New regulations in the UK and abroad signal mounting scrutiny of the misleading practice of greenwashing. Alex Minett, head of global new markets at CHAS, looks at what these changes are and how businesses can respond
Greenwashing is used to describe misinformation about the environmental and sustainability claims of an organisation.
It’s an all-too-common practice. Marketing ploys, vague assurances and manipulation of language and symbols are adopted by companies looking to present themselves as more environmentally responsible than they actually are.
As awareness around greenwashing increases, so too does the demand for evidence on eco claims.
Businesses not only need to be prepared to demonstrate their own sustainability processes but also ensure their supply chains are ready for scrutiny.
Who are the greenwashing culprits?
Greenwashing is employed by a wide range of companies, organisations and even governments. Very often, it is a case of all talk, no action, but some firms go further with their attempts to mislead via deceptive labelling or disingenuous marketing campaigns.
The motivation to greenwash might simply be to improve public image but it can also involve diverting attention from more negative environmental practices that are being undertaken elsewhere in an organisation.
What is the impact of greenwashing?
Greenwashing is not an innocuous practice. It can deceive consumers or stakeholders into thinking they are making environmentally responsible choices when in reality, they may be supporting companies that are not sincerely committed to sustainability. And when companies falsely claim to be environmentally friendly, they may draw support and revenue away from ones that are making genuine efforts to reduce their environmental impact.
Greenwashing also hinders meaningful progress in addressing sustainability and the environment.
It gives the impression that issues are being adequately dealt with, leading to complacency and a lack of urgency in moving forward with sustainable practices and meeting environmental targets. Eroding consumer trust can result in cynicism and apathy, which also impacts progress.
What is being done about greenwashing?
In the UK, the Financial Conduct Authority (FCA) is putting forward a package of new measures to build transparency and trust around sustainability.
These measures include sustainable investment labels, disclosure requirements and restrictions on using terms such as “ESG”, “green” or “sustainable” in product naming and marketing.
It is also proposing an “anti-greenwashing” rule that would apply to all FCA-regulated firms, reiterating that sustainability-related claims must be clear, fair and not misleading. Dates for implementing these measures are expected to be published before the end of the year.
Meanwhile, the EU is planning its Green Claims Directive, which sets out new minimum norms for how companies substantiate, communicate and verify their environmental claims to consumers in the EU.
The directive will apply to the vast majority of EU-operating companies, from SMEs to large public companies, and across industries. This includes companies based outside the EU that target EU consumers.
While still only in draft stage, once the directive comes into force, member states will have 18 months to transfer it into national law and a further six months before the rules are applied. The commission expects a timeline of around four years for the directive to apply.
In the US, the Federal Trade Commission (FTC) is also taking aim at the practice of greenwashing by big business with an update to its “Green Guides”.
The intention is to give the agency stronger legal cases against polluters by clarifying when companies’ deceptive marketing around sustainability and environmental responsibility violates federal law.
How can businesses respond?
The crackdown on greenwashing is gaining traction globally, and the onus is on businesses to maintain transparency and be ready to evidence their genuine commitment to sustainability.
This includes verifying that their supply chain partners are operating in an environmentally responsible manner.
Alex Minett
Head of global new markets
CHAS
Tel: +44 (0)345 521 9222
