Guest post: Software to Mitigate Risk of Carbon Greenwashing

Hunter Richards, Accounting Market Analyst
Accounting Market Analyst Hunter Richards writes about accounting software, with particular interests in "green" innovations and compliance.

With the FTC becoming increasingly serious about enforcing its Green marketing regulations, many companies are looking for ways to ensure that their campaigns remain compliant.

As always in Green marketing, transparency is paramount.  And having solid proof of environmental performance is an excellent way to remain transparent.

While carbon emissions are not the only factor in establishing a company’s environmental footprint, they definitely are a major one, and one currently given heavy emphasis in the media.  In today’s guest post,  expert market analyst Hunter Richards discusses the role of Enterprise Carbon Accounting software in mitigating risk of greenwashing in this area – and five action categories necessary to eliminate it altogether.

ECA Software and Carbon Accounting: The New Threats to Greenwashers

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

Companies are launching major ad campaigns to show off their eco-friendly products and services, but many of these claims are questionable. Greenwashing is threatenening the credibility of legitimate environmental marketing and turning would-be green consumers away from the hype. So how can we know who’s telling the truth about supposedly green products and who’s just greenwashing? We can increase transparency and put an end to greenwashing through standardized adoption of carbon accounting by these businesses. A new kind of software is also a key part of the solution.

The increasing scrutiny of green business campaigns is similar to the demand for transparent financial reporting, especially in the wake of the recent financial crisis. The U.S. is still a leader in financial accounting, but we need to develop the same infrastructure for environmental accounting to restore credibility. Enterprise Carbon Accounting (ECA) software is becoming the foundation of this infrastructure, and the market is growing. ECA software enables companies to track their carbon emissions footprint and more easily find existing opportunities to lower their costs and reduce waste. It’s strengthening the potential for corporate environmental transparency. When the transition fully takes hold, greenwashers could disappear entirely.

For ECA software and environmental accounting adoption to make greenwashing obsolete, we need action in five main categories:

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

Clear Government Action on Regulations

lncreased coverage of existing new policies and decisive action on new legislation could quickly spread carbon accounting and the use of ECA software. 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 to the EPA, could be expanded to include smaller businesses as well. Decisive action on new legislation in the future could also help dramatically in expanding ECA software adoption and ending greenwashing.

Adoption of Carbon Accounting Principles

Stricter requirements for disclosure of standardized corporate emissions information, now more feasible than before with the adoption of ECA software, would provide a precise way to examine a company’s environmental record. When such a measure exists and becomes widely used, one will only need to refer to these numbers to get an impression of a company’s overall environmental performance. It will be a lot more difficult to conceal adverse impacts on the environment in implementing greenwashing campaigns.

Expansion of Scope 3 Emissions Accounting

Mandatory inclusion of suppliers’ emissions and other indirect emissions sources in company environmental reports (Scope 3) would prevent under-reporting of emissions; absolutely all emissions would be measured and reported without room for loopholes. Requiring Scope 3 measurement would also spread more adoption of general carbon accounting throughout the supply chain. When a company must account for Scope 3, it must ask its suppliers to track their carbon footprints as well to produce the required report. A chain reaction could quickly increase the number of companies with comprehensive carbon emissions reports and, in doing so, increase overall environmental business transparency.

Better Economic Incentives For Going Green

Using ECA software to identify eco-friendly savings opportunities can make it cheaper to truly go green, making it unneccessary for businesses to greenwash in the first place. Businesses will often find that shrinking their carbon footprints and minimizing costs can go hand-in-hand. Government incentives can also encourage eco-friendly business practices. ECA software could alert users to new opportunities to take advantage of government incentives as more of them emerge, pushing green sincerity into the best interests of businesses.

Demanding, Informed Consumers

Demanding the hard numbers from standardized carbon accounting reports, while boycotting the proven greenwashers, forces businesses with green marketing campaigns to prove their sincerity or risk failure. After all, fully informed consumers make deception by greenwashing impossible. When standardized carbon accounting is required and ECA software is available, companies won’t have any more excuses to conceal their carbon footprint. The remaining work will be done by informed, rational consumers.

This post was adapted from the original article by Hunter Richards, posted 10/25/2010 on the Software Advice blog.

Check out the full article: Software to Hold “Greenwashers” Accountable.

What do YOU think? Have you struggled with carbon compliance and/or Greenwashing issues?  How would Carbon Accounting Software affect your marketing and/or other aspects of your business?  Post your comments below or click the link to the original article and let’s get some discussion going on this important topic!