[Student IDEAS] by Amir Khan - Master in Finance at ESSEC Business School


This article will look into the origin of the Green Movement and the definition of Greenwashing along with its prevalence, what it entails for consumers & investors, and the current legislative actions in this regard. Post establishing the significance of this challenge, the article will explore Blockchain technology as a potential solution. It will touch upon some of the current projects and critically evaluate them as well as the larger use case in an attempt to map its key challenges and growth trajectory.


When you purchase a box of that cereal or ground coffee that you need to start your mornings, have you ever found yourself wondering about what exactly the manufacturer will do with the money it is making from the sale? Besides producing more of the same stuff you’ve come to love, of course. This food for thought has been catching traction with consumers and investors alike, bringing the cryptic answers out of the explanatory notes of complex financial statements into mainstream attention. The bottom-line is that in a world facing several inter-related environmental crises, which are quickly turning irreversible, people don’t want to give their money to companies that are a part of the problem. This attitude is personified in the environmental movement.

Let’s talk about the Green Movement

Concern for the impact on human life from air and water pollution goes back to at least the Roman times. This concern also arose between the late 14th century and the mid-16th century in wider Europe when pollution was being associated with the spread of epidemics. However, the modern environmental movement began much later in late-19th century. It was based around concern to protect the countryside in Europe and the wilderness in the United States, as well as the health effects of pollution caused by the Industrial Revolution. This was also the time that the Sierra Club was founded (1892). It was finally in the 1960s that these philosophical and social strands of environmentalism – among various others – were given political expression through the establishment of the “green” political movement. This movement aims to protect planet Earth from harmful environmental practices and maintain sustainable living standards. Since the 1980s, climate change has become a primary concern of the green movement among other concerns like organic agriculture, pollution reduction, preservation of forested lands and endangered species, and opposition to nuclear power.

A crucial facet of this movement is green consumerism. Also known as sustainable consumerism, this is the practice of making purchasing decisions in a way that minimizes environmental impact and supports sustainable products and practices. This is based on the belief that individual choices can contribute to positive environmental change, encouraging consumers to be more mindful of the environmental consequences of their consumption habits.

Beyond consumerism, another key facet is green investing. This is an investment ideology that seeks to support business practices that have a favorable impact on the environment. Often grouped with socially responsible investing (SRI), green investments target companies and projects focused on sustainable development and preservation of the environment.

However, it is a mistake to believe that all green consumption & investment till date has actually been aligned with environmental interests and this is because of the widespread problem of greenwashing.

But what is Greenwashing?

How does a fund end up carrying an AA or AAA ESG rating while having close to 70% of its revenues being derived from environmentally harmful activities?1 The answer is greenwashing. The term “greenwashing” was coined by prominent environmentalist Jay Westerveld in a 1986 essay targeting the hotel industry's practice of promoting the reuse of towels as part of a broader environmental strategy; when, in fact, the move was primarily a cost-saving measure. Such practices have been undertaken by numerous corporations and projects, over the decades, to mislead consumers and investors to believe that their products, aims, and policies are ESG oriented.

More recently, in January 2021, the European Commission and national consumer authorities released the results of a screening of websites focused on greenwashing to identify breaches of EU consumer law in online markets; reporting that there is reason to believe that in 42% of cases the claims were exaggerated, false or deceptive and could potentially qualify as unfair commercial practices under EU rules2.

Even more recently, in March 2023, MSCI Inc. announced that it will lower its ESG ratings for around 31,000 funds, a change that will mean only 0.2% of funds will have a AAA rating moving forward compared to the current 20%.[1] This move comes as ESG rating providers have continually drawn criticism for using inconsistent rating methodologies that are yet to be properly regulated, creating room for greenwashing.

Therefore, with nearly half the sustainability claims made by companies online in Europe being misleading and close to one-fifth of ESG funds having been rated higher than they actually stand, this problem is bigger than ever.

Greenwashing is everywhere around us!

