Greenwashing: What is it and how it impacts agricultural carbon credit markets

Those just starting out in their process of learning about carbon credits at some point ask the question, “Do carbon credits give a company the license to pollute while claiming to be good for the environment?” It is understandable why people ask—it can sometimes seem like companies are making false or overstated claims about environmental impact. It is precisely because of greenwashing that high quality carbon credits will become increasingly important and valuable to credit buyers, credit generators, consumers, and concerned citizens. To explain how, we need to first cover a few important details.

First, let’s define greenwashing. It is the process of conveying false or misleading information about a company’s products or actions and their direct or indirect impact on the environment. A common greenwash strategy is for a company to highlight a few of their actions that benefit the environment while downplaying how they contribute to environmental degradation. At the heart of the greenwashing question is a concern that companies will purchase a few carbon credits to play up environmental credentials, which are increasingly becoming a necessity in many markets today, not only to appease consumers, but also to garner investor funding. Meanwhile, some of these companies may continue to contribute to environmental degradation to turn a profit. This creates the illusion of sustainability. 

Now let’s look into some of the facts:

• Consumers and investors have placed a high priority on sustainability. Real sustainability. This means that most businesses have a strong financial incentive to take a proactive approach. In some markets addressing sustainability is not only a request, it’s a requirement. 
• Sustainability is not unanimously defined, leaving room for interpretation. One person’s sustainability is another’s greenwash. This means measurement and documentation will become absolutely necessary to quantify and prove action. 
• Risk of greenwash accusations on an organization’s reputation is huge. The damage from negative publicity is becoming increasingly significant, sometimes causing the shuttering of entire companies. Being able to provide clear, transparent sustainability information reduces the threat. 

Essentially, businesses operating with any type of consumer or investor demand for sustainability need to take action to be competitive. This includes documenting and measuring their carbon footprint and their work and investments to mitigate that footprint. 

Companies need both sustainability transparency and high-quality carbon credits to overcome greenwashing allegations. For the sake of illustration, let’s lay out four greenwashing scenarios that may occur as relates to the purchase of carbon credits: 

• HIGHER RISK - Limited Company Sustainability Transparency + Low-Quality Carbon Credits: For this situation to occur, lack of transparency, measurement, and documentation occur at two levels. First, lack of transparency from the company around their own footprint and emissions reductions efforts. Without these characteristics, an organization may obfuscate significant emissions while brandishing small emissions reductions efforts. And second, the carbon credits purchased came from a system that also lacked measurement, documentation, and transparency (likely due to lack of third party reporting and verification). In this scenario, these low-quality carbon credits in combination with lack of sustainability claim transparency may contribute to the company being accused of greenwashing. 
• MODERATE RISK - Limited Company Sustainability Transparency + High-Quality Carbon Credits: For ag-based carbon credits to reduce the risk of greenwashing, the credits much originate from a system that provides robust measurement of carbon sequestration, documentation on the origin of the carbon credits, and transparency through the use of carbon registry protocols and verification. In this scenario, a company that purchases these high-quality carbon credits may still commit greenwashing acts by lacking internal transparency and measurement about its own sustainability actions, but the high-quality carbon credits they purchase lead to real, demonstrable, and verified positive impact on carbon emissions. This apples-and-oranges approach may incite greenwashing claims. 
• MODERATE RISK - Robust Company Sustainability Transparency + Low-Quality Carbon Credits: A company that has strong internal sustainability goals rooted in regular measurement and transparency activities, who then purchases low-quality carbon credits generated through an ag carbon credit program that uses limited or obscured measurement, documentation, and verification standards (especially those lacking the high standards of a registry program) may find themselves at the risk of greenwashing claims. In this scenario, the company is doing good work and has good intentions, but the quality of the carbon credits may put their good efforts in jeopardy.
• LOWER RISK - Robust Company Sustainability Transparency + High-Quality Carbon Credits: A company that has strong internal sustainability goals rooted in regular measurement and transparency activities, who then purchases high-quality carbon credits generated through an ag carbon credit program that uses robust measurement, documentation, and verification standards dictated by a carbon registry are likely going to find themselves well equipped to overcome greenwashing claims.

As avoiding greenwashing allegations continue to become a driving force for businesses in a variety of industries and in a variety of sizes, they will increasingly not only seek to make their own sustainability activities, but seek to partner with companies who can help them meet these goals with similar rigor. Carbon by Indigo provides rigorous science to quantify carbon credits, adheres to registry protocols to meet additionality requirements and other safeguards, and captures ample evidence to ensure the carbon credits purchased by buyers meet their needs for documented and verified greenhouse gas emissions reductions or increases on carbon sequestration.

By: Ryan Stockwell, Indigo Grower Engagement Senior Manager and Wisconsin farmer