Greenwashing and Its Impact on Global Supply Chains

Written by Vaish Akella (Research Lead), Harini Bhagavathula, William Streets, Anjali John

EXECUTIVE SUMMARY:

• Retailers such as Amazon and Lululemon have faced greenwashing allegations ties to misinformation within their sustainability claims due to supply chain related carbon emissions. 

• Created to offset emissions, carbon credits are starting to be misused by firms to claim sustainability is reaching their firm goals, without reducing their own footprint. 

• Oil Companies such as TotalEnergies use green marketing while maintaining traditional operations. 

• Greenwashing contributes to consumer distrust, but solutions include increased supply chain transparency and stricter reporting standards. 

Introduction

Greenwashing refers to the strategy companies use to exaggerate and misrepresent their efforts in sustainability, and appeal to more environmentally friendly consumers. The most common industries greenwashing occurs in is retail, and energy, fields where environmental impact matters the most and is also difficult to trace. As the demand for sustainability increases, there is increasing pressure for companies to appear “green” and have net zero goals, even without strong operational changes.  

Retail  

Behind the eco-friendly logos and lofty sustainability pledges, some of the world’s biggest retail brands are quietly fueling the very environmental crises they claim to be fighting. Companies like Amazon, Lululemon, and P&G have been linked to the most recent greenwashing scandals. In March 2025, Amazon was hit with a class-action lawsuit over greenwashing claims related to its Amazon Basics paper products. Class Action explains that Amazon sources its paper pulp from suppliers that are contributing to the deforestation of Canada's boreal forest, which “plays an important role in mitigating climate change” while marketing its products as environmentally friendly and sustainable. Amazon’s suppliers release more than “26 million metric tons of carbon dioxide into the atmosphere each year”.   

Lululemon has similarly been under fire for greenwashing. Lulu’s sustainability “Be Planet” campaign, which was released in 2020, has been accused of masking its deep fossil fuel reliance within its supply chain. Despite their claims of becoming more sustainable, since the campaign’s release, the company has had more emissions than before. Vogue Business revealed that Lululemon’s own Impact Report showed a 100% increase in climate pollution since the “Be Planet” campaign started. The main problem for Lululemon is surprisingly their supply chain. Nearly 99% of Lululemon’s issues can be tied to their supply chain, or their Scope 3 emissions.  

Figure 1: Lululemon’s Scope 3 emissions (2020-2022) (Vogue Business)

What makes these cases more troubling is the regulatory gap that allows them to persist. The Wall Street Journal indicated that the SEC (United States Securities and Exchange Commission) approved a new climate disclosure rule. This rule dropped the original proposal that companies should report Scope 3 emissions, which are the emissions indirectly linked to a company. Companies are now only legally required to disclose their Scope 1 and Scope 2 emissions. The emissions that won’t be reported are the main culprit for the majority of companies’ emissions, such as Lululemon. Though these rules are enacted to promote ethical and transparent reporting, the lack of Scope 3 reporting will continue to leave one of the most consequential slices of corporate emissions unexamined. 

Figure 2: Explanation of the Scope levels for disclosure (Emission Index) 

Carbon Credits  

Carbon credits are designed to allow companies to counteract their emissions through funding projects that intend to reduce and remove carbon emissions in other projects and environments. This system, in practice, has been significantly tied to greenwashing, allowing firms to come off as more sustainable without really reducing their own carbon footprint from their operations. MIT News says that the idea is that emissions in one place are compensated elsewhere, but through implementing the credits it has become “far more complex and fraught with problem” than initially expected. 

Many companies are relying heavily on voluntary carbon markets, purchasing credits instead of cutting their own emissions and improving operations, delaying real decarbonization. The Guardian has highlighted investigations that show that this system is very often unreliable. A large portion of corporate purchased credits are tied to projects that are unlikely to be ineffective, with structural issues such as exaggerated reductions in emissions and lack of permanent effect.  A previous analysis found that up to 78% of these projects could be classified as “junk”, which means companies may claim climate benefits that do not exist.  This creates a huge opportunity for greenwashing, where firms use carbon credits to market themselves as carbon neutral, or net zero, when continuing the high levels of pollution.  Financial Times reports that the voluntary carbon market is lightly regulated, heavily encouraging companies to rely on the lower quality offsets when making bold claims on sustainability. Though carbon credits are intended to support global emission reductions, the misuse allows companies to shift responsibility rather than take action on their own environmental impact.  

Figure 3: Use of offsets for carbon neutrality claims and net zero pledges (NewClimate) 

Oil Companies  

In recent years, many oil companies have been at the forefront of greenwashing claims, affecting not only their brand image but also the structure of global fuel supply chains. In the context of transportation and fuels, greenwashing refers to the tendency of promoting energy commodities as environmentally sustainable while their actual operations remain dependent on fossil fuels.  

