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Greenwashing legislation

March 7, 2022

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Josh Papachristidis

‘Greenwashing’ is this just another word to add to your ESG glossary?

In short, no.

As of this year, greenwashing, either intentionally or unintentionally, can be punishable in the UK, European countries, for example, Denmark and others including Australia.

So what is it?

Greenwashing, as defined by the Cambridge Dictionary, is “a behaviour or activity that makes people believe that a company is doing more to protect the environment than it really is.”

Nominally through advertising or marketing.

According to the UK’s Competition and Markets Authority (CMA), in a global review of randomly selected websites, a massive 40% of green claims made online could potentially be misleading.

Why is it bad?

For an individual entity, greenwashing would bring short-term benefits. It would allow a company to take advantage of the positive moral compass of customers through false advertising. Misleading statements can cause eco-friendly consumers to un-wittingly take part in un-sustainable practices – for example incorrect disposing of products that are marked as biodegradable.

Furthermore, this unethical and harmful policy of greenwashing inhibits the united effort to keep global temperature increases to 2°C, or the more ambitious but increasingly unlikely target of 1.5°C.

Greenwashing will have negative long-term effects on a company, from bad press leading to a damaged reputation and therefore profit loss. To the continued tarnished image of the company as although they may work to retract and rectify these statements, the reputation of untrustworthiness will continue to follow them.

How do we ensure that we aren’t guilty of greenwashing?

The CMA has set out rules, the Green Claims Code, that came into legislation at the beginning of 2022.

To ensure that any environmental claims your company is making abide by the Green Claims Code you should; make sure all claims are truthful, accurate, clear, unambiguous, fair and meaningful, that these claims do not omit or hide important relevant information, that the claims consider the full life cycle of the product or service advertised and most importantly that the claims can be substantiated.

You should be able to provide information to validate your claims. This also goes for any claims that use information from a third party

If found to be publishing misleading claims, a company will be investigated to ascertain if consumer protection legislation has been broken.

The cracking down on vague and unsubstantiated green claims is occurring worldwide and across industries. Financial regulators have matched the increase in ESG funds with the due increase in investigations into these claims.

Within the EU, financial funds and asset managers are required to abide by the EU Sustainable Finance Disclosure Regulation (SFDR). In the USA, the Securities and Exchange Commission has, according to Reuters, begun asking asset managers to explain the ESG standards they use for classifying funds. Whilst the Danish Consumer Ombudsman released guidance back in 2014 on the use of environmental and ethical claims in marketing.

Did the hospitality sector invent greenwashing?

Not quite.

The term greenwashing was first coined in 1986, by a student who had holidayed in Fiji; Jay Westerveld. He noticed a hotel was asking guests to reuse their towels to help the environment, the same hotel was in the middle of an expansion destroying said environment and were presumably aiming to save money. Jay noticed the irony. He published an essay coining the phrase in a New York magazine and the term was added to every ESG glossary.

There are of course examples of greenwashing prior to 1986 and there have been high profile examples of greenwashing within companies and products in the hospitality sector. Such as; Ryanair, with unsubstantiated claims of being Europe’s lowest emissions airline, Hilton whose development, the Bimini Bay Resort and Casino, came at the destruction of an important marine ecosystems whilst their website stated in their sustainability mission that they ‘Protect our world globally’, and even the coffee pod machines that have begun being integrated into hotel rooms as companies Nespresso and Keurig whose claims that their capsules are recyclable have been publicly refuted.

Hotels and accommodation centres that have ‘green certifications’ need to make sure that these are reviewed on a regular basis or are third-party verified, for example, B Corp, BREEAM, GreenKey, LEED certification. Tourism attractions and operators need to ensure that they are not misleading tourists with vague claims of eco-friendly offers that lead customers to believe they are bettering the local community and environment. This is especially key with the recent uprise in demand for eco-tourism.

If you need assistance in adhering to the Green Claims Code or want to apply for verified certifications to allow you to showcase your green credentials, please contact Considerate Group at info@considerategroup.com.