How Profitable is Green Marketing?

With climate change worsening, many companies are leaning towards sustainable development to limit greenhouse gas emissions. Many people only want to support eco-friendly products. This can have a negative effect on consumerism for companies that don’t use this. So many companies have started to use green marketing to show consumers they’re changing their practices to support sustainability, this is called green marketing. While others are using greenwashing, an illegal practice of deceiving how sustainable the company is, as an attempt to foster false hope in the consumer and hopefully increase profits as a result. Greenwashing has been found in several industries such as fuel, automobiles, and fashion. 

Green Marketing vs. Greenwashing

Green Marketing is the tactic of eco-friendly products. It involves sustainable changes made at the production level that affect advertisement structure. However, this is different from greenwashing. Greenwashing is a deceptive marketing strategy used to make the company seem more sustainable than it actually is. While there are plenty of companies that actually use Green Marketing, such as Starbucks, Patagonia, and Apple, others use greenwashing to deceive consumers into buying their product. Greenwashing runs rampant in the fashion industry, specifically fast fashion. With the rise in second hand clothing and sustainable fashion, many fast fashion companies are using greenwashing to make their brand appear environmentally friendly so consumers will buy thinking they are guilt free. Companies such as H&M, Zara, and Uniqlo have attempted to rebrand themselves as eco-friendly, but actually use greenwashing by hiding certifications of sustainability, producing large carbon footprints, and mass producing new clothes everyday that end up in landfills. 

Costs

With the battle between green marketing and greenwashing growing, which one is more profitable? The answer is green marketing. Greenwashing costs more if you get caught. In 2009, Volkswagen used greenwashing to claim their cars were low in emissions, but it was new software that allowed them to produce high emission vehicles for low. Volkswagen was fined a total of 25 billion dollars for using greenwashing instead of real changes and an additional 14.7 billion dollars settlement for consumers that were lied to, totaling $40 billion. In 2022, oil company ENI was fined 5 million euros for claiming their diesel fuel was sustainable. Green marketing is nowhere near cheap either since it starts at the production level. That means sustainably sourced fabrics, parts, and fuel and advertisements and packaging, however the fine for greenwashing is much larger.

Consumers

When companies are caught greenwashing, or even found to have suspicious activity in environmental departments, customer satisfaction drops around 1.34% which results in a large hit to net earnings, according to the Harvard Business Review. A study by McKinsey & Company concluded that 66% of consumers claim a sustainable life is important to them. A research study at Jadara University revealed that Green marketing in the automobile industry led to an increase in profits. The use of green marketing in production stages also helps companies limit spending in operations for resources. Reducing environmental impact has a strong increase in return on sales.

Conclusion

As media coverage on climate change increases, consumers desire to live a sustainable life will also increase. It is in a company's best interest to change with the consumers and move to build a more sustainable, eco-friendly brand using green marketing. Green marketing is the brands best chance at an increase in profits rather than greenwashing, which can lead to a larger loss of profits if caught doing. Greenwashing also leads to customer dissatisfaction and loss of loyalty, whereas green marketing leads to an increase in customer satisfaction and a greater return on sales. What are your thoughts on sustainability practice? Do you prefer an eco-friendly company to one that's not?