With more consumers prioritising eco-friendly products and services, the tide has turned against greenwashing companies. As more companies are making unsubstantiated or misleading sustainability claims to attract customers and investors, regulators are starting to take action.
Greenwashing was initially used only in an environmental context, but today it has expanded to a broader concept of sustainability that also includes social and ethical aspects. As a result, businesses are increasingly at risk of facing civil lawsuits and government enforcement actions. There has been an increase in consumer litigation regarding statements on product packaging and in advertising about environmental, social, and governance (ESG) practices.
In a bid to fight rampant greenwashing claims and misleading advertisements, new regulations have been drafted that will require companies to back up their sustainability claims with evidence and to disclose if their product has an impact in other areas.
In Part 1, we examine the definitions of what a sustainability claim is and the current state of greenwashing. Part 2 covers some high-profile greenwashing cases in various sectors and details the negative consequences and legal risks these companies faced, while Part 3 explores the new regulations being drafted and enforced around sustainability claims, and talks about how companies can prevent greenwashing.
What is a sustainability claim?
There are many definitions of what a sustainability claim is, which is covered in detail in our other article on making reliable sustainability claims. A sustainability claim can also be presented as an “environmental”, “ethical”, "eco", or “green” claim, but is essentially any statement that suggests that a product or service:
- Has a positive environmental impact or no environmental impact at all
- Is less harmful to the environment than an earlier version of the same product or service, or a competitor’s product or service
- Has a positive impact or no negative impact on the welfare of animals or humans
Some examples of what sustainability claims can look like:
- Sustainable materials: made from ingredients that are all-natural, locally sourced, organic, non-toxic, eco-friendly, renewable, made from x% recycled, bio-based, or biodegradable materials
- Fair trade practices: support local producers and communities, pay fair wages, provide safe working conditions, support marginalised groups, reduce gender inequality
- Reduced chemical use: use fewer or less harmful chemicals, switch to natural or non-toxic alternatives
- Climate-neutral: steps taken to reduce and offset carbon emissions so that its net emissions are zero, conserve energy by use of energy-efficient equipment, use of or invest in renewable energy sources, carbon capture and storage projects, reforestation initiatives in the form of carbon credits
Greenwashing can take on different forms, but it is essentially the act of making a sustainability claim that is not substantiated, misleading, or false so that a company appears more eco-friendly than it actually is.
The current landscape in greenwashing
Research by the European Commission in 2020 found that 53% of products had "vague, misleading or unfounded information" on the sustainability claims of the products. A new draft proposal targeting greenwashing reportedly said, "Climate-related claims have been shown to be particularly prone to being unclear and ambiguous and to mislead consumers, amounting to greenwashing2."
A global screening of randomly selected websites has discovered that 42% of sustainable claims online could be misleading consumers. Led by the Competition and Markets Authority (CMA) and The Netherlands Authority for Consumers and Markets (ACM), the screening checked 1,095 websites in November 2020, with a focus on environmental claims for the first time3.
When 344 dubious claims were examined in greater detail, it was found that4:
- In more than 50% of the cases, insufficient information was provided for consumers to be able to judge the accuracy of the claim.
- 37% of cases included vague and general statements to give consumers the unsubstantiated impression that the product did not have a negative impact on the environment.
- In 59% of cases, easily accessible evidence to support the claim had not been provided.
It was also found that companies made use of these misleading tactics, which potentially break consumer law3:
- Use of brand eco logos and labels that are not associated with an accredited or audited organisation
- Hiding or excluding certain information in order to appear more eco-friendly
Another study by ECOS and the Rethink Plastic Alliance has found that almost half of ‘green’ claims on plastic products found on the beaches of Europe were misleading. The most commonly made claims were that these plastic products were reusable, recyclable, containing recycled material, biodegradable, compostable, and bio-based.
Examining the claims displayed on 82 different products that contained plastics or plastic packaging, they found that5:
- 75% of the claims were self-made and not verified by independent third parties
- 49% were potentially unclear to consumers as insufficient information was provided
- 46% were not relevant to addressing plastic pollution
- 26% lacked any supporting evidence and therefore unreliable
Even some of the largest corporations are guilty of making false, misleading, or unsubstantiated sustainability claims. According to the Corporate Climate Responsibility Monitor report6, 15 of the 25 largest global companies were rated to have “low” to “very low integrity,” falling well short of their targets set for 2030 aligned with the goals of the Paris Agreement. While all 25 companies have made public commitments to significantly reduce or eliminate their carbon emissions, only three have clear plans to “decarbonise over 90% of their full value chain emissions. Many of these companies did not account for scope 3 emissions, which should include carbon emissions from the suppliers, transport companies, and waste management companies they worked with.
This is the sobering reality of where we stand today in the race against the climate issues the world is facing. It is no wonder governments and regulators are starting to crack down on greenwashing, and implementing requirements for businesses to substantiate their sustainable claims.
In Part 2 of our series, we look at some notable examples of greenwashing and examine the negative consequences they faced. We then explore how the new regulations against greenwashing could affect your business in Part 3.
Circularise is the leading software platform that provides end-to-end traceability for complex industrial supply chains. We offer two traceability solutions: MassBalancer to automate mass balance bookkeeping and Digital Product Passports for end-to-end batch traceability.