Even in daily life, not falling for greenwashing has become akin to picking your way through a minefield. A classic example of greenwashing, now referred to as “Emissionsgate”, is when Volkswagen was found cheating emissions tests by fitting its vehicles with a “defect” device, with a software that detected when it was undergoing an emissions test and altered its performance to reduce its emissions level. So, while the company was advertising the low-emissions and eco-friendly features of its vehicles; in reality, millions of their cars were emitting up to 40 times the allowed limit for nitrogen oxide pollutants. This went on from 2009 to 2015 till Volkswagen was caught.4

Fossil fuel giants like BP widely take up advertising tactics that focus on their work on low-carbon energy solutions while oil and gas make almost the entirety of their cost allocations and revenue sources.5 Elsewhere, FMCG (Fast Moving Consumer Goods) giants focus heavily on marketing to bury down news like Nestlé, Coca-Cola, and PepsiCo being named the world’s top plastic polluters for the 3rd year in a row in Break Free From Plastic’s 2020 annual report.6

So, then what are Governments doing about it?

Different parts of the world are making progress in environmental legislation at different paces based on their respective socio-economic and political situations, but the ball is definitely rolling when it comes to legislation for sustainability reporting in 2023.

The European Commission, the EU’s executive arm, is planning to release new industry rules in the first half of 2023. The organization has published its “Green Claims Directive”, which is subject to the approval of the European Parliament and Council before it comes into force. The new measures are designed to prevent companies from making unsubstantiated environmental claims about their products and services, warning that they could soon face penalties of at least 4% of their annual revenue for “greenwashing.”7

Meanwhile the UK is planning to table the “Digital Markets, Competition and Consumer Bill”, under which large companies face the threat of civil penalties of up to 10% of their global turnover for breaching consumer law, which will also cover misleading environmental claims.8 The British prime minister, Rishi Sunak, has called the passing of this new bill a “priority” for his government. On the investing front, the UK has launched a consultation on the extent to which ESG raters need to be reined in by clear rules.

Across the Atlantic, the US Securities and Exchange Commission (SEC) issued two new sets of proposed rules in 2022: “Investment Company Names” (“Names Rule”) and “Environmental, Social, and Governance Disclosures for Investment Advisers and Investment Companies” (“ESG Disclosure Rule”). Combined, these two proposed rules are meant to combat greenwashing. They dictate that only funds with an ESG purpose will be permitted to label or indicate themselves as ESG, and a new mandatory disclosure for these ESG-focused funds will allow outside parties to ensure whether such purportedly ESG-focused funds are following their stated investment purpose.

Life is not simple for green investors

In May 2022, Tesla was removed from Standard & Poor’s (S&P) 500 ESG Index, which continued to retain Exxon Mobil. This means that the index, which tracks companies based on S&P’s own sustainability standards, considers the fossil fuel major to have better overall sustainability credentials than the EV giant. However, on the other hand, research by Institute for Energy Economics and Financial Analysis (IEEFA) shows that this view may not be shared by other rating providers.9 This is because the disparity in outcomes of ESG ratings between providers suffers from “the lack of unified objectives and standards for ESG measurements, disclosures and methodologies.” The subjective nature of these ratings makes them incomparable and difficult for green investors to use in decision making. In fact, green investing still faces the fundamental problem of a lack of globally accepted definitions and standards on what actions constitute the fair usage of terms like ‘Conscious’, ‘Eco-friendly’ and ‘Zero Environmental Footprint’ among others in public claims.

On the sustainability reporting end, while the initial approach has been orientated towards traditional financial auditing, there are significant issues in this approach to reporting and auditing environmental data. Sustainability reporting encompasses a wide range of qualitative and quantitative data, including environmental impact, supply-chain wastage, and corporate governance practices; factors that are often complex and subjective. This makes it challenging for traditional auditing approaches, which primarily focus on financial metrics, to capture and evaluate the full scope of environmental performance.

ESG metrics data is gathered from various internal and external sources, including self-reported information, 3rd party assessments, and industry benchmarks. Ensuring that this data is comprehensive while also being accurate and reliable is beyond the scope of traditional auditing practices. This is because traditional auditing relies on robust internal control systems and verifiable financial records, whereas sustainability data tends to be more decentralized and subjective, making it easier to manipulate.

The solution: “In Blockchain we trust”

When dealing with high volumes of data that has such a wide qualitative and quantitative range, being collected from sources which in turn are dispersed and diverse, it is natural to question the accuracy of the reports being created based on the same. It is in this critical role of reliable and transparent data management that blockchain can be leveraged.

Blockchain is a decentralized, distributed, and public digital ledger that is used to record transactions in batches called blocks. The ledger is stored across many computers so that the record cannot be altered without the alteration of all subsequent blocks and the consensus of the network. Because of this, blockchain is ideal for storing shared information since it provides a de-facto immutable and decentralized record. A blockchain network can track many metrics and with all network members sharing a single view of the data, the technology offers greater confidence in the data reported.

