The end of greenwashing? How companies can track their transition to transparency

Post Date
17 May 2024
Author
Regan Leary
Read Time
4 minutes
  • ESG advisory

Greenwashing’s days are numbered. Faced with increased scrutiny from regulators and consumers, companies are rethinking what they say about the environmental and social characteristics of their products and services and how they say it. The risks of greenwashing are higher in sectors with complex supply chains, such as food and beverage, fast-moving consumer goods, and fashion and retail. For a number of years, fashion companies like Nike, Zalando, and H&M have marketed their products to consumers with bespoke sustainability labels or ‘conscious’ curations, all aimed at helping customers make informed choices.

But customers are frustrated. What does ‘green,’ ‘eco-friendly,’ or ‘nature positive’ actually mean? Is slavery-free chocolate better than Fair Trade certified? Or should I buy a recycled cotton t-shirt versus a ‘carbon neutral’ one? A spate of class-action lawsuits have thrown this frustration into light and revealed the risks around green claims. In the US, for example, H&M [1] and Allbirds [2] were sued by groups of consumers who argued the companies misrepresented the true environmental impact of their products and misled consumers. Consequently, companies that have found themselves in the spotlight are rolling back on sustainability claims and sharing less information publicly about their wider ESG activities, a trend now known as ‘greenhushing.’

In parallel, regulators are also stepping up their game. In the UK, Asos, Boohoo, and George at Asda pledged to update their claims around material labelling and the marketing imagery following an investigation from the Competitions and Markets Authority [3]. Following dialogue with the EU, Zalando agreed to remove sustainability branding from its website and the option to filter and search for products via a sustainability tag [4]. Going forward, they will also add more detailed information about the percentage of recycled materials in a given product.

Are these signs that sustainable products and services will be no more?

No, in fact, and quite the opposite. These are strong signals from consumers and regulators that companies should continue embedding sustainability into their operations and products, and regulators are busy laying out how companies can get it right. The UK Competition and Markets Authority and Advertising Standards Agency have updated their Green Claims Code [5], the US Federal Trade Commission is in the process of updating its Green Guides [6], and the EU recently approved a Directive aimed at ensuring companies’ sustainability claims are robust, accurate, and verifiable [7]. This Directive includes a set of ‘black-listed practices,’ and lays out plans to harmonise certification and labelling schemes.

Overall, these guides establish principles for companies to follow when making claims about products or services, requiring claims to be truthful and accurate, consider the full life-cycle of a product, be substantiated by robust evidence, and verifiable by credible certifications. There is also a growing focus on the repairability, durability, and circularity of products, aimed at promoting responsible consumption and the circular economy. Companies are being strongly encouraged to help consumers understand how they can extend the life of their purchases through repair and better care practices. For example, Uniqlo has a range of ‘how to’ videos on sewing buttons and hemming trousers [8].

We’re in a period of transition for green claims and companies should take this time to review, reflect, and prepare for the road ahead.

So where to start with your own transparent sustainability journey ?

  • Review the claims your company makes about green products or services
  • Remove generic words like natural, sustainable, or eco-friendly 
  • Collect and analyse company-level or product-level data on environmental or social characteristics 
  • Ensure that data and claims reflect the full life-cycle of the product or service
  • Evaluate available sustainability certifications and choose credible schemes
  • Work internally with your Communications, Marketing, Sales, and Product Development teams to ensure you have the right processes and governance in place to give you confidence in your claims
  • Consider establishing or updating your Responsible Marketing Principles to align with regulatory guidance and best practices in your sector

-------------------------

References

[1] https://www.reuters.com/legal/legalindustry/guidance-sustainable-claims-after-dismissal-hm-greenwashing-class-action-2023-06-02/

[2] https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2023)753958

[3] https://www.reuters.com/business/retail-consumer/uk-probes-fashion-groups-asos-boohoo-asda-over-green-claims-2022-07-29/

[4] https://ec.europa.eu/commission/presscorner/detail/en/ip_24_948

[5] https://greenclaims.campaign.gov.uk/

[6] https://www.ftc.gov/news-events/news/press-releases/2012/10/ftc-issues-revised-green-guides

[7] https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2023)753958

[8] https://www.youtube.com/playlist?list=PLth8ow3KfOconrFnYJgZzVgoz7WrTP3HE

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