Greenwashing and New Green Claims Regulation: is your business ready?

Greenwashing and the new Green Claims Regulation: is your business ready?
November 27, 2023

With the EU and UK introducing stringent regulations to combat greenwashing, it's crucial for marketers and employees to grasp sustainability's nuances and accurately convey claims to stakeholders.

A startling global review by the CMA found that 40% of green claims online could be misleading. Under the new regulations, such inaccuracies could lead to severe financial penalties. Vague terms like 'eco' or 'sustainable,' self-styled eco logos, and selective information omission are not just consumer deceptions but also pose major reputational and legal risks for businesses.

New and emerging regulation

The new 'Green Claims Code' in the UK, mandated at the end of April 2023, is designed to eradicate greenwashing activity and ensure that business environmental claims align with the UK consumer law. Under the Green Claims Code, firms will face fines of up to tens of millions of pounds for unsubstantiated or misleading claims.

Similarly in the EU, the Green Claims Directive will ban unsubstantiated environmental claims and unverified emissions offsetting schemes. The directive is expected to be formally adopted in November 2023 and will enter into force shortly after, with businesses given a 24-month period to adapt.

Costs of Non-Compliance

What are some of the costs of greenwashing?

- Financial sanctions: Under the new regulations, fines can amount to tens of millions of pounds. For smaller or medium-sized enterprises, such penalties could prove financially devastating.

- Reputational damage: Misleading sustainability claims can lead to a loss of trust among consumers. Consider the case of Shell, which faced backlash for advertising its biofuels as a green solution while still heavily investing in fossil fuels. This damaged their reputation and triggered protests.

- Loss of contracts: The financial implications of greenwashing extend beyond just fines and potential litigation; it can cascade across the entire business, affecting the ability to win tenders and retain customer loyalty. A survey from the Anti-Greenwash Charter and Futurebuild found that 57% of surveyed parties would remove suppliers guilty of greenwashing from their supply chain.  

Reducing the risk

What can you do to mitigate these risks?

- Educate the team: Implement regular training for the workforce on sustainability principles, standards, and legal requirements. Focus particularly on marketing and communications teams to ensure their strategies and messages align with regulatory and ethical standards.

- Verify claims: Obtain third-party certifications like ISO 14001 or the EU Ecolabel to validate environmental claims. Regular audits of business practices and supply chains are also vital to maintain compliance.

- Communicate transparently: Maintain an honest approach about your environmental impact and future sustainability goals. Avoid vague terms and be specific in your communications. This builds trust and shows a genuine commitment to sustainability.

- Introduce a Green Claims Policy: Develop a clear policy outlining how to make and support environmental claims, ensuring all marketing and communication teams are aligned.

- Audit regularly: Conducting periodic audits helps identify and address areas of potential non-compliance, ensuring timely corrective actions.

In summary, navigating the evolving landscape of green claims is a delicate balance between truthful communication, adherence to legal standards, and proactive sustainability initiatives. By embracing these changes, businesses can avoid penalties, foster consumer trust, and establish themselves as responsible, sustainable leaders in their industries.

PS Interested in aligning your team with the latest in sustainability and green claims regulations? We've recently added a set of focused modules on Marketing and Communicating Sustainability to the growing list of topics covered in our sustainability education and engagement platform. You can break down your team's journeys by department to help each one understand, and take action on, sustainability in the context of your business strategy. Learn more here.

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