Greenwashing harms customer relations – study

LONDON – A new study found that businesses which make misleading marketing claims or ‘greenwash’ damage their customer relationships. Researchers studied over 200 publicly traded US firms, looking at these companies’ stated goals and actions related to green product innovation over an eight-year period. This information was tracked alongside customer satisfaction data from the American Customer Satisfaction Index (ACSI), social responsibility data from Thomson Reuters’ ASSET4 ESG database, and accounting and financial data from WorldScope.

They found customers are highly likely to be aware of the gap between stated green claims and implementation. “Customer satisfaction levels, as measured by ACSI, fall as the number of goals outweighs the number of actions,” say the researchers. “This disconnect triggers perceptions of corporate hypocrisy, which affects the customers’ experience with the product itself.”

However, their research also suggests that a company’s reputation for product quality or innovation may partially mitigate such a negative impact on customer satisfaction.

Previous studies on greenwashing have focused on the impact on corporate reputation of greenwashing. This is the first detailed study to attempt to directly measure the impact of misleading marketing claims on how customers experience a company’s products or services.

Writing in the Harvard Business Review, the researchers state: “We found that customers are highly likely to be aware of the gap between stated goals and implementation, and that customer satisfaction levels, as measured by ACSI, fall as the number of goals outweighs the number of actions.”

They add: “In a surprising twist, we found that customers, while punishing companies they thought were greenwashing, gave a pass to those whose brand they held in high regard. They weren’t more likely to support these companies than others, they just no longer factored failed benchmarks into their satisfaction. According to our estimates, companies with a high capability reputation — i.e., a reputation for high product quality or innovativeness — managed to maintain their customer satisfaction levels intact when perceived to be greenwashing.”

The study team suggest that managers need to be mindful not to over-promise on marketing claims. “The key is consistency. It is better to promise three and deliver three than to promise eight and deliver six,” they state.

The study authors were Loannis Ioannou, an associate professor of strategy and entrepreneurship at London Business School; George Kassinis a professor of strategy at the University of Cyprus; and Giorgos Papagiannakis, an assistant professor of entrepreneurship and sustainability at the University of Peloponnese.

Full paper (behind a paywall) here: The Impact of Perceived Greenwashing on Customer Satisfaction and the Contingent Role of Capability Reputation | SpringerLink