In terms of greenwashing, blockchain can minimize the possibility of data manipulation of the collected data points, in the process creating a transparent data pipeline for accurate sustainability reporting. A prospective structure of such a process for reporting to stakeholders can be as follows:

Data Collection

Automated data collection through technological tools not only reduces the related cost of labor but also helps reduce the possibility of errors and manipulation in the data. A real-time data feed can be developed by combining environmental and/or supply chain data collected from satellite-based sensors, power smart meters, web scraping, imaging drones and IoT sensors.

Data Management

Blockchain technology’s role in transparent sustainability reporting is through its ability to provide immutable certification and automated reporting of data points related to an organization’s ESG metrics data. By using this, manufacturers can track and trace products and labor conditions along their supply chains, storing these findings on the blockchain alongside their other metrics. By integrating data from their vendors and suppliers, companies can measure every relevant metric using a uniform mechanism. All the information would be immutable and remain on-chain, therefore, ensuring that it is free of any manipulation once it has entered the blockchain.

Data Sharing

The unalterable record of sustainability data on the blockchain can then be shared in a transparent and efficient manner. Smart contracts are a great way to do this; these are digital, immutable, and automated contracts on a blockchain in which the contracts’ rules and execution instructions are written directly into self-executing code. Smart contracts can be used to automatically disclose ESG information either in real-time or based on a preset schedule to the public or regulators. Since human supervision is not required, errors are minimal, and the authenticity of the data is ensured.

While immutability of data is ensured by the blockchain network, we face a similar limitation of garbage in, garbage out as we do with other technologies. Rigged meters or sensors becoming faulty over time are very real possibilities and can hamper the accuracy of data, a serious concern when said data becomes immutable. This point of fragility, termed the “Oracle Problem” can be strengthened by incorporating solutions like decentralized oracle. Decentralized oracles act as public libraries with multiple sources of information, through these multiple data sources they minimize counterparty risk and transfer on-chain the most accurate data available. Over time, the ability of these decentralized oracles improves through “learnings” by penalizing individual oracles that provide inaccurate data.

Blockchain projects and startups forging the way forward

Application of blockchain to counter greenwashing is an area of discussion that has been ongoing for the past few years and has relatively recently started giving rise to its first implementation projects. Here we look at some of the solutions currently being scaled:

EY and its EY OpsChain ESG platform

One of the Big 4 accounting firms, EY is looking to offer carbon traceability and carbon credit services with the launch of EY OpsChain ESG by leveraging blockchain technology. Carbon traceability is the ability of an organization to trace its own carbon footprint, and carbon credit – also known as carbon offset – is a reduction or removal of emissions of carbon dioxide to compensate for emissions made by an enterprise.

This new solution is based on the EY Blockchain SaaS platform. It offers a single and verifiable view of CO2 emissions to help organizations accurately measure and track their carbon footprint, offering enough granularity for enterprises to be able to link their carbon output to specific product output. The platform is developed on the Ethereum blockchain and is independently verifiable by using key emissions data validators.

This product offering has been introduced in May 2023 under the leadership of Paul Brody, EY Global Blockchain Leader and is managed by Sam Azad, EY OpsChain ESG Product Owner. Their team has developed this platform based on the standards for Carbon Emissions Tokens published by the Sustainability Business Working Group of InterWork Alliance.

Provenance and its 'Proof Points' system

Provenance is an early-stage startup founded in 2014 that has developed a blockchain-based data platform designed to offer open and accessible information about products and supply chains. Founded by Jessi Baker who currently acts as CEO, Provenance is headquartered in London and is working with 200+ beauty and cosmetics brands across D2C and retail partners in USA, UK, and the EU.

The startup offers digital verification for sustainability claims such as ‘Reduced Carbon Footprint’, ‘Fully Recycled Packaging’ and ‘Upcycled Ingredients’ as well as 3rd party certifications like Fairtrade and Leaping Bunny Cruelty-Free. Currently, Provenance offers verification for close to 90 claims, divided into 5 categories: climate, waste, nature, workers, and communities. These claims are displayed as ‘Proof Points’ that offer deeper information to consumers.

This entire platform is powered by blockchain. Phil Verey, Managing Director at Provenance explains “The way we use blockchain at Provenance is really just to provide a secure, immutable and transparent way of logging claims, make sure they are fact-checked, that they have the right evidence and making sure those claims are then accessible to anyone who wants to see them”.

