Greenwashing as a Catalyst for Market Failure: an Analysis of H and M

This study explores the systemic disruption caused by greenwashing—the deceptive practice of exaggerating a firm's environmental credentials—and its role in precipitating market failure. By distorting signals of quality and cost, greenwashing creates a state of significant information asymmetry, leading to adverse selection where genuinely sustainable firms are outpaced by deceptive competitors. Through the theoretical lens of the "Seven Sins of Greenwashing," this research examines the retail giant H and M as a primary case of quasi-strategic greenwashing. Analysis reveals that H and M utilizes strategic ambiguity and selective disclosure—exemplified by "Conscious Choice" branding—to mask substantial negative externalities, including microplastic pollution and rising greenhouse gas emissions. These practices result in a "market for lemons," where consumer skepticism erodes trust in green markets and environmental costs are socialized while corporate profits are internalized. The study concludes that the intersection of greenwashing and the fast-fashion high-volume business model is fundamentally incompatible with ecological equilibrium. Ultimately, the persistence of these informational gaps necessitates robust regulatory intervention and standardised reporting to internalise environmental costs and restore market efficiency.