How blockchain technology can effectively combat green­washing 

Greenwashing, the practice where companies falsely advertise their products as sustainable, poses a significant threat to the integrity of sustainable markets, hampers efforts against climate change, and compromises social justice. 

Misleading claims that paint non-sustainable products as 'green' can severely undermine consumer trust, reducing the perceived value of genuine green products and limiting consumers’ ability to make informed, sustainable choices. This erosion of trust turns markets, which could otherwise drive environmental sustainability, into ineffective entities.

The role of blockchain in mitigating greenwashing

Research indicates that providing consumers with reliable, transparent, traceable, and tamper-proof product information can significantly mitigate the adverse effects of greenwashing, particularly in the ecological food sector. 

Blockchain technology offers a more robust solution against the risks of greenwashing than traditional certification systems. By authenticating product information, blockchain not only encourages the development of sustainable products but also protects the intellectual property rights of green suppliers and guarantees a consistent supply of verified green products.

The impact on credibility and market dynamics

The prevalence of greenwashing jeopardises the credibility of products, brands, and institutions, threatening the pursuit of a sustainable future. As former U.S. Vice President Al Gore highlighted, the proliferation of misleading sustainability claims could severely impede climate progress. 

The motivation to label non-sustainable products as 'green' arises from a desire to attract a growing demographic of sustainability-conscious consumers, particularly millennials, who often base their purchasing decisions on the sustainability credentials of products, thus increasing the appeal of greenwashing for companies.

Challenges with traditional certifications

The effectiveness of traditional eco-labels and certifications is increasingly under scrutiny. These systems frequently lack robust information support and authoritative enforcement, rendering them less effective in a globally interconnected market. 

In contrast, blockchain technology offers a reliable and efficient alternative. Its decentralised and immutable ledger allows consumers to independently verify the sustainability claims of products, enabling them to make well-informed decisions.

Addressing greenwashing and advancing the green shift with blockchain

Reports from the European Commission and various studies underline the prevalence of misleading green communications, with many online claims proven to be inaccurate or unsubstantiated. Furthermore, the investment strategies of major environmental, social, and governance funds have been criticised for including companies with dubious sustainability practices.

To genuinely advance the Green Shift and effectively combat greenwashing, it is essential to harness technologies like blockchain. This strategy increases the transparency and reliability of sustainability claims and strengthens consumer trust in green markets, ensuring that authentic sustainable practices are recognised and rewarded. 

By embracing blockchain, businesses can better align with environmental standards and consumer expectations, fostering a more sustainable and ethically sound market environment.

The need for ongoing research and monitoring

Regarding market dynamics, perceived greenwashing creates conditions where consumers are deterred from making their intended sustainable purchases. This leads to market dysfunction akin to the 'lemons' problem described in the seminal 1970 paper by Nobel Laureate George Akerlof. Research suggests that access to transparent, traceable, and tamper-proof information can significantly alleviate perceived greenwashing. 

While certifications remain potentially effective, their enforcement is increasingly challenging in a global trade context. Employing a mix of strict certification enforcement alongside blockchain-enhanced information access can bolster consumer confidence and enhance the market viability of genuinely sustainable products. 

Additionally, the study underscores the necessity of monitoring market behaviour to reduce greenwashing perceptions, pointing to the critical ongoing need for research in this vital area of market sustainability.

Reference:

• Nygaard, A. & Silkoset, R. (2023). Sustainable development and greenwashing: How blockchain technology information can empower green consumers. Business Strategy and the Environment, 32(6), 3801-3813. https://doi.org/10.1002/bse.3338

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