DRIVERS

The first driver is market factors which range from customer demand, investor demand, or pressure from their competitors. These are key factors that affect the performance of the company and even influence the company’s bottom line. Therefore, companies will do everything they can to maintain a positive performance image in the market as well as secure their bottom line. It is important to note that customers and shareholders are key stakeholders in a company hence many businesses are likely to dance to their tune. For instance, it is common to see that consumers and investors placing pressure on companies to be environmentally friendly. This pressure forces the company to paint a positive image on matters of environmental preservation and sustainability. Increased pressure from customers makes companies bow to the pressure of greenwashing to appease them. Competitors also subject companies to the pressure of communicating positively about their environmental performance. Companies tend to mimic their competitors in order to appear as being legitimate or attract more customers. This has been evidenced by the adoption of green practices because of the fear of their competitors gaining more credibility in the industry.

 

The incentives and ethics surrounding a firm also influence the ethical behavior of firms. In this case, incentives are usually in the form of rewards for managers for good performance as well as the attainment of financial goals. Companies engage in greenwashing practices because they support the achievement of financial goals. Companies are usually given incentives to attain certain goals and this may push them to adopt greenwashing practices. Managers usually take the shortcut of using greenwashing in their marketing to accrue these incentives. Lack of ethical codes in organizations also creates a loophole that is exploited by managers in their execution of greenwashing practices. Ethical codes are effective in explicitly spelling out the conduct that is required by every member of the organization to reduce unethical behavior. As such, companies lacking the ethical code of conduct often get away with a lot of unethical behavior such as greenwashing. This is because they are assured that they will not face penalties for their actions. Further, they can simply state that they were ignorant which would make them easily get away with such unethical practices.