The hidden risks of greenwashing and bluewashing
ReGen Strategic
Sustainability & ESG. Stakeholder Engagement. Strategic Communication.
Sustainability is no longer just a nice-to-have in business; it’s a must. In Australia, as in the rest of the world, companies are under the microscope to show they’re doing their part for the environment and society. But here’s the catch: it’s not enough to just say you’re green. If you don’t back it up with real action and tangible evidence, especially through a thorough materiality assessment, you’re walking a fine line toward blue and greenwashing – and that’s a dangerous game to play.
Greenwashing is when a company tries to look environmentally ‘sustainable’ without actually doing much to earn that badge, while bluewashing focuses on a company’s social rather than environmental performance. Think of it as putting a green label on a product that’s still harmful to the environment or making grand sustainability claims that aren’t backed by real action. It's about perception over reality – and it’s a huge risk.
In Australia, where sustainable business practices and credible claims in relation to social and environmental performance are becoming a greater concern for stakeholders, green and bluewashing can blow up in your face. With consumers, investors, and regulators all paying close attention, those who get caught out can suffer serious reputational and financial damage.
Enter the materiality assessment. This tool helps businesses pinpoint the environmental, social, and governance (ESG) issues that matter most to their stakeholders. It’s the roadmap for prioritising what’s truly important. Done right, a materiality assessment guides your sustainability strategy. Done poorly – or skipped altogether – it’s like trying to build a house with no blueprint. You end up with a shaky foundation that can crumble under scrutiny.
So, why does skipping this step put you at risk of blue and greenwashing? Let’s break it down.
Different groups care about different things. Your customers might want you to reduce plastic waste, while investors are focused on your carbon footprint, and local communities could be more concerned about job creation. Industry and NGO groups push alignment with specific ESG frameworks and standards, which may or may not be relevant to your specific stakeholders and your company’s local and operational context. If you don’t take the time to find out what really matters to through a proper materiality assessment, you’re essentially guessing. And guessing wrong is a surefire way to get called out for green and bluewashing.
A weak or non-existent materiality assessment can lead companies to focus on the wrong things. You might boast about using recycled paper in the office, while ignoring the fact that your supply chain is a major contributor to deforestation; or laud your donations to a community sports team, while paying no need to the severe health and wellbeing impacts of your project’s noise and dust emissions. The result? You’re shouting about the small stuff, while stakeholders are waiting for you to address the real issues. This disconnect between company performance and stakeholder expectations is exactly what blue and greenwashing is about, and can also take the form of claims that are so poorly defined or broad that its meaning is likely to be misunderstood; comparing apples with oranges; or selectively picking data that puts the company in a good light while ignoring information that doesn’t.
In the age of social media, people don’t hold back. If your business is seen as blue or greenwashing, your customers will let you – and everyone else – know. Brands that have been caught blue or greenwashing, from fast fashion companies to automotive giants, often see their reputations take a nose-dive. This is particularly risky in Australia, where environmental activism is strong and consumers have little patience for corporate spin.
Once trust is broken, it’s hard to get back. Blue and greenwashing can lead to long-term damage to your brand, affecting customer loyalty, investor confidence, and even employee morale. No one wants to work for or invest in a company that’s faking its environmental and social credentials.
The impact goes beyond the court of public opinion, with regulators starting to take this more seriously. The Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC) have been clamping down on misleading sustainability claims, with penalties in place for those found guilty of blue and greenwashing. If your company isn’t addressing what really matters, those claims might get you in hot water fast. Just last month, ASIC’s greenwashing action against Vanguard Investments Australia resulted in a record $12.9 million penalty.
Investors have also been paying closer attention. ESG factors are becoming a key part of investment strategies, and investors are increasingly putting their money into companies that can demonstrate genuine sustainability practices. If your claims don’t hold up under scrutiny because you skipped the materiality assessment, you’re not just risking your reputation—you’re risking your funding.
The good news? You can avoid blue and greenwashing by doing your homework. Here’s how:
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A solid materiality assessment isn’t done in isolation. It involves talking to the people who matter most – your customers, investors, employees, and local communities. Find out what they care about, and then make sure your sustainability strategy reflects those priorities.
No one expects perfection overnight. What stakeholders want is transparency. Be honest about the challenges you’re facing and the steps you’re taking to address them. This builds trust and shows that you’re serious about sustainability, not just paying lip service to it.
Sustainability isn’t a one-off campaign; it’s a long-term strategy. Set clear, achievable goals and show your progress over time. When you’re in it for the long haul, it’s easier to prove that you’re serious about making a difference.
A sustainability report filled with nothing but good news a red flag. Every company and project poses potential outbound risks to the environment and communities; assessing, managing and reporting on these, alongside evaluating and reporting on benefits and opportunities, is key to avoiding accusations of selective disclosure.
In Australia’s increasingly socially and environmentally conscious market, businesses can’t afford to take shortcuts on sustainability. A thorough materiality assessment is your safeguard against blue and greenwashing, helping you align with stakeholder expectations, deliver on meaningful issues, and stay on the right side of both regulators and public opinion.
Without it, you’re gambling with your reputation, your bottom line, and your future. So, if you’re serious about being a sustainable business, do the work—because while blue and greenwashing may score short-term points, it’s likely to result in a long-term loss.
ReGen Strategic materiality assessments are delivered through our sustainability & ESG practice. Talk to us today about how we can deliver a bespoke materiality assessment that sets your organisation’s sustainability strategy and ESG reporting up for success.