Sample Essay on Effects of Greenwashing on the Companies Involved

Effects of Greenwashing on the Companies Involved

Executive summary

Greenwashing refers to phony corporate initiatives designed to give the illusion that the company is socially responsible when it is not quite as exposed from scandals emerging from the company’s unacceptable social behaviors. Due to emerging trends of increased demand for environment friendly goods and services amongst consumers and investors, most companies whose main priority is skyrocketing profits as opposed to the quality of the product they produce have been known to use excessive media advertisement in portraying themselves as being environmental conscious to attract investors and consumers while engaging in non-environmental friendly practices as observed in the Volkswagen, Walmart, Nike, Coca-Cola, British Petroleum and Seaworld scandals.

Greenwashing often leads to increased levels of distrust for the company’s products amongst consumers who in most cases are not in a position to tell whether a company’s claims of being green are phony or genuine. Another disadvantage of greenwashing is that it leads to huge losses to the company most of which take too long to gain their status and in worst case scenarios, some are unable to revive themselves completely. Phony claims of greenness on the part of the company can be hazardous to the environment or even life threatening as observed in the case of BP’s oil spills. In most cases, the exposure of a greenwashing company leads to massive job losses among workers due to layoffs by managers in an attempt to reduce losses accrued from such exposures.  It also leads to financial losses for the company mostly emanating from fines from law suits mostly from the investors or /and workers and compensations from workers who have been injured or compensation to the families of workers who might have died due to injuries from accidents at work due to negligence or ignorance on the side of the company. With proper strategies and formulation of different strategies, most affected companies are able to recover the value of their stock prices although in some cases, the recovery process is slow for some companies. The study findings show that for most of the companies involved, a complete change of administration is necessary in dealing with such scandals in that most of the CEOs either stepdown or are fired following the exposure.

Volkswagen’s ‘Emissions gate’ Scandal

The Volkswagen emissions scandal first came to light on 18th September 2015 when it was realized that they were in violation of the Clean Air Act. This is after it was found out that their ‘clean diesel cars’ claim was in fact not true in that after being tested on the dynamometer, it was realized that they had installed a cheat device on their vehicles. This was a software programed to falsify readings in an emissions test in order to pass the standards set for regulations in that when being tested, the vehicles showed only a controlled amount of emissions because of the turbocharged direct injection (TDI) diesel engines installed while in real sense, the vehicles produced up to 40 times of the toxic emissions while being driven.

After the exposure of their greenwashing, Volkswagen was negatively affected in a number of ways. For instance, their market cap fell by 25%, stocks went down by 18% and their sales reduced by 25% in a period of two months.  The then CEO resigned citing his reasons for resignation to have been connected to the irregularities found on the software programed  while the head of brand development and the research and development head were suspended (Du & Deborah). The scandal brought about consumer mistrust in the brand and lack of loyalty on the company in addition to completely tarnishing the company’s image because of their deceptive claims (Lynes). The company also faced a charge of billions in penalty for knowingly violating the Clean Air Act in addition to the millions in losses accrued from the recalled vehicles.

The graph shows the fall in Volkswagen’s stock price soon after the greenwash exposure and the slow increase in the stock value with time.   Series 1 is a representation of Volkswagen’s stock value in June 2015 before the scandal and series 2 represents performance of Volkswagen’s stock price after the scandal

The ‘Blackfish’ Effect to Seaworld

Seaworld’s greenwashing was brought to light in January 2013 when a documentary by Gabriella Cowperthwaites was aired about an orca named Tilikum that was involved in the death of three people including his trainer. The film mostly featured the plight of workers and the killer whales in captivity leading to a public out roar against Seaworld. The film made people Seaworld who for years had been considered as a place where the dolphins would be kept, treated and nurtured after being rescued from the wild while on the contrary, it emerged that the orcas were actually captured from the oceans by Seaworld and exposed to poor conditions for instance living in a very small tank as opposed to the oceans, being punished for not performing to the Seaworld’s standards by being denied food or by being locked up in the small holding tanks the entire day.

