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  • Writer's pictureLeah

Impact Washing: How Companies Use Social Causes to Sell Products

a rubber duck in washing machine

The buzzword, or rather the swear word, seems to be on every ESG player’s lips these days, and the villain is, with little surprise, IMPACT WASHING.

• “Greenwashing, please meet Impact Washing”

Not to be confused with the equally infamous and definitely more maligned greenwashing, impact washing is specifically tied to the world of business investment, whereas its close relative encompasses the wider domain of commerce, hence its greater leverage. Greenwashing is synonymous with blatantly dishonest marketing practices aimed at misleading customers about the ethics and sustainability of their goods with the sole purpose of inducing purchase, irrespective of factual accuracy. By spinning a story that does not quite fit the truth, greenwashing does much harm to the businesses that actually pull out all the stops to secure socially and environmentally fair production lines, as the malpractice casts an aura of discredit on the sustainability ecosystem as a whole.

Impact Washing, however, due to its intricate and nontransparent maneuvers in the shape of unsupported claims about alluringly sustainable stocks and bonds, is all the more challenging to identify, as it remains the exclusive domain of the financial sector’s expertise and thus makes it less liable to popular criticism.

Sustainable investments are obviously the go-to route a fast-growing number of shareholders wish to take now that environmental and social pressures have reached an all-time high. So how not to fall prey to jiggery-pokery?

• The Premium Tool: Impact Measurement

Here’s the deal: purpose-driven assets can throw dust into the most well-intentioned investor’s eyes if proper safeguards have not been implemented beforehand. So what might these protective measures be? Let’s have a look at what expert Zahara Malik, CEO and founder at Grosvenor Capital, UAE, has to say about it:

“Impact measurement is needed to achieve more clarity in the growing realm of impact investing. ( . . . ) Impact valuation is challenging in the social sector in general, but it is especially difficult in impact investing for a variety of reasons. For example, laborious measurement is costly and therefore contests financial returns. Many investments also target impact indirectly. And few "gold standard” measurement practices exist.”

Even though impact investing is in many ways a minefield, it is very much in demand for, at the end of the day, is there any other way to envisage making a profit whilst benefitting people and the planet? The name of the game is not to discard it but rather, to arm oneself against its potential pitfalls. “To avoid the hurdles,” highlights Malik, “many impact investors are currently using a variety of common practices, including the following:

1. Focus on outputs, meaning the activities produced by the investment, instead of outcomes, and on the actual social or environmental impact created by the investment.

2. Base confidence on intuition and judgment rather than hard metrics.

3. Use point-in-time metrics which consider the impact at a one-time period versus over a full investment lifecycle.”

So watch out, yet never let up on your efforts to partake in a cleaner financial system that doesn’t feed off its loopholes, but rather serves the ultimate welfare of all stakeholders.


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