Published January 25th 2024 in Business Green: https://www.businessgreen.com/opinion/4167172/greenwash-reckoning-begun-uk-firms-ready?utm_source=linkedin&utm_medium=social

New EU rules restricting misleading green claims are a win for firms making genuine efforts towards sustainability, writes Changing Markets Foundation’s Nusa Urbanic

Last year saw a significant increase in the regulatory clamp down of greenwashing. It started with the announcement of the UK’s Competition and Markets Authority (CMA) in January to scrutinise the green claims of household essentials, a market worth around £130bn, and ended with the decision in December to investigate green claims made by Unilever.

In 2024, the greenwash reckoning began with the final green light from the European Parliament to approve landmark greenwashing legislation, The Directive on Empowering Consumers for the Green Transition. This law will make the EU the toughest region in the world, when it comes to claims companies can make to consumers. It will ban a number of vague green claims, such as ‘carbon neutral’, ‘net zero’ or ‘environmentally friendly’. Such claims will now need to be substantiated by an official certification scheme, set up by public authorities, while claims that are solely based on offsetting will be banned. The days of carbon neutral pizza and climate positive baby food are numbered.

How widespread is greenwashing?

There has been a proliferation of green claims in Europe over the last decade. In 2014 alone, a European Commission investigation revealed that 76 per cent of non-food products assessed in shops contained an environmental claim. Further research showed that 53 per cent of green claims give vague or misleading information, while 40 per cent have no supporting evidence. Ten years later, the CMA revealed that 100 per cent of toilet products in the UK have a green label, leading to concern about the validity of these claims.

Recent YouGov polling across the UK and Germany, commissioned by the Changing Markets Foundation, showed that almost half – 49 per cent – of people surveyed regularly choose food products with environmental sustainability labels or certifications. These consumers are interested in sustainable purchasing, and one in three – 35 per cent – are willing to pay more for climate and animal welfare labels. In such a consumer environment, the multiplication of green claims and greenwashing is not surprising. Instead of doing the hard work toward climate action, many companies cut corners, relegating such important decisions to their marketing departments.

Changing Markets Foundation was not surprised, when iits latest analysis, entitled Feeding us Greenwash revealed that greenwashing was rampant in the food sector. Our main focus was to investigate claims made by meat and dairy giants – companies that are responsible for outsized climate and methane emissions. We found that they are not shy, when it comes to making product or project-specific environmental claims. What surprised me the most was that the vast majority of claims were focused on climate impacts, with products being labelled carbon neutral, net zero and climate positive. Often these claims, on what are the most carbon intensive food products, had little or no evidence to prove the claim and relied solely on offsetting (such as paying a certifier project to plant trees or building renewable energy somewhere else). Under the new rules, companies in the EU will have to remove the majority of such vague climate claims, and will only be able to include them if part of a recognised scheme, like the EU Eco-Label. Action which is long overdue.

The new law also prevents claims for things that companies are already obliged to do under existing legislation. For example, the Red Tractor label in the UK, which certifies a product meets minimum UK legal requirements in farming, would be banned in the EU market. However, it is a bit less clear what the Directive will do with regards to more subtle greenwashing, such as images of grazing animals in the fields, or weak government sponsored schemes.

What does it mean for UK companies?

This law will apply to any companies wanting to export to the EU, which accounts for 40 per cent of UK foreign trade in goods. This means that many UK companies will have to adapt to EU labelling rules and they might want to do it sooner rather than later. We have already seen several companies starting to move away from carbon neutral labels, while one of the major certifiers, stopped using the ‘carbon neutral’ label last year, saying that it will focus on emissions reductions instead. Although the UK’s Advertising Standards Authority (ASA) also tightened rules on the use of terms such as carbon neutral and net zero, the new EU law will go even further, specifically banning claims based on offsetting and demanding officially recognised certification schemes to prove claims.

What next?

The law will now have to be transposed into national legislation and enters into force in 2026, but I don’t believe we will have to wait for two years to see the change on the market. Many companies are already taking steps towards compliance. Yet, we are still missing a critical part of the puzzle to ensure effective implementation and enforcement.

The Green Claims Directive, published by the European Commission in March 2023, provides more detail on how companies can make green claims, as well as what kind of methodologies companies and certification schemes must apply. Crucially, it also sets up enforcement and penalties for non-compliance. It is unlikely that this Directive will be adopted before the European elections in June, but it will be a central component of the new greenwashing regulatory framework.

I expect that we will see much less green claims in the coming years, which is a good thing. We often hear people say that this will result in greenhushing, and that this will be bad for consumers, as companies will provide less information about their sustainability journey. I do not see it like that. Green claims are entirely voluntary and serve as a selling point for companies that want to distinguish themselves from their competitors. Without regulation to verify the evidence for these claims, we disadvantage good companies and consumers. Regulatory frameworks like the EU’s will reward the best companies that are making genuine efforts towards sustainability. At the same time we still need legislation that obliges all companies to set science-based climate targets and provide concrete information about their progress.