Just like the clothing and accessories industry, the ethical investment industry is made up of numerous companies that have little to no experience or oversight in the areas of ethics and governance. These are the same companies that advertise their green credentials on social media with the tagline, “We invest our money in companies that make a positive impact on the environment.”
This is greenwashing — the practice of purchasing products or services that do not conform to the company’s stated mission or ethics.
While some greenwashing practices can be overcome with intensive due diligence and appropriate checks, many are impossible to avoid. To help you out, here’s a detailed guide on spotting and avoiding greenwashing companies.
1. Check the Company’s Website
The first step is to check the company’s website for any information about their mission, ethics, and governance. This will help you to better understand why their products or services might not be as green as they claim.
Additionally, it can be helpful to look at the company’s social media channels and see if there are any posts that could be indicative of a lack of transparency or ethical oversight. For example, if a company posts pictures of them working on an eco-friendly project or taking care of the environment, it would be indicative of a company that is committed to being ethical and environmentally friendly.
2. Trade Associations and Forums
When you’re looking for a company that has ethical values, it’s important to check out their trade associations and forums. These are where you can find information and discuss the company’s policies in an open and transparent manner.
By engaging in these discussions, you can help your business build trust with potential and current customers. Additionally, these forums can be a great place to connect with other ethical investors and learn about the latest ethical investing trends.
You should also research the company’s governance and ethics practices before making any investments. Do their website and social media links contain contact information for the board of directors? Are there any independent ethics inspectors present? This will help you to make informed decisions about whether or not to invest in this company.
3. Check the TV and Radio Ads
When a company begins advertising on television or radio, they will typically include a disclaimer that the ads are not sponsored or endorsed by the company. However, many times these disclaimers will not be enough.
The companies who run these ads will often list their affiliation with a specific organization, such as the World Wildlife Fund (WWF), which is often a greenwashing institution.
In fact, WWF has been caught promoting products that have harmful effects on the environment. For example, in 2002, WWF was caught promoting an animal welfare product that killed more than 1 million animals. In another instance in 2007, WWF was caught pushing a product called “Rainbow Trout” that causes significant harm to the environment.
4. Read Their Annual Report and Blog Posts
When looking for a company to invest in, it’s important to have an understanding of their nature of business.
Annual reports are a great place to start, as they give you an overview of the company and their mission. You can also use these documents as a way to gauge the company’s honesty and integrity. For example, did the company disclose all of their financial information? Have they disclosed any conflicts of interest? Are there any hidden agendas or skeletons in their closet? If not, then you should be safe investing with this company.
Blog posts can be a little more difficult to evaluate, but they play an important role in customer service and overall marketing, blog posts can provide valuable insights into the company and its mission, as well as how the business is currently performing. Additionally, blog posts can be used as a way to build trust and credibility with potential customers.
5. Consults With Environmental Experts
Before making any investments, it’s important to consult with environmental experts to ensure that the company you’re investing in aligns with your values and goals. This is especially important if the company has a stated environmental mission.
In addition to consulting with experts, make sure to do your own due diligence on the company and its products. Do your research and speak with people who have experience in the field before investing.
6. The Company’s Reputation
When it comes to ethical investing, it’s important to be suspicious of companies that have been reported to have nefarious practices. These scandals often involve unethical behavior or illegal activities by the company.
The best way to avoid these types of dealings is to do your own research before investing in any company. Make sure you are familiar with the company’s history and the allegations made against them.
In addition, it’s important to be suspicious of companies with a greenwashing tagline. This term often implies that the company is doing good things for the environment, when in reality they may not be.
7. Company Culture Analysis
Check to see if the company’s values align with your own. Not all ethical investment companies are created equal. You may be able to trust a company that has strong environmental and social policies, but it’s important to do your research first. Do a thorough company culture analysis to determine if there are any red flags that might suggest the company is not really committed to ethical practices.
To Wind It Up
Ethical investing is an important process especially when it comes to greenwashing companies, it’s a never-ending task. As such, the process involves much more than just reading a few headlines or skimming a few pages of a prospectus.
You need to be aware of potential red flags and stay away from those that don’t meet your standards. Research and test the companies you invest in to determine if they are operating in accordance with the criteria set forth by the company’s marketing and/or other company sources.
It requires getting to know the company’s executive team and its social and environmental impact records. It also requires you to ask the right questions and conduct a thorough due-diligence investigation. This way, you’ll be making an informed decision about the business’s practices and the likely impact on consumers and the environment before making your investment.