ACCA Applied Knowledge · Business and Technology · Environmental and sustainability factors
A company is accused of 'greenwashing' after its advertising claims its products are environmentally friendly, although little has changed in its operations. What is the main risk to the company?
The main risk is loss of stakeholder trust and reputational damage. Greenwashing gives a misleading impression of environmental responsibility, and once exposed, customers, investors and regulators may react negatively. It does not remove limited liability or force ownership to transfer to employees.
- ALoss of stakeholder trust and reputational damageCorrect
- BAutomatic loss of limited liability status
- CCompulsory transfer of ownership to employees
Explanation
Greenwashing means giving a misleading impression of environmental responsibility. When exposed, stakeholders lose trust and reputation suffers, and there may be regulatory action over misleading claims. Limited liability and ownership are not affected.
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