May 8, 2024
May 8, 2024
5
Min Read

The Greenwashing Regulations Guide: What You Need To Know

Greenwashing
Blog
  • Greenwashing - i.e., the act of making a product, project, or activity to appear more environmentally than it actually is - is at an all-time high & under unprecedented scrutiny.
  • Regulations are popping up around the globe to regulate and curb business greenwashing, many of which include hefty fines for unsubstantiated claims.
  • Ensuring your business has strong interdepartmental alignment, reliable & validated sustainability data, and marketing claims tied to this data, will help protect your business.

With recent heightened environmental consciousness — consumers, industry experts, and investors are scrutinizing businesses' sustainability claims more closely than ever. However, not all green claims are created equal. In this guide, we cover the concept of greenwashing, explore the regulatory landscape surrounding it, discuss its implications for businesses, and offer strategies for navigating this complex terrain. We'll also touch on BanQu as a trusted solution for ensuring transparent and verifiable sustainability claims.

What is Greenwashing?

Greenwashing refers to the act of making a product, activity, or project appear more environmentally friendly (or less environmentally damaging) than it actually is. It often involves exaggerating or fabricating environmental achievements to appeal to eco-conscious stakeholders and gain a differentiated market edge. Countries across the world have set up detailed greenwashing regulations specifically to prevent this.

Credit/Source: European Parliament

Why are the discussion and regulations around greenwashing at an all-time high? Because greenwashing is getting out of control. According to the European Parliament, 53% of green claims give vague, misleading, or unfounded information, 40% of claims have no supporting evidence, and half of all green labels offer weak or non-existent verification.

Credit/Source: European Parliament

Greenwashing vs. Greenhushing

While the term greenwashing is most often used to describe unfounded or questionable sustainability claims, it is sometimes interchangable with greenhushing. Let’s dive into the difference between the two terms.Greenwashing involves overtly promoting false environmental credentials; greenhushing occurs when a company downplays or conceals its environmental impact to avoid scrutiny. Regardless of whether a company is greenwashing or greenhushing, both can be counteracted with realistic sustainability claims backed by verifiable data.Understanding Greenwashing RegulationsGreenwashing regulations encompass laws and guidelines established by governments or industry bodies to combat deceptive environmental marketing practices. These regulations aim to protect consumers from misleading claims and promote transparency in sustainability reporting. While historically most greenwashing regulations have been voluntary, more and more are becoming mandatory — with large financial penalties for noncompliance.

Top Global Greenwashing Regulations to Know

EU Anti-Greenwashing Regulation

In March 2023, the EU Commission adopted a proposal for a Directive on green claims. This regulation would aim to standardize and verify green claims through a set of guidelines and independent audits. Once voted into law, companies would be fined for noncompliance. The regulation was voted on and passed into law April 2024. Once the Greenwashing Directive is published in the Official Journal of the EU and enters into force, Member States will  have 24 months to transpose the Directive into their national legislation. This will likely occur by end of 2024 to early 2025.

Ecodesign for Sustainable Products (ESPR)

The Ecodesign for Sustainable Products (ESPR) was adopted in March 2022 as part of the Sustainable Products Initiative. The regulation aims to increase product sustainability, reliability, and circularity. It will require companies placing products in the EU market to meet a wide range of requirements and ultimately require every product to have a Digital Product Passport (DPP) - a unique code that can be scanned to see the entire lifecycle of the product. ESPR is tentatively slotted to go into full effect in mid-2017. Member states will determine penalties for non-compliance, including fines.

UK Greenwashing Regulations & Green Claims Code

The UK Green Claims Code - similar to the EU anti-greenwashing regulation - is a set of 6 key points to help companies check if their claims are genuinely green. These points outline that claims must:

  1. Be truthful & accurate
  2. Be clear & unambiguous
  3. Not omit or hide important information
  4. Only make fair comparisons
  5. Consider the full lifecycle of the product
  6. Be substantiated

Firms will face fines of up to tens of millions of pounds for unsubstantiated or misleading claims. Once the directive is approved by both Parliament & Council, it will formally be adopted into law. The UK Green Claims Code will likely go into effect around Fall 2024.

Australia Greenwashing Regulations & Green Claims Code

Similar to the UK Green Claims Code, the Australia Green Claims Code sets forth standards and checklists for companies to make honest green claims. According to this code - which is still in process of being officially adopted - ESG claims must:

  1. Have evidence to back them up
  2. Not use broad, vague, or unqualified language
  3. Not omit important info that misleads consumers

Failure to comply with Australia’s Green Claims Code can result in fines of up to $1.1 million. The code is currently “live” and some companies have already faced penalties.

