Greenwashing refers to the deceptive practice of promoting a false impression or misleading information about the environmental and sustainable practices of a company, product, or service. Essentially, it involves exaggerating or falsely claiming environmentally friendly attributes to attract environmentally conscious consumers without actually implementing meaningful changes.

Companies may engage in greenwashing for various reasons, such as improving their public image, capitalising on the growing demand for eco-friendly products, or deflecting attention from their actual environmental impact. Some common tactics include using vague or unsubstantiated environmental claims, showcasing a single environmentally friendly aspect while ignoring overall harmful practices, or creating misleading labels and marketing materials.

Why does Greenwashing matter?

The act of Greenwashing erodes consumer trust in companies and products. When consumers believe they are supporting environmentally responsible businesses, they may be more likely to make purchasing decisions based on these claims. Greenwashing can lead to disillusionment and distrust when these claims turn out to be false.

Genuine efforts to reduce environmental impact often require significant investments and changes in business practices. Greenwashing allows companies to avoid making necessary changes while still benefiting from the positive perception associated with environmentally friendly practices. This can hinder overall progress in sustainable and environmentally responsible practices.

Greenwashing can create an uneven playing field in the marketplace. Companies genuinely committed to sustainability may face unfair competition from those making false claims, as consumers may choose products based on misleading information.

Misleading environmental claims may attract regulatory scrutiny. Governments and regulatory bodies may intervene to prevent false advertising or establish guidelines to ensure accurate representation of environmental practices. Companies found guilty of greenwashing could face legal consequences.

Efforts to adopt sustainable practices and reduce environmental impact deserve recognition and support. Greenwashing detracts attention and resources from companies making authentic strides in sustainability, potentially slowing down the overall progress towards a more sustainable economy.

What is the UK stance on Greenwashing?

In the UK, CMA investigations into the accuracy of green claims within the fashion and fast-moving consumer goods sectors are set to conclude in 2024. There is potential for additional investigations in other sectors to be announced during the year. The CMA has identified travel and transport as priorities for concerns related to greenwashing. Notably, the UK government has resisted including greenwashing in its list of automatically banned practices under the DMCC Bill, but it remains open to reconsidering this stance if sufficient evidence warrants further action.

Shifting focus to direct marketing, legislative reforms are anticipated in the UK in 2024. The Data Protection and Digital Information Bill (DPDI Bill), which gained renewed attention in 2023, is expected to become law in mid-2024. The DPDI Bill amends regulations to permit non-commercial organisations, such as charities, to conduct direct marketing via email and text message on an opt-out basis in specific circumstances. Additionally, it aligns the Information Commissioner's Office's (ICO) enforcement powers with the UK GDPR, potentially resulting in increased fines for breaches related to direct marketing and targeted advertising.

What is the EU stance on Greenwashing?

Meanwhile, in the EU, the Green Transition Directive is anticipated to become law in 2024. This directive will update consumer protection laws to proactively prohibit various greenwashing practices. Specifically, it aims to prevent generic environmental claims without demonstrated excellent environmental performance and challenges claims based on carbon offsetting without proof of a neutral, reduced, or positive environmental impact.

Concurrently, the Green Claims Directive, despite starting its legislative journey after the Green Transition Directive, is also expected to become law in 2024. Prioritised by the European Commission, this directive seeks to enhance the substantiation of green claims about products and businesses. It aims to ensure that environmental labelling schemes are both robust and transparent. While the requirements of these directives are unlikely to apply until 2026 at the earliest, their introduction reflects a commitment to addressing greenwashing in a comprehensive manner.

On the EU front, plans to replace the E-Privacy Directive with a Regulation on Privacy and Electronic Communications remain a priority. This regulation, focused on clarifying rules for direct marketing and the use of tracking technologies for targeted advertising, has been in progress since its proposal in January 2017. However, there is scepticism regarding its adoption as law in 2024, given its extended timeline.

Why should I be thinking about Greenwashing in my business?

In 2023, regulatory efforts to address greenwashing in advertising gained significant momentum. The focus on tackling greenwashing is expected to continue in 2024, with the UK's Competition and Markets Authority (CMA) leading enforcement activities and the European Union (EU) passing two new laws aimed at outlawing misleading green claims.

From an in-house legal perspective, the evolving landscape of regulations surrounding greenwashing and direct marketing presents both challenges and opportunities for businesses. The increased focus on tackling greenwashing underscores the importance of transparency and accuracy in environmental claims, aligning with broader societal expectations for corporate responsibility. As such, businesses must prioritise compliance with existing and forthcoming laws to mitigate the risk of regulatory enforcement actions and reputational damage.