There is a clear direction of travel against greenwashing in the EU, the UK and the US, through increased regulation and litigation. The implications of greenwashing extend further than misleading marketing and advertising communications to companies reporting publicly on their sustainability programmes, goals and targets.
Policy & regulatory developments
Greenwashing policies are being tightened by various governments, with some specific regulatory action in the pipeline for EU member states.
- The proposed EU Directive for Empowering Consumers for the Green Transition amends the Unfair Commercial Practices Directive and the Consumer Rights Directive, and introduces a black-list of banned misleading commercial practices and rules on product sustainability information and verified sustainability labels. Black-listed terms will include the use of commonly-used generic terms such as ‘environmentally friendly’, ‘eco-friendly’, ‘green’, ‘carbon neutral’ and broader statements such as ‘conscious’ or ‘responsible’, if a company is not able to prove that these terms meet recognised environmental standards.
- The proposed EU Ecodesign for Sustainable Products Regulation will build upon the existing Ecodesign Directive, aiming to tackle greenwashing by setting specific rules for improving the environmental performance of products. It will provide consumers with more consistent environmental information to mitigate against greenwashing. The EU Commission will hold a public consultation to prioritise product categories in 2023.
Litigation and consumer authority trends
Scrutiny on greenwashing and misleading claims is coming from two angles. Consumer authorities across the EU, the UK and the US have made very strong statements that they will be holding companies to account on greenwashing. They are increasingly empowered to investigate incidents of greenwashing and are taking robust action against companies, resulting in companies having to defend sustainability claims in court. There has also been a significant uptick in litigation initiated by consumers (both individual and class action) and by non-governmental organisations (NGOs) against companies resulting from misleading claims. NGO litigation is often part of multi-pronged strategies to hold companies accountable for environmental and human rights impacts.
- High-risk sectors for human rights and environmental risks are most targeted for greenwashing litigation and investigations. This includes the garment and footwear, food and beverage, energy, and transport sectors. But as the attention on greenwashing intensifies, it is likely that a broader range of industry sectors will be impacted.
- The scope of greenwashing cases and investigations is expanding beyond marketing claims. Corporate policies – such as commitments to tackling human rights abuses in supply chains – and company due diligence reports, are now being caught in the ambit of greenwashing investigations.
- Certifications and life-cycle assessments used by companies as proof of their environmental credentials are increasingly being scrutinised by consumer bodies and other relevant authorities.
- Environmental claims have traditionally been the focus for greenwashing, but ‘social washing’ relating to human rights, decent work, and social impact is increasingly under scrutiny.
Implications for business
As governments flesh out regulatory frameworks designed to tackle greenwashing, and litigation by consumer authorities and NGOs proliferate, companies need to take extra care to ensure any environmental or human rights claims they make can be substantiated.
- Companies should consider greenwashing as a business risk for any public communications, and not just marketing communications. Due diligence reports, sustainability reports, product labelling, submissions to external stakeholders and benchmarks, corporate policies, and statements including ‘aspirational’ goals, commitments and targets can all be included with the ambit of greenwashing. This is particularly important in light of new reporting obligations in the EU such as the Corporate Sustainability Reporting Directive.
- Businesses which make claims about their approach to environmental issues or refer to life cycle assessments should be able to back these up with specific and precise quantitative evidence which is scientifically rigorous and will hold up in a court of law.
Due Diligence Design produces a bi-annual Greenwashing Brief for clients in the consumer goods, energy, transport and telecoms sectors. This 70-page brief provides a detailed overview of the EU, UK and US regulatory landscape and implications. It includes monitoring of 40 cases against companies that we believe are setting the direction of travel and provides over 50 sustainability claims and terms that are being flagged as problematic by consumer authorities.