Seaworld suffered immensely after the release of the ‘Blackfish’ documentary. There was great backlash and outrage from the public. Shareholders, investors and partners like South West airlines pulled out almost immediately for fear of being branded as supporters of human cruelty. Financial losses accrued from the greenwashing were huge mostly from the poor attendance of locals and tourists as a result of campaigns from animal rights activists like PETA and from boycotts of the parks’ activities and performances by celebrities. In addition, Seaworld was slapped with lawsuits from investors who claimed to have been kept in the dark about the conditions the whales were kept under (Pedicini). Seaworld experienced a major 83% drop in income after the release of the documentary exposing their greenwashing. This drop was due to cancellation of performances by celebrities like the Heart, Willie Nelson and the bare naked ladies bands. Performances from such celebrities would have earned Seaworld a lot of money in the form of tickets sold to both locals and tourists. In 2015, they earned less than $6 million as compared to the $37.4 million earned in 2015. Attendance to the parks dropped by around 100000 visitors from 6.58 to 6.48 in 2014. Consequently, orca shows were banned from Seaworld and other related theme parks. According to research, the stock prices reduced by 33% in a day after the release of the documentary (Kosman).

Series 1 is a representation of Seaworld’s stock price before and during the ‘blackfish’ effect.

Series 2 shows the fluctuating value of the Seaworld stock after the effect and

Series 3 shows the increase in Seaworld’s stock value before the ‘blackfish’ effect.


BP’s Deep Water Horizon Oil Spill

Beyond petroleum, formerly British petroleum was the world’s second largest producer of fossil fuel that prided itself for decades as being one of the most environmental conscious, green energy enterprise. The company backed up its green energy public relations claims by investing in solar power, bio fuels and carbon fuel cells, but underneath it all, they were looking to expand their territories oblivious of the obvious dangers they would most likely encounter. According to Walker, the green advertising by BP were merely public relations stunts pulled to appease the public since their records showed a relatively small margin in their investments of 1.39 % investments on solar initiatives and 2.79 % in biofuels compared to their 93 % investment in oil and gas.  While the company was getting appraisals for caring about the environment, it was realized that it was phony. One of the greatest oil spills in the gulf that led to massive deaths of wildlife emanated from what investigations would determine to be as a result of negligence and cost cuts and ignorance on the part of BP.

Blasts that left scores of its workers hurt and claiming the lives of fifteen workers were also as a result of failure and ignorance by BP to rectify conditions that were hazardous to its workers. It was also discovered that BP was engaging in manipulative market dealings. After the exposure, BP was slapped with numerous lawsuits from investors. Their stock took a nosedive as a result of the fines from their negligence, violations of safety and from compensating the injured workers and families of the workers that died following the blasts. Between April 20th and June 25th 2010, BP shares lost 54% on the New York Stock Exchange and the same amount in London.


Source: Google finance

From the graph, the stock value is relatively low after the exposure but with time, the stock value increases greatly due to changes in the company’s operations, adopting of measures that promote customer and investor loyalty and trust in their brand as well as formulation of strategies that favor their operations. BPs stock market value increases with time due to increased investor trust in its brand as compared to other companies like shell. Which means that although at a slow pace, BP is most likely going to fully recover as a result of this backing from investors and consumers.

Coca-Cola’s Greenwashing

In its public relation advertisements, Coca-Cola has for the longest time claimed to be involved in activities and products that are environmental friendly and to be supporting programs that support and protect the safety of the environment.  Coca-Cola’s advertisement of its bottle as environmental friendly and causing no environmental problems was found to be phony according to the Danish and European marketing act since there was no documented proof that the bottle had any positive reductions in the emissions of carbon dioxide. It was also found out that Coca-Cola was draining water from drought stricken areas where their plants are located in Southern India and Latin America (Kerr). This in turn rendered the farmers in this areas unable to irrigate their crops since all the water had been redirected to the plant by the company. Additionally, a Coca-Cola plant had been forced to shut down in Kerala India due to allegedly contaminating the water.

Coca-Cola which also manufactures Dasani drinking water has also faced public backlash for piping water from drought prone areas in California and for purchasing the municipal water from Downey, San Leandro and Anaheim. Researchers have claimed that the coke healthy ‘green’ drink is merely a faux and a publicity stunt aimed at attracting the health conscious customers since there is no actual documented proof that the drink is any different from its previous form. Despite being one of the most successful brands in the world, the exposure of its greenwashing brought about financial constraints for Coca-Cola. Between 2003 and 2007, their brand value went down by US $ 5.1 billion but after taking up initiatives in India, their stock prices went up by 2 %. The hit on Coca-Cola’s stock was however not big since the controversy surrounding them was not as negative as that of Volkswagen or BP (Trumpbour 53-60).

Series 1 represents Coca-Cola’s stock performance during the greenwashing scandal and after implementing some policies to earn back customer trust.

