Empowering Consumers: How to Avoid Greenwashing In a Free Market System

It’s the age old question: sustainability vs. profit? Read more to take a closer look at free market capitalism and how consumers can learn to avoid damaging marketing tactics like greenwashing.

Cameron Barnes

January 2, 2024

Empowering Consumers: How to Avoid Greenwashing in a Free Market System

By Grace Lauren

In the complex system of free market capitalism, where innovation, profit, and progress are driving forces, a challenge arises – the deceptive allure of greenwashing, where eco-conscious consumers navigate a system of mixed motives and genuine sustainability.

Free Market Capitalism and the Practice of “Greenwashing”

Free market capitalism is an economic system whose primary principles are private ownership and limited government regulation. The essential driving forces within free market capitalism are profit and competition between businesses. Businesses compete with one another to attract consumers and generate sales. Factors such as supply, demand, cost of production, and inflation predominantly determine prices and allocation of resources.

In a free market capitalist system, consumers are free to make choices on which products and services to purchase. In almost every industry, there is a wide array of options. However, it is not always a simple choice for consumers. The pursuit of profit within the free market capitalist system can lead to unethical and unsustainable business practices, such as “greenwashing.”

What is Greenwashing?

Greenwashing is the name for a deceptive practice in which businesses use misleading marketing, advertising, and design choices to make their products, goods, and services appear more sustainable, ethical, and environmentally friendly. This leads to consumers being misled in their conscious and active purchasing choices.

Conscious purchasing power refers to the consumer’s informed awareness about the goods and services they intend to purchase. Active purchasing power refers to a consumer’s immediate ability to actively make a purchase. Both are essential for empowered consumers to understand how to avoid greenwashing.

Why Greenwashing Occurs

As demand and desire for ethically-produced, environmentally-friendly goods and services rise, businesses are motivated to engage in genuine sustainability practices. However, companies may also attempt to create a positive public image through greenwashing tactics to capitalize on the demand for sustainable products, goods, and services.

The Effects of Greenwashing

Greenwashing is often harmful because it is misleading to consumers and undermines the trust between the consumer and the business, negatively impacting the company’s reputation. It can also negatively impact environmental regulatory efforts and waste resources.

Greenwashing may even discourage genuine efforts towards sustainable practices by diverting attention towards their products when customers seek out environmentally friendly options, diminishing and distorting credibility within the market or industry.

It is crucial for companies to provide evidence of their sustainable standards and verify their claims through certifications and transparency.

How to Identify and Avoid Greenwashing

Greenwashing can present in many ways and across many industries, from the food industry to beauty, fashion, home, and business practices. Common greenwashing tactics include:

Making vague and unsupported claims with the use of buzzwords like ‘green,’ ‘eco-friendly,’ or ‘natural’ without specifying or providing evidence. For example, the beauty industry often faces greenwashing issues with ingredients labeled ‘clean beauty,’ ‘cruelty-free,’ or ‘vegan’ without verification and certification.

Misleading packaging, labels, and logos. The use of the color green is common in greenwashing tactics because it can often signal to consumers that the product may be ‘natural’ or ‘sustainable.’ Also commonly found is the use of earth-based imagery such as the planet, nature, and leaves.

Overemphasis of minor changes within the business standards or procedures. Businesses may highlight minor or minimal improvements and changes within their products, formulas, or practices.

Portraying ambiguous efforts that the company is making significant changes on the environmental front, such as campaigning for future actions that will be enacted 10+ years out.

Lack of transparency in practices, sourcing, production, materials, and manufacturing, especially when taking advantage of production and manufacturing in developing countries, where businesses can pay extremely low wages for workers. The clothing industry often takes advantage of low wages in developing nations for their production and manufacturing.

Brand comparisons. Businesses sometimes compare themselves to competitors who are less sustainable or environmentally friendly, making themselves seem more sustainable in contrast. This can be misleading to consumers, encouraging them to think the brand is genuinely sustainable.

Lack of environmental verifications, such as not providing reputable certifications through trusted verification labels. For example, food is commonly labeled as ‘organic’ even though it has not earned a certified USDA organic label.

Short-term solutions, such as one-time campaigns, that do not produce long-term changes in sustainability practices within the business. Especially common are limited-time packaging changes or minimal one-time donations, portrayed as an extravagant act of charity.

Companies taking advantage of questionable environmental laws as they differ by geographic region. Commonly found in large corporate industries such as car and transportation industries are immense carbon and pollutant atmospheric outputs. Regulations differ by country, and companies often take advantage of this, basing their production and manufacturing in locations that allow for more pollutant outputs.

Recycling also faces significant greenwashing issues. Consumers may be led to believe that all plastics can be recycled when they often end up in landfills, despite consumer efforts.

Purchasing Sustainably as a Consumer

Free market capitalism does have the power to create positive change and a range of benefits, including creating sustainable businesses in developing countries and communities where opportunities may have otherwise been limited. Those benefits may also include creating job opportunities, access to products, goods, and services, reducing poverty, opportunities for entrepreneurship, innovation and investment, trade, development, and greater social/economic equality.

Free market capitalism can also allow for beneficial practices, such as organizations like Business Connect, that work towards charitable causes and drive sustainability trends and standards within their industries.

Free market capitalism makes a dynamic impact on the way consumers make choices. There are ways to be empowered as consumers and make genuinely sustainable purchases, not under the deceptive guise of greenwashing. Consumers can use discernment, support ethical businesses, and seek transparency and verified sustainability within the market. Making informed decisions and holding companies accountable can drive positive change within the system and lead to a more sustainable world.