This was the debate for a panel discussion at edie 24, edie’s biggest face-to-face event of the year, today (21 March).
The discussion comes as the EU is progressing its Green Claims Directive – a package of legislation that will penalize businesses operating and/or trading in the bloc from making misleading, inaccurate, incomplete or commonly misunderstood claims about the environmental impact of their products and services.
Businesses will be required to back their claims up with third-party verified data, and some terminology, such as ‘climate-neutral’, will be banned altogether.
Louise Harman, partner at law firm Bates Wells, said the Directive “represents a substantial shift in legislation” and is the most progressive package of its kind globally.
She said: “We’ve seen the EU move towards a much more targeted approach. Policymakers felt that existing EU regulations around consumer protection in general were not sufficient to tackle the complexities around green claims.
“In the UK, in many cases, regulators think current regulations are already doing their job.”
The UK has no formal legislation on greenwashing. However, the Competition and Markets Authority (CMA) is starting to investigate and penalize large companies in the fashion and consumer goods industries for falling foul of its Green Claims Code.
It bears noting that the CMA is likely to gain additional enforcement powers later this year. The Digital Markets, Competition and Consumer Act will enable the Authority to begin investigations without going through the court process, and boost the level of fines it can impose to a maximum of 10% of corporate turnover.
It will also give the Secretary of State powers to create new types of offences. Harman says it is “not beyond the realms of possibility” for a specific greenwashing offence to be created.
Burden or opportunity?
All four panellists agreed that good regulation and legislation is important, given the proliferation of greenwashing as businesses clamour to appeal to increasingly environmentally aware customers.
A ‘sweep’ of global corporate websites, commissioned by the UK Government in 2021, found that 40% of claims potentially flouted the CMA’s Green Claims Code. Nusa Urbancic, chief executive of the Changing Markets Foundation, said her team’s assessment of claims in the fashion sector found that some brands were likely misleading with up to 90% of their claims.
She said: “Many businesses are investing more in their sustainability marketing budgets than they are on creating actual solutions. We have a situation where false solutions create delays to any meaningful action – which we cannot afford.
“Greenwashing creates a really un-level playing field where those that have invested to be genuine in their claims have a competitive disadvantage against those that have not.”
This is particularly salient given the growing market products deemed to be ethical which has, by some estimates, grown by one-third in the UK since the start of the decade.
Arguments against greater corporate sustainability disclosure and due diligence requirements often centre around whether they place an unreasonable burden on firms – an argument which has proven persuasive in the EU at this time of economic downturn.
Adam Bastock, founder of Small99, argued that this line of thinking is more applicable to small (particularly micro) businesses, but it often misappropriated by large corporates who are more than sufficiently resourced to check their claims.
His organisation convenes hundreds of UK-based SMEs. He explained that being accused of greenwashing is “a real fear point” for many of them, with the vast majority not seeking to deliberately mislead.
Fear, Bastock said, has caused many SMEs to resort to greenwashing – communicating less, if anything, about their environmental targets, impact and programmes on a voluntary basis.
He said: “It’s incredibly easy to do nothing.. The main thing that we’re lacking is confidence. It’s not education or knowledge. It’s knowing they can put their head above the parapet.”
Greenhushing is a particular concern to Bastock given that it can prevent knowledge-sharing and collaboration between SMEs in the same locations or sectors as each other, who are typically trustworthy sources to one another.
Closing knowledge gaps
Professor Chris Harrop, ESG strategy director at Marshalls, agreed with Bastock that most companies are not deliberately greenwashing. Instead, he’s observed SMEs grappling with a lack of capacity to train marketing teams and some bigger businesses “getting carried away with PR fluff”.
Both Harrop and Bastock said SMEs do have some advantages in improving their green claims processes and strategies, such as agility and adaptability.
Regardless of business size, Harrop said, fear of non-compliance or reputational damage could be abated by closer collaboration between marketing and sustainability teams, owing to the fact that most greenwashing arises from “a communications gap”.
Chartered Institute of Marketing research last year found that three-quarters of marketers have recently worked on a sustainability-focused campaign.
Harrop said: “This has to be a process, not a magic bullet. Getting the marketing teams to explain to the sustainability teams the customer needs, the current and future trends… is important.
“Sustainability professionals need to understand the challenges that marketeers have. From the other side of things, sustainability teams need to train the marketing teams, conveying the difficulties of making statements around carbon, nature, product performance.”
A World Federation of Advertisers Survey in 2023, taking in 900 experts, found that 35% of marketing professionals believe there is an ongoing knowledge gap in their field relating to corporate sustainability processes and terminology.
Steps companies could take to close this gap include running regular briefings and co-learning sessions, plus adding a Green Claims Code filter to all sign-off processes in marketing.
Bastock emphasised the importance of keeping training short, accessible, digestible and regular. He said the answer to avoiding greenwashing, without greenhushing, lies in “radical transparency” – not only in external communications but also in internal, cross-functional meetings.