What constitutes “healthy” food? Which energy sources are truly “green”? Consumers can get lost easily between fact and fiction. 

In this INSEAD Explains Sustainability episode, Thomas Keusch, Assistant Professor of Accounting and Control at INSEAD, discusses the role of non-governmental organisations in steering companies towards more sustainable operations and preventing greenwashing.

Consumers and regulators are increasingly concerned about greenwashing, where businesses portray their environmental practices, risks and impacts to be more favourable than they are. This may include advertising “false solutions” to sustainability challenges or making factually incorrect claims about their products. 

Besides greenwashing, some businesses are simply operating in ways that harm the environment and society. Advocacy NGOs can ensure sustainable business practices by acting as a “watchdog” in monitoring companies and sounding the alarm when companies engage in unsustainable or unethical practices.

Beyond policing, NGOs can be worthy partners. They have played collaborative roles as expert advisers to help firms move towards more sustainable operations. For instance, to help preserve the Amazon, Nike engaged with Greenpeace to create a policy requiring Nike leather suppliers to certify that their leather does not originate from cattle raised in the Amazon.

Moreover, the influence of NGOs is extending to the regulatory sphere. The European Securities Markets Authority (or ESMA) has announced that it will consult reports produced by NGOs as a source of information about corporate greenwashing. To sum up, NGOs are an important part of the sustainability ecosystem.