Series 2 represents Coca-Cola’s stock performance before and during the scandal.

Series 3 represents Coca-Cola’s high stock performance before the scandal.

Nike’s Sweatshop Crisis in The 90s.

Nike’s greenwashing scandal was exposed following an audit done by Ernst and Young of Nike’s corporate plant in Vietnam.  The audit exposed the unfair working conditions workers were subjected to. The reports exposed the plight of workers showing that most of the workers who were mostly young ladies in their early twenties or late teens would be forced to work for more than 10 hours a day every day. They would work overtime exceeding the allowed hours in Vietnam for a minimum wage of $10. The report also showed that contrary to Nike’s claims of ensuring a safe, healthy and comfortable working environment for its workers throughout the world, most of the workers in Vietnam were exposed to toxic chemicals including carcinogens which resulted in respiratory diseases among a good number of the workers.

The company failed to provide the workers with protective masks and gloves thus exposing them to more danger. It was later discovered that those suffering from respiratory problems would still be required to work with the toxic chemicals and would not be allowed to move to non-chemical areas which posed risks to their lives (Greenhouse). The workers complained of harassments and verbal abuse from their managers. Following the exposure and public out roar in addition to demonstrations by college students against the company, Nike experienced a heavy decline in sales and was forced to lay off some of its workers.


Source:” Journal of Marketing; New York; Jul 2000.

From the graph, the stock value fell soon after the exposure but there is a slow increase in the stock value which can be as a result of proper public relation moves by the company thus slowly gaining back the trust of shareholders, investors and customers.

Walmart’s Ethical Scandals

Despite being the world’s biggest retailer and the world’s biggest private employer with over 1.2 million employees, Walmart has been marred by controversies especially following the release of the film ‘Walmart: the high cost of low price’ that highlighted the plight of workers amongst them including the retailer’s policies against workers’ unions, poor working conditions, exploitation of workers and insufficient health care (Kurtzleben). It was also discovered that Walmart exploited workers by requiring overtime, denying them minimum wage and in some cases, workers claimed to have been physically abused by the supervisors. Walmart failed to supply enough working/safety tools for workers for instance gloves for their fabric cutters with reports claiming it was easier for Walmart to have a worker’s blood washed off of a fabric than for them to buy    the gloves.   Some of the workers in California claimed to have been denied the 30 minutes paid lunch break that is customary to the rules and regulations of workplaces.

Walmart is faced with numerous class-action law suits each year from employees and is forced to pay hefty sums in penalties, compensational and punitive damages.  Aside from the employees’ grievances, Walmart has been accused of forcing the small business community out of business due to their exaggerated low prices which in a way forces suppliers to either comply with their extremely reduced prices or be face the risk of running out of business as was the case with Kraft Foods which was forced to shut down 39 of its plants due to Walmart’s constant insistence of lower prices. In addition, Walmart has been the subject of criticisms for years for always donating money in support of politicians who are against environmental conservation despite their claims of supporting the environment.  Amidst all these criticisms, Walmart continues to thrive. This factor has been largely attributed to the fact that Walmart produces the basic necessities at considerably cheaper prices compared to other businesses hence the customers ‘need to keep going back despite its bad public relation.  Walmart accounts for  a big percentage of revenue in companies such as proctor and gamble   thus making such companies dependent on them (Hopkins).

Series 1 is a graphical representation of Walmart’s performance during the scandal.

Series 2 shows the small effect the scandal has on Walmart’s stock since it stabilizes fast after the scandal.

Series 3 is a representation of Walmart’s performance during and after the scandal.


Greenwashing generally brings about bad public relations to any company as observed from the above companies that have been known to engage in it. It tampers with the customer and investors loyalty to the brand. Greenwashing has also been known to heighten consumer/customer mistrust on the companies’ products and services as witnessed in the case of Volkswagen, Seaworld, Coca-Cola and the Nike controversy. In essence, greenwashing usually has major impacts on the stock of any given company. The most common outcome of the stock value of a company that has been exposed for having engaged in greenwashing practices is a decrease in the value and price. But research has shown that for most companies whose stock and reputation have been marred by greenwashing, implementation of effective policies and good strategies puts the said companies in a better financial level for example BP and Nike. For some companies however, the adverse effects brought about by greenwashing to their stocks and reputation are irreversible. A good example is Seaworld’s fall in the stock price after the ‘Blackfish’ exposure. The stock prices fell by 33% a day after the film was aired and Seaworld was unable to redeem its value moving forward. This inability was due to several factors. For instance, the massive boycotts and campaigns against the entire Seaworld by celebrities hindered the influx of locals and tourists to the parks which meant loss of income from ticket cancellations.