This issue has drawn an increasing amount of surveillance from courts and non-governmental organizations (NGOs), as seen in the case against French oil firm TotalEnergies. In October of 2025, The Guardian reported that the French court ruled the company made misleading environmental claims about its climate strategy. Greenpeace France and Friends of the Earth France, two prominent sustainability NGOs in France, also got involved, making it their first time partaking in a greenwashing scandal with oil companies. TotalEnergies was charged a hefty fine of €10,000 ($11,707.50) if they didn’t remove their claims of placing “sustainable development at the heart of its strategy”. Similarly, The Guardian also revealed how an Australian gas company Santos was accused of making misleading claims about being a manufacturer of clean energy. 

The effects of greenwashing in the world of transportation are most evident across the stages of fuel supply chains. At the upstream production level, companies continue fossil fuel extraction while marketing alternatives like synthetic fuel as low emissions. This can be seen with European airlines, who stated they would continue air operations by utilizing synthetic fuel due to increased demand, going against rules mandated by the European Union. However, Reuters announced that “there's little available supply of synthetic jet fuel and that planned production facilities are unlikely to come online in time to meet the mandate”. Because of their inability to wholly utilize synthetic fuels due to low supply, European airlines obscured the true carbon footprint of their operations, misleading consumers.  

Figure 4: Logarithmic scale displays large differences in magnitude in jet fuel consumption in the United States (U.S. Department of Energy) (U.S. Energy Information Administration)

At the midstream processing level, firms increasingly rely on carbon credits rather than directly reducing their operational emissions. According to Carbon Market Watch, major fossil fuel companies like BP, Chevron, and Shell purchase low-cost carbon offsets to compensate for emissions created during extraction, refining, and transportation. This creates an appearance of sustainability, allowing companies to pursue normal operations without disrupting their supply chains. This harms the potential investment opportunities that could have been received toward genuine decarbonization of refining or synthetic fuel production. 

Downstream, these falsifications continue into the distribution and consumption stages of the supply chain. Fuel products are often marketed as part of a “green transition,” influencing both corporate buyers and everyday consumers. This disconnect creates a lack of trust between supply chain partners, while also reinforcing fossil fuel dependence.  

Overall, greenwashing in the fuel and transportation industries shows that even when companies claim to be “sustainable”, their supply chains usually stay the same. The stages of fuel supply chains continue to rely on fossil fuels, often misleading consumers and businesses but also slows down real progress toward sustainability. Understanding these patterns helps reveal why change is considered difficult. 

Consumer Psychology and Mitigation Strategies 

Customers are increasingly prioritizing environmental sustainability in their purchasing decisions, with 68% willing to pay more for eco-friendly options. However, this trust is weakened by greenwashing scandals and vague claims, with 78% of consumers expressing distrust in eco labels (JournalCP). Together, this highlights a significant demand gap in sustainable products. Most consumers lack even the most basic understanding of how a company's supply chain operations; such as sourcing, logistics, and manufacturing impact and degrade the environment, making it difficult for consumers to fully realize the impact of the products they purchase. Furthermore, greenwashing preys upon consumer psychology deliberately misleading and even tricking customers. 

Greenwashing exploits several cognitive biases and general psychological tendencies. One prominent bias is the halo effect, where the presence of a singular environmentally friendly decision or attribute leads consumers to believe the product is fully sustainable, even when other aspects of the product, such as transportation or manufacturing, are unsustainable (ethicsunwrapped). In addition, consumers are influenced by information overload. This overwhelming complexity of sustainability information causes many consumers to doubt suspected claims. According to the EU, 53% of environmental claims are misleading, vague, or simply untrue (sciencedirect). Furthermore, this lack of clear, usable information allows companies to engage in “Eco Opportunism” deceiving consumers into purchasing products that, when considering the full environmental impact of a company’s operations aren’t genuinely sustainable (frontiers).  

Several approaches have been identified to restore consumer trust and reduce the prevalence of greenwashing. The first of which is to increase a company's transparency, specifically within their supply chain. Increased transparency can help mitigate the effects of greenwashing on these consumer perspectives (Springer). Another solution is the implementation of formal reporting and investigating measures within supply chains. This mechanism would involve the documenting and verifying and auditing of certain sustainability claims made by companies. By enforcing these harsh accountability standards, companies can limit their misleading claims and reduce greenwashing across their operations (Taylor & Francis). In addition to transparency and reporting measures, educating consumers about environmental issues and sustainability can help mitigate greenwashing impact. Research shows that increased environmental knowledge enhances consumer knowledge regarding greenwashing, leading to more informed and pro-sustainable purchasing decisions (MDPI). 

Conclusion

Greenwashing hides the reality of supply chain impact on the environment, and in return, delays real progress when reducing emissions. Practices such as misleading sourcing claims, reliance on carbon credits, and incorrect data provided to customers shift the responsibility rather than solving the issue at hand. Addressing the issue requires much greater transparency, stricter regulations, and operational changes.