatures can only be explained by including human activities, particularly increased greenhouse gases such as CO2.

A few months ago, I began looking for environmental organizations where I could get involved and learn more. I came across Citizens Climate Lobby (CCL). The goal of this organization is to “create the political will for a sustainable climate [and] to empower individuals to have breakthroughs in exercising their personal and political power.” Both of these goals spoke to me on a deep level. In fact, that is why I am writing this article — to create political will for a sustainable climate and to empower myself and others.

One bill in Congress to address climate change uses a cap-and-trade approach. Cap and trade sets a carbon cap for utilities, transportation, and manufacturing. While this sounds like a great way to limit carbon emissions, the details are dicey to say the least. Businesses will have no true financial incentive to decrease reliance on fossil fuels, the amount of carbon allowed is still a mystery, and — even if it works — it won’t be fast enough. We need something more transparent and effective, and we need it now.

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Citizens Climate Lobby and a number of other climate-oriented organizations came up with a solution: the fee-and-dividend plan. Under this proposed legislation, an escalating carbon fee will be imposed on fossil fuels at their point of entry into the economy, whether it be at mines, wells, or ports. This fee will raise the price of fossil fuels and make clean energy technology more competitive.

Additionally, 100% of the carbon fee is refunded to American households to offset increased energy prices during the transition to clean energy. The dividend is equally divided among American households. Those who cut their dependence on carbon can pocket the difference between increased energy prices and their dividends. Under this plan, businesses and individuals have a great incentive to reduce dependence on carbon-based energy — their wallets.

The potential benefits of fee and dividend are significant, including —

  • The increased price of carbon will lead to an explosion of green jobs, in solar energy, wind energy, weatherizing, and the like.
  • As fossil fuel dependence decreases and clean energy increases, we will import less foreign oil.
  • Carbon emissions and other pollutants will decrease, benefiting the health of our planet and heading off catastrophic climate change.

We are hopeful for a better future, with cleaner skies and renewable energy. Photo: © Lee Chin Yong -

The fee-and-dividend approach has bi-partisan appeal. Similar plans have been presented by Rep. John Larson (D-CT) and by Rep. Bob Inglis (R-SC). But this legislation needs the support of citizens. If you like the idea of the fee-and-dividend plan, contact your Members of Congress and tell them so. Let them know you support climate legislation that places a fee on carbon and returns the revenue to all households. It’s transparent, it’s simple, and it will be effective.

Perhaps the worst fears of climate change will never be realized; but, they may. We have no viable choice but to plan for the worst while hoping for the best. Each of us must do our part to reduce our dependence on fossil fuels and to reduce CO2 emissions. But our responsibility doesn’t end there. We also have a responsibility to engage in the political process to make real change happen. In the best-case scenario, we’ll have a healthier planet in the end.

But, for that to happen, we need to take action now. I invite you to lend your support to the people’s climate bill — fee and dividend. Be a part of the solution. Contact your Congresspersons today.

Shraddah Reyna

Contributing Writer

Blue Planet Green Living (Home Page)

For More Information

Citizens Climate Lobby