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ECA Software: A New Threat to Greenwashers

Greenwash (verb, ˈgrēn-wȯsh) – to market a product or service by promoting a deceptive or misleading perception of environmental responsibility.

Companies are launching major ad campaigns to tout their green credentials, but many of their claims are misleading. So how can we know who’s telling the truth about supposedly green products? “Greenwashing” is eroding the credibility of environmental marketing and turning would-be green consumers into skeptics. But there’s a way to end the practice and increase transparency, and new software is a key component of the solution.

Scrutiny of green business campaigns is reminiscent of the demand to hold corporations accountable for their financial reporting. The U.S. is still a leader in financial accounting (thanks in part to accounting software systems), but we need to develop the same infrastructure for environmental accounting to prevent further greenwashing. Enterprise Carbon Accounting (ECA) software is becoming the foundation of this infrastructure, and the market is growing; roughly 60 vendors are currently providing solutions. ECA software enables companies to consistently track the many components of their carbon footprint while identifying opportunities for cost savings and waste reduction, making a whole new era of corporate environmental transparency well within reach.

For ECA software and environmental accounting adoption to drive truly green business practices and make greenwashing obsolete, we need action in five main categories:

  • Clear government action on regulations;
  • Adoption of carbon accounting principles;
  • Expansion of Scope 3 emissions accounting;
  • Better green business incentives; and
  • Demanding, informed consumers.

Clear Government Action on Regulations

lncreased coverage of existing new policies and decisive action on new legislation could quickly increase the adoption of carbon accounting and the use of ECA software. The EPA’s Mandatory Greenhouse Gas Reporting Rule, which requires companies that emit 25,000 metric tons or more of greenhouse gases annually to disclose emissions to the EPA, could be expanded to include smaller businesses (who collectively have a large carbon footprint). Decisive action on new legislation is also a potential boost to ECA software adoption and a threat to greenwashing.

Adoption of Carbon Accounting Principles

Stricter requirements for disclosure of standardized corporate emissions information, now possible with the adoption of ECA software, would provide a far-reaching and objective method with which to examine a company’s environmental record. When such a measure exists and becomes widely used, one will only need to refer to these numbers to get an impression of a company’s overall environmental performance. It will be a lot more difficult to conceal adverse impacts on the environment in implementing greenwashing campaigns.

Expansion of Scope 3 Emissions Accounting

Mandatory inclusion of suppliers’ emissions and other indirect emissions sources in company environmental reports (Scope 3) would prevent under-reporting of emissions; absolutely all emissions would be measured and reported without room for loopholes. Requiring Scope 3 measurement would also spread more adoption of general carbon accounting throughout the supply chain; when a business must account for Scope 3, it must ask its suppliers to track their carbon footprints. Then those suppliers must ask their own suppliers and so on to create a tidal wave of carbon accounting and emissions transparency – the greenwasher’s worst nightmare.

Better Green Business Incentives

Using ECA software to identify eco-friendly savings opportunities can make it cheaper to truly go green, making it unneccessary for businesses to greenwash in the first place as they find that shrinking their carbon footprints and minimizing costs can go hand-in-hand. Government incentives can also encourage eco-friendly business practices. A global survey this year by workspace solutions provider Regus concluded that 63% of U.S. companies need more tax breaks to accelerate green investments. ECA software can develop to alert users to new opportunities to take advantage of government incentives as more of these opportunities emerge, ensuring that green sincerity is in the best interests of businesses.

Demanding, Informed Consumers

Demanding the hard numbers from standardized carbon accounting reports, while boycotting the proven greenwashers, forces businesses with green marketing campaigns to prove their sincerity or else re-think their public relations strategies. After all, fully informed consumers make deception by greenwashing impossible. When standardized carbon accounting is required and ECA software is available, companies won’t have any more excuses to conceal their carbon footprint. At that point, the responsibility will rest with the consumer to leverage informed demand and phase out greenwashing entirely.

Hunter Richards is Accounting Market Analyst at Software Advice.