Your Guide to the Latest Anti-Greenwashing Regulations
Greenwashing, when a company or group actively presents its activities or product as sustainable without being able to back it up, is increasingly being highlighted.
Unfortunately, lots of companies are guilty. In 2020, the European Commission found that 53% of examined environmental claims in the EU were vague, misleading or unfounded, and 40% were unsubstantiated.
But what is in place to prevent it? (Other than a moral compass, of course).
The European Commission’s Green Claims Directive
In Europe, the European Commission is in negotiation with the EU Parliament on the European Commission’s Green Claims Directive.
Originally proposed in March 2023, the directive aims “to prevent greenwashing by requiring companies to substantiate their voluntary green claims in business-to-consumer commercial practices, by complying with a number of requirements regarding their assessment".
The European Commission says: “The proposed directive does not prescribe a single method for the assessment.”
It continues: “The proposal aims to ensure consumers get adequate information on products' durability and reparability before purchasing a product.”
FCA's anti greenwashing rule
Looking to the UK, the Financial Conduct Authority has passed an anti-greenwashing rule designed to protect consumers by ensuring sustainable products and services they are sold are accurately described.
“Confirming the new anti-greenwashing guidance and our proposals to extend the Sustainability Disclosure Requirements and investment labels regime are important milestones that maintain the UK’s place at the forefront of sustainable investment,” says Sacha Sadan, Director of Environmental, Social and Governance, FCA.
“Our good and poor practice anti-greenwashing examples will help firms market their products in the right way. We continue to work closely with the ASA and CMA to address greenwashing,” he continues.
“Consumers care about investing in products that have a positive impact on the planet and people. That’s why we want to boost the integrity of the market and ensure people can make informed decisions with their money.”
Many companies seem to welcome the guidance.
“As the anti-greenwashing rule comes into force, it is good that the FCA has supplemented the rule with guidance on regulatory expectations and examples of good and bad practices. In the absence of the guidance there was a genuine risk that firms would have delayed progress on sustainability for fear of tripping up,” says Paul Hamalainen, Global Sustainable Finance and UK Prudential Policies Director, Mazars.
“The four expectations are guiding lights to help firms stay within the rules. Now it is down to companies to undertake a drains-up assessment of their sustainability practices and promises to ensure they are operating in accordance with the guidelines and the requirements for public disclosure. Firms shouldn’t underestimate how long this could take.”
Global greenwashing deterrents
These two examples are recent additions to a large collection of global greenwashing regulations, including but not limited to:
- The US Federal Trade Commission’s Green Guides for the Use of Environmental Claims
- Australia, the Australian Competition and Consumer Commission (ACCC)’s guidance on environmental claims
- China’s advertising language enforcement
- South Korea’s proposed Amendment to Environmental Technology and Industry Support Act.
Greenhushing: Why aren’t companies publishing sustainability goals?
Greenwashing has a close relative called greenhushing – where companies downplay or do not share their sustainability goals or achievements.
A report by South Pole found that 44% of companies have found that external sustainability communications have become more challenging in the past year, 58% are reducing communications and 18% have no plans to publish their targets at all.
Many cite an uneven global regulatory framework as a key reason, especially those operating in multiple markets.
Despite pressure from consumers to highlight sustainability – and the increase in sales that is often seen with impressive sustainability achievements – some companies are choosing to tread lightly, rather than get caught up in new or evolving regulations.
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