Last updated: CPG carbon neutrality: The murky world of environmental claims

CPG carbon neutrality: The murky world of environmental claims


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Hoping to demonstrate environmental responsibility, more CPG brands are making carbon neutrality and recyclability claims on product labels these days.

The rush to demonstrate environmental sustainability comes as concern about global warming grows among consumers, employees, business partners, and investors.

At the same time, inconsistencies around carbon neutral labeling and a lack of standards around environmental marketing can make it risky. Brands must avoid greenwashing at all costs and back up their claims with real action.

CPG carbon neutrality: The pressure points driving brands to claim green practices

Michael Vandenbergh, a law professor at Vanderbilt University and co-author of Beyond Politics: The Private Governance Response to Climate Change, says global warming concerns are leading brands to take action.

“We are seeing a growth in carbon labeling and neutrality claims because people are becoming legitimately concerned about climate change,” he told us.

“Consumers are looking for some way to act that’s consistent with what they know needs to be done, and information on labels can help with that.”

More specifically, Vandenbergh says brands are motivated by five different pressures, including:
  1. Customers: A GreenPrint survey show 66% of U.S. consumers and 80% of young people are willing to pay more for sustainable products. But 78% of those surveyed admit they don’t know how to identify environmentally friendly companies. Labels can provide clarity.
  2. Employees: Similarly, 67% of respondents in an IBM survey say they’re more willing to apply for, and 68% are more willing to accept positions from, companies that are seem to be environmentally sustainable.
  3. Supply chains: Many companies won’t do business with supply chain partners who don’t adhere to at least minimal standards for carbon neutrality. So, brands must fall in line or risk losing valuable business relationships. In fact, Vandenbergh plans to release data showing 80% of the largest global firms and seven global sectors already impose environmental requirements on suppliers.
  4. Major investors: Pressure from investors to become more aligned with climate mitigation is forcing many companies to become more sustainable. Vandenbergh notes that all six of the largest lenders in the US have made major climate commitments. Institutional investors have boosted sustainable and impact investing activity by 81% over the past four years. If startups want to access that pool of money, it helps to be able to demonstrate environmental traction through labeling.
  5. Operational efficiency: Every business, especially in a struggling economy, feels pressure to improve operational efficiency. Efforts to reduce carbon footprints often start by finding places to improve efficiency, like distribution routes or manufacturing processes, that result in cost savings to benefit the bottom line.

Environmental labels: Rinse with a bit of skepticism

Carbon neutrality labels and environmental claims, however, are far from consistent, which can make consumers skeptical.

Even though carbon neutrality is clearly defined as achieving net zero greenhouse gas emissions (GHGs), brands can say they’ve achieved that status without completely doing so on their own. They can do this through carbon offset credits.

The Massachusetts Institute of Technology defines carbon offset credits as “tradable “rights” or certificates linked to activities that lower the amount of carbon dioxide (CO2) in the atmosphere.”

Each carbon credit represents a tonne of carbon that has been removed from or prevented from going into the environment. By buying these credits, a person or group can fund projects that fight climate change, instead of taking actions to lower their own carbon emissions.

In other words, a company that’s failed to meet its carbon footprint goals buys credits from another company that has exceeded them. In that way, they’re able to claim they’re doing their part for the global ecosystem.

The practice can be hugely beneficial for companies in industries like energy and finance where it’s particularly difficult to completely curb GHG emissions. Roughly a third (36%) of S&P 500 companies buy carbon offsets, according to a recent Ecosystem Marketplace analysis.

Carbon neutrality statements can be risky business

Yet, using offsets to make carbon neutrality claims on labels – especially if that fact isn’t fully disclosed – can lead to costly legal and public relations problems for brands.

The number of lawsuits related to corporate environmental claims is growing, fueling consumer skepticism.

Some companies may also be taking advantage of inconsistencies and lack of standards for how recycling is measured and communicated to consumers. The Wall Street Journal notes a labeling program is now saying companies claim their plastic packaging is “widely recyclable,” even though EPA data shows only 2.7% of plastic material is recovered each year.

The controversial change builds on data showing U.S. consumers put 60% of their polypropylene containers in recycling bins – the bare minimum for making such claims under the law.

The push for transparency & credibility

Companies that are making progress on emissions goals and want to appear credible have a few options. They can either print claims on their own and run the risk of being called to task or can tap into a growing number of independent services providing marks of certification for climate accountability.

One such firm, Climate Neutral, a nonprofit, has certified 294 companies, 80% domestic and 20% abroad, including Allbirds, Kickstarter, Klean Kanteen, and REI, representing more than 1 million tonnes of carbon, according to Fast Company.

To earn the certification, companies must go through a rigorous evaluation process involving their complete emissions, supply chain history, and carbon offsets, among other considerations.

Vandenbergh says that although he agrees with calls for more disclosure around how companies arrive at what they put on their labels, he thinks that demands for more information can go too far and deter them from labeling at all – which would be unfortunate long term.

“I would love to see a world in which all major companies felt compelled to make a claim, even if only 80% of them complied with it,” he says. “Even near misses by a lot of companies that are committing to carbon neutrality would still be a good thing.”

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