Protests against ‘greenwashing’ at an Amsterdam clothes store in November 2020. | Image: Robin van Lonkhuijsen/ANP/Keystone

Companies like to appear as green as possible. That’s why one textile giant today publicises its policy of recycling old clothes. But according to some reports, this doesn’t stop it from burning unsold new goods without telling anyone. Other companies go so far as to spread false information in order to appear environmentally friendly.

Such ‘greenwashing’ isn’t actually illegal, but small investors don’t like it – as has been shown by a study carried out by Università della Svizzera italiana. The test subjects had to decide whether to buy shares in fictitious companies, but first had to read files about their supposedly varied acts of greenwashing.

Potential investors proved particularly allergic to active lies, whereas diversionary tactics tended to be tolerated. If companies want to attract small-scale investors, says Peter Seele, the head of the study, then they should cease all misleading communication. But it remains to be seen whether complete silence from such companies would actually be more effective.

Gatti et al.: Green lies and their effect on intention to invest. Journal of Business Research (2021)