SEC Climate Risk and Emissions Disclosure Rules

Typically behind the curve, the USA is also taking steps to regulate greenwashing. The U.S. Securities and Exchange Commission (SEC) is currently finalizing new rules that would require publicly traded companies to disclose climate reports backed by standardized, quality data. First reports will be required on the 2025 financial year, due at the beginning of 2026.

Greenwashing Regulations By Year
Credit/Source: Harvard Law

Specific penalties or fines for non-compliance have not been mentioned, but it will be up to the powers of the SEC to manage non-compliance instances.CSA Climate-Related Disclosure RulesCanada - following a similar trajectory to the US - is also in process of developing new rules on climate-related disclosures for public companies. These regulations would require companies to disclose climate-related risks & strategies. The standard will likely go into effect in 2025 (extended from the original 2024), with a phased-in approach. Penalties are to be determined, but these climate disclosures would be required.

Additional voluntary & mandatory greenwashing regulations exist around the globe, from France to South Korea. Depending on where your business operates, be sure to familiarize yourself with regulations in both countries you source from and countries where you place products on the market to ensure the utmost compliance.

The Business Consequences of Greenwashing

Reputational Damage: False sustainability claims can erode trust and tarnish a brand's reputation, leading to a loss of consumer - and potential investors or partnerships - confidence and loyalty.

Loss of Customer Loyalty: In an increasingly eco-conscious marketplace, consumers are gravitating towards brands that demonstrate genuine environmental responsibility. Greenwashing can alienate environmentally aware consumers and drive them to competitors.

Short-Sighted Strategy: While greenwashing may yield short-term gains in terms of sales or public perception, it is ultimately unsustainable - even from a financial perspective. Companies that prioritize genuine sustainability over superficial greenwashing are better positioned for long-term success with their business resilience & a growing customer base.

Compliance Fines: Violating greenwashing regulations can result in significant financial penalties and legal repercussions. Ignorance of the law is not a defense, making it imperative for businesses to stay up-to-date on regulatory requirements.

The Business Benefits of an Anti-Greenwashing Strategy

Verifiable Sustainability Claims: Authentic sustainability efforts build credibility and trust among consumers, enhancing brand reputation and customer loyalty. Truly verifiable sustainability claims are backed by reliable, primary data. Obtaining & reporting on such data often yields other business benefits - such as gaining more supply chain visibility and securing higher-quality ingredients or materials.

Stakeholder Loyalty: Transparent practices foster stronger connections with environmentally conscious consumers, investors, and partners who value honesty, integrity, and compliance in corporate behavior. Rising generations are increasingly socially and environmentally concious, so setting up an anti-greenwashing strategy now will pay dividends in the future.

Long-Term Resilience & Growth: Committing to data-backed sustainability aligns with a forward-thinking business approach, positioning companies as leaders in environmental stewardship, innovation, and supply chain resilience - while also reducing risk.

Best Practices to Strengthen Your Business' Greenwashing Defense

Know the Regulations that Affect Your Business: Staying informed about relevant laws and guidelines to ensure compliance is crucial for any business aiming to avoid greenwashing.

How BanQu Can Help: BanQu’s blockchain-based platform captures data throughout supply chain operations, making it easier for businesses to adhere to and report on regulatory requirements. By providing a clear record of sourcing and production processes, BanQu helps businesses demonstrate compliance with environmental laws and standards - regardless of how complex or global the value chain. This digital ledger can be crucial for proving that business practices align with local and international regulations.

Marketing, Sustainability, and Sourcing Alignment: It's important for businesses to align their marketing messages with reliable, primary sourcing data to maintain credibility and authenticity in their sustainability claims.

How BanQu Can Help: BanQu gets you the sustainability, sourcing, and supply chain data you need along your value chain to multi-solve and report on the measures that matter most to your business. Whether your marketing team wants to run a locally-sourced campaign, your sustainability team needs data power their yearly ESG reports, or your sourcing department needs to improve forecasting, BanQu has your back.

Data, Data, Data (You Can Trust): Utilizing reliable data to substantiate sustainability claims and track progress towards environmental goals is essential for credible reporting and improvement.

How BanQu Can Help: BanQu’s platform provides an immutable record of transactions and interactions within the supply chain. This capability ensures that the data used to track sustainability initiatives is accurate and trustworthy - from source to shelf. Businesses can use this data to generate transparent sustainability reports and real-time dashboards that reflect their environmental impact. The accountability and transparency offered by BanQu help businesses not only defend against accusations of greenwashing but also make informed decisions that enhance their business decisions.

