With the mandatory climate disclosure bill now passed and the Australian Securities and Investments Commission (ASIC) issuing its first greenwashing penalty, many businesses will be rethinking how they market their environmental efforts. But the risks of greenwashing go beyond regulatory fines—it can undermine the long-term success of your business.
To better understand this, we can turn to a concept from systems thinking called the “Eroding Goals” archetype. Systems thinking is a way of seeing the bigger picture in complex situations, helping businesses recognise how their actions today shape their future. By applying this lens, it becomes clear that greenwashing isn’t just misleading—it sets the stage for deeper problems that can erode your business’s true potential.
If you think the system is working…..
Systems dynamics is a way to understand how different parts of your business interact and affect each other. Instead of just looking at problems in isolation, it helps you see the bigger picture—how everything is connected. This approach can reveal patterns and feedback loops that might not be obvious at first, helping you anticipate unintended consequences and make smarter decisions.
One common pattern that businesses often fall into is called the “Eroding Goals” archetype. This happens when a business starts lowering its long-term goals because of short-term pressures. Instead of fixing the root cause of the problem, the business keeps adjusting its targets downward, making it easier to hit short-term goals but sacrificing long-term success. Over time, this creates a cycle where each goal becomes less ambitious, leading to a decline in overall performance.
So how does this translate to Greenwashing?
Imagine you’re a business that’s committed to sustainability. You set a goal to reduce carbon emissions by 50% within five years. Ambitious, but achievable. As time progresses, competitors emerge, costs rise, and with competing priorities, suddenly that 50% goal feels insurmountable. Rather than addressing this, reviewing and resourcing accordingly, you decide instead to lower the bar to 25%, then 10%, celebrating minimal reductions in emissions as a massive win. It’s this celebration of the eroded goals that amounts to greenwashing. Putting on a green label without doing the work you know needs to be done had you stuck with that original goal.
Another way this could play out is by separating out your Scope 3 emissions – which effectively amounts to eroding goals-led greenwashing. Scope 3 are indirect emissions that occur in a company’s value chain and are frequently the first area that businesses will instigate a slide in standards. Scope 3 presents difficulties for two reasons: It’s often the majority of a business’s carbon footprint and tracking and reducing these emissions is extremely complex. Rather than resourcing the efforts in reduction appropriately, some businesses set and report impressive Scope 1 and 2 targets separately and minimise their focus on Scope 3 reduction.
A local example is Woolworths. According to their 2023 sustainability report, Woolworths recognise that Scope 3 contributes 94% of their emissions. However, they separate out Scope 3 reduction. They’re committing to 80% reductions of Scope 1 and 2 by 2030 but only a 19% reduction target for Scope 3. So while an 80% reduction looks fantastic, it’s arguably misleading. That 80% Scope 1 and 2 reduction only represents a 4.8% reduction of their total emissions. You can see how this feels less impressive. On top of misleading targets, they are potentially missing out on value. Coming from up and downstream in the value chain, Scope 3 reduction has potential impacts on efficiencies and cost. Value that now won’t be realised.
The Cost of Greenwashing
So greenwashing is more than a miscommunication. Primarily, what it does is undermine the trust that consumers place in the brands that claim to care about the planet. It also sets a standard for others to reach down to rather than inspiring purpose and progress by striving for more.
Beyond that, it’s robbing the business of the potential to be better. Not just in a sustainability context, but as a business overall. It’s equivalent to reducing sales targets so that performance looks better. And it’s not just genuine progress towards your sustainability goals that is lost, it’s the learnings and opportunities that go with them that are lost too. If you’re willing to let your standards slide, eventually your business will fail.
Breaking the (Spin) Cycle: What Can You Do
Well then, how do you avoid falling victim to eroding goals and subsequent greenwashing? Hold the line! Don’t let your standards slip. Use the transparency of your goals to drive progress rather than submitting to failures as a source of shame. If you aren’t meeting them it’s time to reassess the actions, not the goal. The goals aren’t there to make you look good, they are there to sustain your business.
Consider taking it a step further by aiming for renewing goals. Just as eroding goals minimise results, you can maximise them by setting loftier targets when you’re doing well. Don’t rest on your laurels, do the difficult things until they’re easy, then find the next difficult thing.
Greenwashing is the enemy of progress. It’s a clear manifestation of eroding goals, where good intentions are replaced with hollow gestures. But if you don’t fall into the trap you’ll reap the value that comes with your original goals. By maintaining your standards your businesses can be profitable while also genuinely sustainable.
