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Greenwashing: How To (Not) Walk the Talk

Due to increasing environmental concerns, environmental awareness has grown in society, particularly among consumers, who are eager to purchase environmentally friendly products. The growing demand for environmentally friendly products and practices, coupled with a growing public awareness of green issues, has made corporations more aware of the need to go green. Recent studies from 2022 suggest that more than a third of the world's largest public companies have made "net zero" emissions pledges. In 2020 that number was only a fifth.

However, this starts to beg the question - amid the skyrocketing rate of accusations of greenwashing, are all companies staying true to their words?

TerraChoice reported that 95% of green products in Canada and the USA committed at least one of the "sins of greenwashing" including hidden trade-offs and false labels. Furthermore, according to advertising firm Ogilvy & Mather, greenwashing practices are becoming increasingly prevalent. Since greenwashing has increased along with green markets, customers need help identifying a truly environmentally friendly claim.


But what exactly is greenwashing? Apart from trying to capitalize on the growing consumer demand, what are other factors driving the greenwashing phenomenon?

As a result of the multifaceted nature of the term, there are many definitions of greenwashing. However, according to several dictionaries, greenwashing is the practice of promoting environmentally friendly programs to hide an organization's unsustainable or less savory activities. Here, two behaviors are observed - retaining negative information related to a company's environmental performance while exposing positive information.

Examples of greenwashing can take the following forms:

  • Making environmental claims for future environmental performance without specifying objective and verifiable commitments and targets or an independent monitoring system​.
  • Usage of non-certified sustainability labels or labels not established by public authorities.
  • Making a generic claim about environmental performance for which the trader cannot demonstrate recognized excellence.
  • Using environmental claims about an entire product if they only apply to a particular aspect of the product.

So, where does the problem come from? Is it due to the lack of definitions of what precisely green is? Or the lack of regulations that prohibit and actively punish the act of greenwashing?

Compared to developing countries, developed countries have a higher level of environmental awareness, which is reflected in their regulations. And yet, in some countries, regulation of greenwashing practices is minimal, and enforcement strategies remain ambiguous. Thus, environmentalists, scholars, and activists have argued that non-binding regulatory guidelines do not adequately protect consumers against greenwashing's harmful effects.


Others, however, are taking note and proactively working to limit greenwashing's adverse effects.

The EU Prospectus Regulation provides that errors or misleading information in capital markets prospectuses may trigger administrative fines, as defined in Article 11 (1) as well as Article 38 (2)(d).

As a result of this provision, if relevant information is found to be false national legislation would be required to impose administrative fines of up to (at least) EUR 5 million, or 3 percent of the annual turnover of legal entities, and administrative fines of up to EUR 700,000, for natural persons.

A most notable example is EC's proposal for a Directive on empowering consumers for the green transition, which will amend the below two Directives and will be further supported by the initiatives.

Amendments to the Consumer Rights Directive (2011/83/EU) are expected to contribute to a circular, cleaner EU economy by enabling consumers to make informed purchasing decisions. The former will be accomplished through the mandatory requirement to provide information on the durability and reparability of products. ​

Additionally, amendments to the Unfair Commercial Practices Directive (2005/29/EC) will target unfair commercial practices that mislead consumers away from sustainable consumption choices.​

Furthermore, the Green Claims Initiative will force companies to substantiate their environmental claims using an EU-wide methodology called Product Environmental Footprint. The purpose is to make the ecological labels and credentials listed by companies reliable, comparable, and verifiable across the EU (e.g., by displaying the product's recyclability or biodegradability).

Lastly, the Sustainable Products Initiative and EU Digital Products Passport will build on the current Eco Design Directive to introduce sustainability requirements for products that are to be sold in the EU. The latter will ensure that products on the EU market are designed to be energy-efficient, repairable, durable, recyclable, and free of hazardous chemicals.​

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