Greenwashing regulations around the world

Greenwashing regulations around the world

Welcome back. ๐Ÿ‘‹

It's time for the newest edition of the Greenifs sustainability newsletter. This week is all about greenwashing. ๐Ÿงผ

It is deceptive publicity, created by an organization to present a falsely environmentally responsible public image. It ranges from setting sustainability goals without clear targets, timelines, or action plans to flat out cheating emissions tests... (Volkswagen Group).

Several important steps have been taken to prevent companies from falsely advertising or exaggerating their sustainability actions. Let's explore the main laws and regulations regarding greenwashing in different regions around the world. โš–๏ธ

๐Ÿ‡ช๐Ÿ‡บ The EU:

The European Union was one of the first to adopt legislation to curb the use of greenwashing. Although not officially a law, before a vote from the European Parliament, this proposal will affect all claims made by companies from now on.

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Greenwashing statistics in the EU

In March of 2023 the European Commission adopted a proposal to fight greenwashing. According to the press release of the event:

The proposal requires companies to substantiate claims they make about environmental aspects or performance of their products and organisations using robust, science based and verifiable methods."

According to the proposal, all sustainability claims made by the companies will have to present in their marketing material:

  • All environmental aspects, environmental impacts or environmental performance covered by the claim.
  • The underlying studies or calculations used to assess, measure and monitor the environmental impacts, environmental aspects or environmental performance covered by the claim.
  • A brief explanation how the improvements that are subject to the claim are achieved.

The fines for the failure to achieve any of the points in the proposal will be handled by the court system of each member, however the amount of such fines was set to at least at 4 % of the traderโ€™s annual turnover in the Member State.

You can read more about the proposal and all of its points here.

๐Ÿ‡ฌ๐Ÿ‡ง The UK

The main legislative document, governing sustainable claims in the UK is the Green Claims Code. It states that:

  • claims must be truthful and accurate.
  • claims must be clear and unambiguous.
  • claims must not omit or hide important relevant information.
  • comparisons must be fair and meaningful.
  • claims must consider the full life cycle of the product or service.
  • claims must be substantiated.

To strengthen the system already in place, the Financial Conduct Authority put forth new proposals. Although still in development, the goals and guidelines of the proposal are outlined here.

As for the fines, currently, the maximum amount that can be charged for companies registered in the UK are:

  • Up to 10% of global turnover
  • Up to 300 000 pounds for individuals

๐Ÿ‡บ๐Ÿ‡ธ USA

In the USA, the organization responsible for ensuring the sustainability claims are accurate is the Federal Trade Commission. Its green guidelines are the basis for the companies to follow while making green claims. The main points of these guidelines are:

  • Supplementing qualifications and disclosures should be written, or cited in plain text and language next to the sustainability claim.
  • An environmental marketing claim should specify whether it refers to the product, the productโ€™s packaging, a service, or just to a portion of the product, package, or service.
  • An environmental marketing claim should not overstate, directly or by implication, an environmental attribute or benefit.
  • Comparative environmental marketing claims should be clear to avoid consumer confusion about the comparison.

The penalties for the infringement of these points are handled by American court system and are handled on a case to case basis.

๐Ÿ’ต Fines

There have already been several high profile cases of companies being fined for false sustainable advertising claims. In Europe, oil company Eni has been fined 5 MLN Euros for the environmental benefits of palm oil derived diesel. Walmart was fined 3 MLN $ for falsely advertising bamboo products as chemical and toxin free. However, with the new regulations around the world will be able to fine companies much more. Particularly Oil and Gas companies, fast fashion producers and banks are facing the biggest danger of losing up to 10% of their revenue due to greenwashing in various countries.

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๐Ÿ™Fun and interesting facts:

Let's end by learning how the movement discussed today even came into existence. The term "greenwashing" was first coined in 1986 by environmentalist Jay Westerveld. He used the term to describe the hotel industry's practice of placing placards in each room promoting the reuse of towels to "save the environment." Westerveld noted that there was little else to suggest the hotels were interested in reducing environmental impacts.

๐ŸŒŠ Sources

  • European green claims proposal https://environment.ec.europa.eu/topics/circular-economy/green-claims_en
  • UK Green Claims code - https://greenclaims.campaign.gov.uk/
  • USA FTC Green guides - https://www.ftc.gov/news-events/topics/truth-advertising/green-guides
  • ENI fine - https://www.transportenvironment.org/discover/oil-major-slapped-%E2%82%AC5m-fine-greenwashing-palm-oil-diesel/
  • Oil company risk of fines for greenwashing - https://www.globalwitness.org/en/campaigns/greenwashing/fossil-fuel-greenwash-since-launch-of-green-claims-code/
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