Greenwashing is the process of conveying a false impression or providing misleading information about how a company's products or services are more environmentally sound.
Greenwashing has become more common in recent years, and it is becoming an obstacle to making significant improvements to tackle climate change. Greenwashing is most of the times intentional, clever PR, partial disclosure of what is convenient, or of actions that have only a marginal sustainable benefit, but occasionally greenwashing can be a result of not having enough information or a scientific understanding on how to implement a meaningful strategy and communicate truthfully its impacts.
There has been increase in investigations or litigation across sectors and geographies. in 2021 11 brands were called out for greenwashing. More recently, a group of UK fashion retailers ASOS, Boohoo and George at Asda are being investigated by the Competition and Markets Authority (CMA) over their products eco-friendly and sustainability claims. Environmental groups are suing Dutch airline KLM, alleging that adverts promoting the company's sustainability initiative are misleading; this is the first lawsuit to challenge airline industry "greenwashing" under the EU's Unfair Consumer Practices Directive.
To address greenwashing challenges, we have seen regulators in several major markets introducing new rules for ESG disclosures, such as the recent proposal by the U.S.’ Securities and Exchange Commission (SEC), the EU’s Sustainable Finance Disclosure Regulation (SFDR) framework, the UK’s Financial Conduct Authority (FCA) requirements. The Monetary Authority of Singapore (MAS), unveiled also new reporting and disclosure requirements to go in effect in Jan 2023 for ESG funds of retail investors, enabling investors to better understand the ESG performance of the funds they invest in, in an effort to reduce the risk of greenwashing.
Regulations, guidance, requirements for disclosure , pressure from stakeholders will help minimize greenwashing instances, but what needs to change is behavior, taking ownership, doing things and communicating openly the way things are. There are better ways to successfully communicate sustainability progress.
Despite climate commitments and progress in sustainability reporting, recent research suggests that up to 40% of sustainability claims could be misleading.