Provenance’s aim is to create a future where shoppers make purchases based on verified information instead of blind trust on ESG claims. Going further, the company is even exploring the potential of taking their project to an ingredients level of transparency for the cosmetics industry.


Empower is an early-stage startup founded in 2018 by Wilhelm Myrer (CEO), Carl Nesset (COO) and Gjermund Bjaanes (CTO) that combines plastic recycling and blockchain to create a sustainable circular economy platform that ensures zero greenwashing. The Norwegian startup aims to extend Norway’s incredibly efficient national plastic exchange system (that recycles 97% of all plastic bottles) to a global scale.

Empower uses blockchain for every step of the process starting from collecting plastic at the source through the sorting process to its eventual recycling and reintegration back into the supply chain. The use of blockchain doesn’t just allow each step in the process to be fully verifiable with incorruptible documentation but also allows for seamless tracking and monetization of plastic - even in 3rd world countries where a large part of the population is unbanked.

By tracking every aspect of the journey, from on-the-ground plastic pickup operations to eventual reuse in other products, the level of transparency negates any chances of greenwashing and that is attractive to companies, plastic processors, and consumers. This increases the value of the waste plastic collected, turning plastic collection into a viable earning activity for the world’s underprivileged populations.

Treejer and its Treejer Protocol

Treejer is a seed stage startup founded in 2021 that connects sponsors to rural planters worldwide. It is a “A unique borderless approach in Climate Action powered by blockchain technology.” Treejer creates a link between those who fund trees and those who plant them even in the most remote parts of the world. The platform uses smart contracts to record credit ownership and enables secure payment between different parties.

Founded by a team of 6 people in Iran, the CEO of this fledgling project is Ermia Saharkhiz. Over the last 12 months, the team has launched the Treejer Protocol on Polygon, a public and eco-friendly blockchain. This enables anyone anywhere to fund and plant forests using Treejer’s apps. Donors use a web interface to fund planting of trees and expand their forests online while rural planters use the app to get onboarded, submit planted trees, and receive support for their contributions.

The whole process takes place through direct crypto payments enabled by Treejer’s smart contracts on the blockchain. These smart contracts receive, store and release payments based on predefined terms. The planters are provided with user-friendly and non-custodial crypto wallets to receive their conservation rewards without bank accounts. In this way, Treejer unlocks new opportunities to support unbanked local communities around the world by creating reliable monetary incentives for planting trees.

Critical Evaluation

Application of blockchain in sustainability reporting has gathered significant steam in the last few years through numerous initiatives and startups. The projects covered in this article have made great strides as well in the past couple of years. Provenance has established its presence in Europe, North America, and Asia Pacific; partnered with Douglas, a sizeable European e-commerce platform for beauty and health; and closed a $5m funding round led by Working Capital Innovation Fund and Nordic Eye. Empower has launched EmpowerChain, a blockchain network that provides tools, infrastructure, and incentives needed for the circular economy to work; developed the Empower Product Passport in collaboration with EY Doberman; and recycled 32mn kg of plastic till date. Treejer was selected for the 2021 UNICEF Venture Fund cohort, successfully ending up as one of the 5 joiners to graduate from the fund in September 2022; and is making deep inroads into Africa and Latin America through several strategic partnerships. EY’s OpsChain ESG platform launched a few months ago is already onboarding prospective clients onto its beta version and plans to leverage EY’s global reach to take this platform far and wide.

However, at the same time, the path forward to scaling these solutions globally faces several challenges that need to be overcome, such as:

  • These projects tend to require heavy initial investments in digital infrastructure and technical expertise along with several initial pilot runs to develop the blockchain network and protect against the Oracle Problem.
  • This also brings into question the relative strength of different countries’ relevant infrastructure (internet availability and speeds, distributed and cloud computing, reliable supply of electricity, and digitized data, all of which power the blockchain) where these projects are supposed to operate.
  • Interoperability between various ledger types (public and private ledgers) is key. For this, blockchain architecture standards will have to be developed to allow interoperability between technology solutions for collaborative trust.
  • In the case of sustainable traceability management, system performance is vital for applying blockchain. The challenge being to consistently ensure the stability and robust performance of blockchain based applications.
  • Finally, blockchain technology does not have a legal and regulatory framework yet. However, there is good progress in this area thanks to The World Economic Forum, which in 2020 published the white paper “Global Standards Mapping Initiative: An overview of blockchain technical standards”. This white paper delivers a much-needed analysis and guide for sifting through technical standards.