BanQu: Traceability Data You Can Trust to Avoid Greenwashing and Back Up Sustainability Claims

As greenwashing regulations continue to evolve and consumer expectations rise, businesses must prioritize authenticity, transparency, and accountability in their sustainability efforts. By adhering to best practices, leveraging reliable data, and partnering with trusted solutions like BanQu, companies can navigate the complex landscape of greenwashing with integrity and confidence. Together, we can build a future where sustainability is not just a marketing buzzword but a genuine commitment to environmental stewardship and social responsibility.BanQu is a leading provider of supply chain traceability solutions, offering transparent and verifiable data to support your sustainability claims. Ready to fortify your business against greenwashing allegations and build a more sustainable future? Contact us today to schedule a consultation with our responsible sourcing experts. Together, we can leverage the power of transparency and integrity to drive positive change and ensure a more sustainable tomorrow.

Download The Greenwashing Regulations Guide: What You Need To Know

In this guide, we cover the concept of greenwashing, explore the regulatory landscape surrounding it, discuss its implications for businesses, and offer strategies for navigating this complex terrain.

Download the Guide

Resources
The Greenwashing Regulations Guide: What You Need To Know
  • Greenwashing - i.e., the act of making a product, project, or activity to appear more environmentally than it actually is - is at an all-time high & under unprecedented scrutiny.
  • Regulations are popping up around the globe to regulate and curb business greenwashing, many of which include hefty fines for unsubstantiated claims.
  • Ensuring your business has strong interdepartmental alignment, reliable & validated sustainability data, and marketing claims tied to this data, will help protect your business.

With recent heightened environmental consciousness — consumers, industry experts, and investors are scrutinizing businesses' sustainability claims more closely than ever. However, not all green claims are created equal. In this guide, we cover the concept of greenwashing, explore the regulatory landscape surrounding it, discuss its implications for businesses, and offer strategies for navigating this complex terrain. We'll also touch on BanQu as a trusted solution for ensuring transparent and verifiable sustainability claims.

What is Greenwashing?

Greenwashing refers to the act of making a product, activity, or project appear more environmentally friendly (or less environmentally damaging) than it actually is. It often involves exaggerating or fabricating environmental achievements to appeal to eco-conscious stakeholders and gain a differentiated market edge. Countries across the world have set up detailed greenwashing regulations specifically to prevent this.

Credit/Source: European Parliament

Why are the discussion and regulations around greenwashing at an all-time high? Because greenwashing is getting out of control. According to the European Parliament, 53% of green claims give vague, misleading, or unfounded information, 40% of claims have no supporting evidence, and half of all green labels offer weak or non-existent verification.

Credit/Source: European Parliament

Greenwashing vs. Greenhushing

While the term greenwashing is most often used to describe unfounded or questionable sustainability claims, it is sometimes interchangable with greenhushing. Let’s dive into the difference between the two terms.Greenwashing involves overtly promoting false environmental credentials; greenhushing occurs when a company downplays or conceals its environmental impact to avoid scrutiny. Regardless of whether a company is greenwashing or greenhushing, both can be counteracted with realistic sustainability claims backed by verifiable data.Understanding Greenwashing RegulationsGreenwashing regulations encompass laws and guidelines established by governments or industry bodies to combat deceptive environmental marketing practices. These regulations aim to protect consumers from misleading claims and promote transparency in sustainability reporting. While historically most greenwashing regulations have been voluntary, more and more are becoming mandatory — with large financial penalties for noncompliance.

Top Global Greenwashing Regulations to Know

EU Anti-Greenwashing Regulation

In March 2023, the EU Commission adopted a proposal for a Directive on green claims. This regulation would aim to standardize and verify green claims through a set of guidelines and independent audits. Once voted into law, companies would be fined for noncompliance. The regulation was voted on and passed into law April 2024. Once the Greenwashing Directive is published in the Official Journal of the EU and enters into force, Member States will  have 24 months to transpose the Directive into their national legislation. This will likely occur by end of 2024 to early 2025.

Ecodesign for Sustainable Products (ESPR)

The Ecodesign for Sustainable Products (ESPR) was adopted in March 2022 as part of the Sustainable Products Initiative. The regulation aims to increase product sustainability, reliability, and circularity. It will require companies placing products in the EU market to meet a wide range of requirements and ultimately require every product to have a Digital Product Passport (DPP) - a unique code that can be scanned to see the entire lifecycle of the product. ESPR is tentatively slotted to go into full effect in mid-2017. Member states will determine penalties for non-compliance, including fines.

