Impact-washing - What is Impact-washing

November 15, 2022
Glossary
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Definition

The term “greenwashing” has been around since the 1980s.

Today, “impact washing” has been added to the lexicon of those seeking to hold companies and in particular financial institutions for their green claims.

Impact washing can be defined as any marketing claim about a product/good/services/funds triggering a change in the real economy that cannot be supported by evidence.

“Many financial institutions pretend that a change in the composition of their portfolio (such as reducing the exposure to the oil sector) automatically delivers environmental impacts,” explains Stanislas Dupré, Founder of the think tank 2° Investing Initiative and Convenor of the ISO working group that developed ISO 14097 (ISO 14097 is the standard “Greenhouse gas management and related activities – Framework including principles and requirements for assessing and reporting investments and financing activities related to climate change”).

“Today, impact washing is the norm rather than the exception. When my think tank reviewed the practices of asset managers in Europe in 2020, we found that many of them were making environmental claims and that almost all of these claims were misleading and non-compliant.”

How to stop impact-washing

To fight “Impact-washing” and to understand more deeply the impact of their investments on the populations served, investors can:

  • not only require their investees to report on a set of common impact indicators but also run periodic in-depth impact studies, field visits, and partner on external evaluations and assessments
  • evaluates its contribution to each of its investments based on an assessment of what would have happened in the absence of its investment
  • set realistic, evidence-based targets, then monitor and evaluate actual achievements, using data and evidence to measure

A few tools have been created for governments, policymakers, and regulators to tackle the issue of impact washing:

  • The standard ISO/TS 17033, Ethical claims and supporting information — Principles and requirements, which sets out internationally agreed ways to make a credible ethical claim
  • The standard ISO 14097 - Greenhouse gas management and related activities — Framework including principles and requirements for assessing and reporting investments and financing activities related to climate change, ​​which sets a benchmark for reporting financial institutions’ climate actions.
  • The standard ISO 14021:2016 - Environmental labels and declarations — Self-declared environmental claims, which specifies requirements for self-declared environmental claims, including statements, symbols and graphics, regarding products. It further describes selected terms commonly used in environmental claims and gives qualifications for their use in order to avoid green washing.

In conclusion…

Demonstrating impact has not always been high on the agenda. However today, it is not enough anymore for all organizations, from governments to for-profit and nonprofit organizations, to simply say they are acting for the planet. They need to actively and verifiably demonstrate how they are doing it and give pieces of evidence.

Measuring their impact is crucial to prove environmental and social commitment to citizens, investors, stakeholders, employees, customers.

It will become the new standard so companies have to get prepared for the use of impact measurement frameworks and impact reporting.

In order to meet these demands, consolidation of methodologies, consistency in measurements and valuations and the increase in collaborations at a sector level to ensure comparability and transparency are expected in the coming years.

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