If you like what we do and think we can help then let’s chat.

contact@greenheartbusiness.com

Work.Life, 9 Noel Street, London, W1F 8GG

Back

Making green claims worth talking about

Greenwashing and how to avoid it Half-circle stamp style image with 'Greenheart for greener futures' caption
Section edge texture with light green on top and light blue on bottom

The sustainability market is booming with consumers increasingly looking to buy in line with their ethics and values. With consumers increasingly having to deal with the disruptive effects of climate change, studies have shown a shift in consumer preference for sustainable products and consumers willing to pay a premium for products and services marketed as environmentally friendly as consumers become more and more aware about the impact of products and their supply chains.

This shift in consumer preference and the will to ‘do the right thing’ has resulted in companies looking to capitalize on the fact that sustainability itself is a powerful tool to gain a competitive advantage over market peers. The results of this are evident everywhere you shop, in-store or online, products with labels such as “sustainably sourced”, “fair trade”, “carbon neutral”, and other types of marketing related to the environmental and social responsibility of a company or product. An EU Commission study as well as a 2021 Competition and Markets Authority (CMA) review found that many green claims were unclear and ambiguous, contained vague, general statements which could not be associated with any concrete evidence and therefore could be deemed as misleading and potentially breaking consumer law. In most cases, this is likely not done with wrongful intention, but is a result of a lack of understanding or confusion regarding what claims can (and cannot) be made on the environmental performance. Many may not realise but the use of catchy, vague statements may be misleading, despite having a valid, verifiable claim.

What are the risks of greenwashing?

  • Damage to brand reputation and loss of consumer trust

A major risk (and arguably one of the most important to companies) is relating to brand reputation. Companies that have engaged and been reprimanded for greenwashing are likely to find that consumers will avoid their products and services. In this day and age, where information is so easily spread on social media and consumers’ collective ability and willingness to boycott brands exposes brands to substantial risks if they are caught greenwashing. The potential fallout and erosion of customer trust can have long-lasting effects on a company’s reputation. It takes years to build trust and seconds to destroy it.

  • Fines and costs of litigation

Lawsuits involving ESG-related issues have grown significantly in recent years as consumers have become increasingly aware and concerned for climate change. Recent trends in litigation targeting greenwashing claims show a shift from targeting the use of buzzwords to challenging more broader sustainability representations and long-term sustainability goals.

Additionally, government agencies are cracking down on greenwashing. There is a growing number of regulation and greenwashing-specific rules setting fines that could apply to companies found guilty of greenwashing.

  • Loss of investors

The awareness about sustainability isn’t exclusive to consumers but is also increasing among investors as well, particularly considering the growth of sustainable investing and the consideration of ESG factors in investment decisions. 

Due to the growing influence of ESG factors in investment decisions, companies exposed for greenwashing may erode investor confidence and may lead to lower ratings and rankings.

The legal landscape

Globally, sustainability related regulations are expanding and becoming increasingly stringent aimed at combating greenwashing and regulating environmental claims. These developments in legislation and guidance are a result of the rises in increasing greenwashing as well as heightened customer awareness and concern for climate change.

Source: BDO

Let’s review the some of the laws and guides that govern greenwashing around the world:

The UK: In September 2021, the Green Claims Code was adopted in the UK. The Green Claims Code outlines six principles to avoid greenwashing including being truthful and accurate, clear and unambiguous, and not omitting relevant information. The Green Claims Code in and of itself is not a law, however, companies deemed to not be complying with the Green Claims Code can be held accountable for violations through fines and penalties by the Competition and Markets Authority (CMA), Trading Standards Services, or the Advertising Standards Authority.

In the spring of last year the Digital Markets, Competition and Consumers 2024 was passed. A key part of The Act was substantially enhancing the CMA’s powers in enforcing consumer protection, including the power to impose significant fines in relation to infringement of the laws.

