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Going green isn't as easy as it seems
While the most common New Year’s resolutions focus on exercise and weight loss, a number of people will set environmentally sustainable resolutions. Some of these resolutions are tied with the diet component of weight loss, like eating less meat, but others are specific to changes that impact carbon emissions. For example, a popular resolution is rethinking travel, whether that’s changing the daily commute or rethinking personal vacations. Before the pandemic, transportation was responsible for nearly 29% of the US’s greenhouse gas emissions. While carbon offsets are a popular way for people to reduce their environmental impact, it isn’t the only way to purchase sustainability.
One of the recommendations by Popular Science was to switch to a green bank. A growing number of financial technology companies focus on investing in companies that aren’t heavy carbon emitters. Some companies may invest in local businesses while others invest directly in clean energy companies. Aspiration, an online financial tech company, promises to plant a tree every you make a purchase if you opt into a program that rounds up your change to the next dollar. It’s similar to Bank of America’s Keep the Change Savings Program, but the change goes to the bank instead of your savings account.
Do programs like this really make the difference they claim to make or are they just another example of “greenwashing”? For Aspiration’s platform, in particular, ProPublica conducted an investigative report on their claims and found some surprising results. Some claims appear manipulative, like how they count the number of members or how they measure profitability. For the environmental claims, it wasn’t clear that Aspiration is making the impact it claims. According to the report, Aspiration has only planted about half of the trees they claim to have planted. It turns out that the “total trees” number is the number of trees they intend to plant, not the actual number of trees that have been planted. Switching banks can be a hassle in and of itself, but it’s even harder for a single person to verify that their decisions have the intended impact. Forrest Fleischman, an associate professor in the Department of Forest Resources at the University of Minnesota had this to say about the program:
It’s easy to tie tree-planting to a transaction. But if someone says they are planting a tree every time X happens, it doesn’t really tell you they’re doing a meaningful activity, and it very well could be a method of greenwashing.
A lot of environmental advertising can actually just be a cover for cost-saving decisions by firms. Take for example the practice of reusing towels or refusing housekeeping service at a hotel. Signs are often posted on bathroom counters asking customers to do their part in saving the environment. The environmental pitch is that this decision saves the environment by reducing water associated with cleaning towels. This decision also saves the company money since they’re using less water, detergent, and labor to clean those towels. It’s a lot easier to ask customers to save the environment than it is to ask them to do things that save the company money, but consumers are starting to catch on.
Similar tactics are used in the financial sector to advertise everything from green mutual funds, green bonds, and green credit cards. A lot of companies claim to avoid investments in heavily polluting industries, but end up investing in those companies or their suppliers anyway. Aspiration’s mutual fund contains more shares of Southwest Airlines than sustainable energy stocks. Companies can usually get away with these tactics because it’s costly for consumers to understand exactly what they’re purchasing when they’re buying green products with the intention of saving the environment. Greenwashing concerns have grown significantly and in April 2021, New York City filed a lawsuit against Exxon, BP, and Shell for misleading advertisements around their green initiatives.
Misleading advertising campaigns are a violation of the Federal Trade Commission Act, but the Biden administration is working on new measures to specifically reduce greenwashing by creating new climate change divisions at Treasury Department, Federal Reserve, Commodity Futures Trading Commission, and the Securities and Exchange Commission. Despite legislative efforts to prevent greenwashing, businesses’ profit motives may incentivize continued deception through marketing or legal loopholes.
Take Aspiration’s plan of planting a tree every time a member swipes their card. If a member opts into the Plant Your Change program, the bank will automatically round up the total and transfer the money to Aspiration. The bank will then take that money and plant a tree on your behalf. What’s the problem? It only costs around 10–20 cents to plant a tree, but Aspiration promises to plant trees based on the number of transactions, not the size of the roundup. If a customer swipes their Aspiration-backed card for a bill of $4.10, Aspiration will transfer 90 cents to their own tree-planting account. Aspiration will spend 20 cents to plant the tree and the other 70 cents is counted as revenue. But does it matter?
The customer still planted a tree that wouldn’t have been planted had they been using a different bank. Offering green options can be a profitable strategy for companies and does have the potential to help the environment as well. The environmentally-minded card swiper could have saved their own change and planted more trees on their own, but they likely opted in to the program because it’s easier to let someone else handle the process even if it means it will be more expensive than necessary.
Does reusing towels help cut down on water? Yes, of course, but it also saves the hotel some money. Does swiping your Aspiration credit card result in trees being be planting? Yes, eventually, but it also means that Aspiration is profiting from each tree planted. In some sense, both company and customer are benefiting. The main issue with greenwashing is whether consumers are actually getting the product that they believe they are paying for. If declining fresh towels saves the company money, shouldn’t the price of the hotel room be cheaper? If it only costs 20 cents to plant a tree, shouldn’t more trees be planted when the total is rounded up by more than 20 cents?
If customers are purchasing freshly planted trees or carbon offsets, it’s hard to actually know if those events occur. Blind trust in a company is probably not a good idea and the government already has standards associated with environmental claims. That doesn’t stop companies from using deceptive advertising claims. One solution may be third-party companies that verify environmental claims, but that just adds to the cost of being environmentally responsible. If companies were sincere in their environmental motives, that money could be used to further reduce carbon emissions instead of proving that they’re doing what they claim to be doing.
What does this mean for you personally? If your goal is to really have a more sustainable impact, it likely means that it will become increasingly important for independent research to prevail. If you have any recommendations for people who are considering environmental resolutions, please leave a comment by clicking the button below. A little information can go a long way:
23% of Americans intended to set New Year’s resolutions for 2022 [YouGov]
As of this morning, Aspiration claims to have planted 49,494,561 trees [Aspiration]
An estimated 40% of firms’ green claims could be considered misleading [International Consumer Protection and Enforcement Network]
Aspiration paid more than $300 million to become a founding partner of the Los Angele’s Clippers new arena [CNBC]
There are roughly 400 trees for every human in the world [Scientific American]
Russia holds 20.09% of the world’s forests [Our World in Data]