These challenges signify the necessity for a systematic scaling up of the projects leveraging this use case of blockchain. Even so there is significant support available to these projects coming from the increasing importance of environmental sustainability in today’s times. Bloomberg's “Sustainable Future Study”, sponsored by Mubadala estimates the valuation of ESG assets to hit $50 trillion as soon as 2025, this represents more than a third of the projected $140.5 trillion in total global assets under management. This boom in funding is coupled with changing attitudes in the corporate world with a resounding 71% of global business leaders believing that, “Eventually, no investment decisions will be made without considering ESG.”

Most of the startups in this area are still at Seed to Series A stage; therefore, funding is going to be a key requisite for these enterprises to scale. On that end, McKinsey reports positive findings: “Climate investing experienced a period of breakout growth in capital formation over the past four years. From 2019 until the end of 2022, private-market equity investors launched more than 330 new sustainability; environmental, social, and governance (ESG); and impact funds. The cumulative assets under management in these funds grew threefold, from $90 billion to more than $270 billion.” In this rapid growth of private market investment, the public sector will also be a significant investor. The US Inflation Reduction Act (IRA), passed in 2022 has allocated more than $370 billion in funding for climate change mitigation, while the EU Green Deal can potentially dedicate upwards of €1 trillion in public and private funds. As a result, while these businesses will have to earn their valuation in a tough fundraising market, there is enough dry powder with VCs and other investors to fund these projects.

However, a key challenge also exists on the demand side. Companies must feel the need to incorporate these solutions in their sustainability reporting, something they might be averse to especially if these solutions disclose greenwashing that is covering practices and emissions earning them billions. Essentially, it is the ESG equivalent of a financial audit, and auditors aren’t exactly the best friends of the management. Therefore, mass scale adoption of these solutions on a voluntary basis can end up being very gradual, based on consumer pressure and increased ethical enlightenment among management circles. To circumvent this issue government involvement in terms of legislation is crucial. The pertinent question here being “Does mandating sustainability reporting make a real difference if measures to avoid greenwashing are not mandated as well?”

Closing Thoughts

Several startups have developed scalable solutions applying blockchain technology to eliminate bias from environmental claims and reports. Their growth is tied to the growth of the larger ESG industry and government regulations will play a key role in the same. Within climate-tech, the number of unicorns has not only been rapidly expanding, but the age of new unicorns is also compressing. Close to 60% of the climate-tech unicorns in 2021 reached the $1B valuation mark in less than 7 years. However, startups founded after 2017 have consistently grown into unicorns in 4 or less years, notably making up 40% (approx.) of the prominent 2021 climate-tech unicorn cohort. Based on the funding and valuations trajectory that has stayed strong for climate-tech even after economic headwinds of 2022, the next 7-10 years will see these blockchain-based startups scaling up, turning into unicorns and hopefully – with the help of regulators – counting manufacturing, automotive, aviation, and energy behemoths of the Fortune 500 as their clients. This will finally bring about meaningful change in the trust consumers and investors place in sustainability reporting and who knows, we might save the planet after all.


[1] White, N., & Schwartzkopff, F. (2023, March 30). Over 30,000 Funds to Get Their ESG Ratings Downgraded at MSCI. (Bloomberg).

[2] Press release. (2021, January 28). Screening of websites for ‘greenwashing': half of green claims lack evidence. (European Commission).

[3] White, N., & Schwartzkopff, F. (2023, March 30). Over 30,000 Funds to Get Their ESG Ratings Downgraded at MSCI. (Bloomberg).

[4] Robinson, D. (2022, July 17). 10 Companies Called Out For Greenwashing. (

[1] Robinson, D. (2022, July 17). 10 Companies Called Out For Greenwashing. ( [1] Robinson, D. (2022, July 17). 10 Companies Called Out For Greenwashing. (

[5] Ibid.

[6] Ibid.

[7] Meredit, S. (2023, March 24). A ‘greenwashing’ crackdown in Europe hasn’t gone down well. (CNBC).

[8] Ungoed-Thomas, J. (2023, February 19). ‘Greenwashing’ firms face steep new UK fines for misleading   claims. (The Guardian).

Ideas list