Reputation is one of the most powerful social technologies ever invented. Without it, it’s highly unlikely we would have been able to cooperate successfully in any human group that numbers beyond 150 (Dunbar’s number). Reputation allows an individual to indirectly benefit from prosocial behaviours, while helping the group weed out and punish selfish behaviours, thus vastly expanding the potential space for cooperation to flourish, while making selfish behaviours more risky.

But, clever little monkeys that we are, this also means that it’s possible to get away with selfishness by manipulating one’s reputation, projecting the semblance of prosociality, and then behaving selfishly when no-one is looking. A great deal of human culture and politics can be understood in a new light through this lens. We’ve become experts at identifying disingenuous efforts to manipulate reputations and have developed strong social norms which maintain transparency. Although we could all point to notable exceptions, on the whole it’s quite hard in any given social group to get away with being selfish for long, while those who put others first often stand to gain in other ways.

Things take an interesting twist when it comes to the world of business. Although companies claim legal personhood, we don’t have the same level of moral expectations. In fact, thanks to the short-sighted morality of free market economics and shareholder capitalism, we positively expect companies to act selfishly, and have even set up legal frameworks which punish those companies who don’t.

This, I hope, is slowly changing. Consumers, employees and investors are waking up to the leverage they have over companies, and movements like B Corp are gathering momentum. Make no mistake – this stuff works. Unsustainable and unethical companies generally find it harder to raise investment, have to pay more to hire the same employee and can’t charge the same prices as companies who are perceived to be more sustainable.

But therein lies the rub. As with human reputations, what counts in the marketplace is being perceived to be prosocial. Companies will often spend far more on looking good than on actually doing good. Particularly for companies with opaque business operations and complicated supply chains, it’s far too easy to spend a bit on social media advertising and develop an unearned reputation for sustainability without addressing any of the underlying issues.

This is what is widely known as “greenwashing”. Greenwashing was coined by the New York environmentalist Jay Westerveld in 1986 to describe the practice of hotels who put up signs telling their customers to re-use their towels so as to “save the environment.” He noted that while these actions also had the knock-on effect of reducing the hotel’s laundry bill, little to no effort was being made to reduce waste in other areas of the hotel.

Greenwashing, therefore, is really a label aimed at companies who:

1. Have taken some small steps to reduce their impact on the planet but...
2. whose negative impact still dwarfs any positive effect from those steps...
3. and yet still burnish their green credentials and seek to claim reputational benefits.

The target is not companies whose climate record is genuinely impressive – who have made serious strides to reduce emissions at source, have developed and shared useful innovations to reduce climate impact across their industry and/or have invested heavily in protecting the world’s most precious and biodiverse ecosystems. When Patagonia announce that all their profits will go towards the planet you don’t hear cries of greenwashing, for example. Patagonia are not trying to pretend they are sustainable, they really are sustainable (in as much as any retail company can be). 

Nor does it really qualify as greenwashing if a company with a truly terrible climate record plants a few trees here and there but makes absolutely no attempt to claim any credit/fully acknowledges that they are in no way sustainable. Rather, it’s the gap between what is being claimed and the underlying reality which is the core issue when it comes to greenwashing, because it’s within this space that the reputation game is being played.

In particular, greenwashing accusations seem to stick to companies who do nothing to change their core business practices or reduce their emissions at source, and instead buy a few cheap (and as we’ve seen far too often recently – unreliable) carbon offsets and call themselves “carbon neutral”. This is because “carbon neutral” is such a strong claim to make – you’re essentially saying your negative impact on the planet is zero. These kinds of claims were banned by the EU last week, along with a host of other generic environmental claims such as “environmentally-friendly” unless they were backed up with serious substance.

Instinctively, Native is supportive of these new measures. But in practice, the furore surrounding carbon markets and “carbon neutral” claims has led us to a place where companies are now so frightened of being accused of greenwashing that many of them are choosing not to invest in nature at all. As we have argued elsewhere, it’s quite possible to invest in nature without making spurious or exaggerated claims, and we should incentivise companies to do so.

A We Mean Business Coalition study showed that if the world’s 1,700 biggest emitters compensated each year for just 10% of their emissions through investments in nature, it would mitigate nearly 30 gigatons of emissions and mobilize up to $1 trillion for the planet by 2030. But when asked what their main hesitation was from doing so, nearly half of them cited fears of being accused of greenwashing. If you care about the planet, that’s not a place where we want to be.

That’s what makes this whole area so interesting and nuanced. It’s not that the people who accuse companies of greenwashing don’t want those same companies to invest in nature. On the contrary, they are generally the very same people who push for more corporate climate action. Rather it’s that they are wary of claims which let companies off the hook from doing anything further.

But this “letting off the hook” is really a ball in the consumer's court. From the point of view of a sustainabilty or marketing team (in practice they're often the same thing) it’s our reaction to companies’ claims which counts. It’s our reaction which is going to define how much or how little corporate climate action is taken. That’s where our power lies.

If every single time a company invests in nature someone shouts “greenwashing” they will simply stop doing so. On the other hand, if we’re overly naïve about believing every sustainability label we see on a product then companies have little incentive to go beyond skin-deep and superficial changes.

To extract the maximum possible juice from the apple of private capital, we therefore have to maintain a delicate balance.

By all means let’s applaud companies who invest in nature. But the buck doesn’t stop there.

This article is also published on Native. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.