Major lawsuits from the investors citing dishonesty on the part of the Seaworld officials and from animal activist groups also dealt a blow to their finances which explains their inability to raise their stock value. In addition major partners pulling out like the South west airlines which meant they would refrain from flying tourists to the parks, the ban of orca shows by the government shows. For Seaworld, the fall in their stock value was quite precipitous and long lasting since they were unable to restore their former stock value.

For BP however, though the fall in the stock value was pronounced, several public relation moves on their part saw their stock value rising (Heard). For instance, after the resignation of the then CEO Lord Browne of Madingley and the massive layoffs by the incoming CEO Tony Hayward, the stock value started going up. Several PR moves also undertaken by the company in trying to rebuild their image for instance proclaiming themselves as a safety forward thinking company as opposed to pushing for the ‘green’ image is believed to be working amongst consumers and investors(Ridgeway). The same case applied for Coca-Cola who despite having suffered immense loses and a fall in their stock value by US$ 5.1 billion after the greenwashing exposure were able to grow their stock levels after undertaking PR measures that are believed to have played a role in  their comeback. For instance, after the public backlash Coca-Cola undertook the initiative to provide clean piped water especially in India and as a result, their stock value increased by 2% in 2007.

For Nike, even though the hit on their stock value was relatively high following the greenwash exposure, they have actively undertaken measures over the years that have slowly seen their stock value rise again. For instance, in a move to regain the public’s trust and consumer loyalty in their brand, they actively participated in fair labor associations which was aimed at combining companies, human rights and labor representatives in order to effectively monitor and evaluate the worker’s needs. In addition, Nike promised to raise the minimum wage of their workers. They also put up measures to adhere to the OSHA clean air standards in all factories (Nissen). The company also practiced transparency and produced reports on the developments done as per the workers claims and the developments that were still underway. In addition, the company has continuously incorporated advertising strategies that have seen both their reputation and stock value go up considerably. The greenwash exposure on Walmart was however not as hard as was the case with the other discussed companies.  This is largely attributed to the fact that despite the negative publicity on Walmart’s image, their extremely reduced prices on consumer goods and services have customers going back and their stock value keeps going up regardless of the scandals faced which explains the reason why their stock value never really stays low being one of the biggest companies in the world and the biggest private employer in the world.

The exposure of Volkswagen was quite damning to its stock prices and value.  The billions charged as penalty for violating the Clean Air Act and the billions amounting from the losses accrued from the recalled vehicles added an additional blow to the stock prices at Volkswagen. For Volkswagen, the fall in their market price was long-term in that 14 months after the scandal, their market prices were still relatively low. This is as a result of the major financial losses experienced which proved challenging to overcome faster but despite the slow growth, the growth rate looks promising.

Works cited

Du, Shuili, and Deborah Merrill-Sands. “Our Turn: Volkswagen has a Lot of Work to do to Salvage itself from ‘Greenfrauding’ Scandal.” Concord Monitor Jan 15 2016

Greenhouse, Steven. “Nike Shoe Plant In Vietnam Is Called Unsafe For Workers”. 2008 n. page. Print.

Heard, Ross. “The Great Biofuel Greenwash.” Open Democracy Aug 15 2013

Hopkins, Jim. “Wal-Mart’s Influence Grows”. (2003): n. pag. Print.

Kosman, Josh. “THAR STOCK BLOWS SeaWorld Stock Sinks 50% in ’14.” New York Post Nov 16 2014: 37.

Kurtzleben, Danielle. “Walmart Struggles To Overcome Environmental Criticism”. US news (2012):

Lynes, Jennifer. “Volkswagen Committed The Cardinal Sin Of Greenwashing: Lying”. (2015): n. page. Print.

Nissen, max. “How Nike Solved Its Sweatshop Problem”. Business insider (2013): n. pag. Print.

Pedicini, Sandra. “Investor Lawsuit Filed Against SeaWorld.” TCA Regional News Sep 10 2014

Trumpbour, John. “Greenwash and Globalization.” Monthly Review 50.10 (1999): 53-60.

Walker, Haley. “Recapping on BP’S Long History of Greenwashing”. Green peace (2010): n. page. Web. 19 Nov. 2016.