The EU: The EU is establishing a comprehensive framework to tackle the rise in greenwashing. Notably the new EU Consumer Empowerment Legislation and the proposed Green Claims Directive (GCD) which would strengthen the existing framework on sustainability claims. This includes banning all practices such as sustainability labels that are not based on certification schemes as well as generic environmental claims.

The US: The US has the Green Guides for the Use of Environmental Claims. This is a guide help marketers ensure environmental claims are truthful, substantiated and don’t mislead consumers. Similar to the UK, the Green Guides in and of itself is not regulation but it provides guidance for enforcement of other unfair practices laws.

Regulation relating to greenwashing does vary between states. Some states, for example California, have passed more stringent legislation.

An update to the Green Guides was anticipated in 2024, however that has not happened. Companies should begin preparing for a potential release of the updated guidance in 2025 (hopefully). The last update in 2012 led to a surge in enforcement action, which may likely repeat once the new guidelines are in place.

How to avoid greenwashing

Depending on the market in which you operate, the guidance for green claims may differ.

However, there are some general guidelines you can follow to ensure your company doesn’t fall subject to greenwashing.

1. Ensure your green claims are clear

Avoid using vague terms such as “green” or “sustainable”. These are often too broad and can be misleading without specific definitions. Instead use more concrete metrics.

2. Provide evidence (and make sure they are kept up-to-date)

Ensure environmental data that backs up your environmental claim is publicly accessible.

3. Comparisons must be fair

When comparing products ensure your claims are accurate, unbiased, based on similar, up-to-date data.

4. Ensure visual claims and labels aren’t confusing

Visual claims and labels should support your claims rather than confuse.

5. Educate, educate, educate.

Educate yourself and your team on greenwashing – if you understand what greenwashing is and can identify its signs, it is unlikely that you will unintentionally greenwash in your marketing. Familiarise yourself with the different shades of greenwashing and the laws and regulations relating to this. And remember that this isn’t a one-time exercise, the rules and regulations surrounding greenwashing are changing, so ensure that this education piece is done regularly and updated to include up-to-date information relating to greenwashing.In particular, your legal team should be regularly reviewing current and upcoming legislation relating to greenwashing requirements across the markets in which you are operating and marketing teams should be reviewing all claims against these.

6. Be honest

Honesty is the best policy. We can all acknowledge that sustainability is an exercise of continuous improvement and sustainability is constantly evolving so communicate honestly and openly on your company’s sustainability journey. Celebrate your successes but also acknowledge challenges you have faced. 

7. Focus on genuine impact

Make sure sustainability is integrated into your wider business strategy and that sustainability initiatives fit into this strategy and are not just a short-term marketing tactic. 

Commit to long-term sustainability targets which are ambitious but also achievable. Make sure you have a robust strategy on how these goals will be achieved and communicate this. Set clear, measurable goals and make sure you report on these regularly to track your progress. 

How to spot greenwashing from suppliers

Procurement teams also need to be wary of claims they receive from suppliers and potential suppliers.  Many companies will provide fancy reports and bold statements about how their product or service is ‘sustainable’ or ‘ environmentally friendly’.  These claims also need to be looked at carefully.  It can be hard to judge how true these claims are but you can follow the advice above; check if they are talking about the whole life cycle impact and what data they have to back up claims.  You can also check if they are using generic terms and not being specific about how they are performing better.  By understanding what you need to be looking at to judge the relative performance of suppliers and by introducing a supply chain traceability and transparency system companies can look for and require stronger sustainability evidence supported by trustworthy data. 

We are currently working on a blog relating to engaging with your supply chain which you do not want to miss out on!

Other great resources relating to greenwashing and how to avoid it include The Anti-Greenwash Guide for Agency Leaders as well as the Integrated Framework of Greenwashing.

What next?

  • Sign up to our newsletter to get regular insights straight to your inbox
  • Request a call back from one of the team here, or
  • Check out our website to see how we help companies embed sustainability in their strategies and ensure compliance on green claims and more

If you’d like to know more, watch article author Bianca chat with our founder Tom about this article 👇

Section edge texture with light blue on top and dark green on bottom