UK Greenwashing Regulations & Green Claims Code

The UK Green Claims Code - similar to the EU anti-greenwashing regulation - is a set of 6 key points to help companies check if their claims are genuinely green. These points outline that claims must:

  1. Be truthful & accurate
  2. Be clear & unambiguous
  3. Not omit or hide important information
  4. Only make fair comparisons
  5. Consider the full lifecycle of the product
  6. Be substantiated

Firms will face fines of up to tens of millions of pounds for unsubstantiated or misleading claims. Once the directive is approved by both Parliament & Council, it will formally be adopted into law. The UK Green Claims Code will likely go into effect around Fall 2024.

Australia Greenwashing Regulations & Green Claims Code

Similar to the UK Green Claims Code, the Australia Green Claims Code sets forth standards and checklists for companies to make honest green claims. According to this code - which is still in process of being officially adopted - ESG claims must:

  1. Have evidence to back them up
  2. Not use broad, vague, or unqualified language
  3. Not omit important info that misleads consumers

Failure to comply with Australia’s Green Claims Code can result in fines of up to $1.1 million. The code is currently “live” and some companies have already faced penalties.

SEC Climate Risk and Emissions Disclosure Rules

Typically behind the curve, the USA is also taking steps to regulate greenwashing. The U.S. Securities and Exchange Commission (SEC) is currently finalizing new rules that would require publicly traded companies to disclose climate reports backed by standardized, quality data. First reports will be required on the 2025 financial year, due at the beginning of 2026.

Greenwashing Regulations By Year
Credit/Source: Harvard Law

Specific penalties or fines for non-compliance have not been mentioned, but it will be up to the powers of the SEC to manage non-compliance instances.CSA Climate-Related Disclosure RulesCanada - following a similar trajectory to the US - is also in process of developing new rules on climate-related disclosures for public companies. These regulations would require companies to disclose climate-related risks & strategies. The standard will likely go into effect in 2025 (extended from the original 2024), with a phased-in approach. Penalties are to be determined, but these climate disclosures would be required.

Additional voluntary & mandatory greenwashing regulations exist around the globe, from France to South Korea. Depending on where your business operates, be sure to familiarize yourself with regulations in both countries you source from and countries where you place products on the market to ensure the utmost compliance.

The Business Consequences of Greenwashing

Reputational Damage: False sustainability claims can erode trust and tarnish a brand's reputation, leading to a loss of consumer - and potential investors or partnerships - confidence and loyalty.

Loss of Customer Loyalty: In an increasingly eco-conscious marketplace, consumers are gravitating towards brands that demonstrate genuine environmental responsibility. Greenwashing can alienate environmentally aware consumers and drive them to competitors.

Short-Sighted Strategy: While greenwashing may yield short-term gains in terms of sales or public perception, it is ultimately unsustainable - even from a financial perspective. Companies that prioritize genuine sustainability over superficial greenwashing are better positioned for long-term success with their business resilience & a growing customer base.

Compliance Fines: Violating greenwashing regulations can result in significant financial penalties and legal repercussions. Ignorance of the law is not a defense, making it imperative for businesses to stay up-to-date on regulatory requirements.

The Business Benefits of an Anti-Greenwashing Strategy

Verifiable Sustainability Claims: Authentic sustainability efforts build credibility and trust among consumers, enhancing brand reputation and customer loyalty. Truly verifiable sustainability claims are backed by reliable, primary data. Obtaining & reporting on such data often yields other business benefits - such as gaining more supply chain visibility and securing higher-quality ingredients or materials.

Stakeholder Loyalty: Transparent practices foster stronger connections with environmentally conscious consumers, investors, and partners who value honesty, integrity, and compliance in corporate behavior. Rising generations are increasingly socially and environmentally concious, so setting up an anti-greenwashing strategy now will pay dividends in the future.

Long-Term Resilience & Growth: Committing to data-backed sustainability aligns with a forward-thinking business approach, positioning companies as leaders in environmental stewardship, innovation, and supply chain resilience - while also reducing risk.

Best Practices to Strengthen Your Business' Greenwashing Defense

Know the Regulations that Affect Your Business: Staying informed about relevant laws and guidelines to ensure compliance is crucial for any business aiming to avoid greenwashing.

How BanQu Can Help: BanQu’s blockchain-based platform captures data throughout supply chain operations, making it easier for businesses to adhere to and report on regulatory requirements. By providing a clear record of sourcing and production processes, BanQu helps businesses demonstrate compliance with environmental laws and standards - regardless of how complex or global the value chain. This digital ledger can be crucial for proving that business practices align with local and international regulations.

Marketing, Sustainability, and Sourcing Alignment: It's important for businesses to align their marketing messages with reliable, primary sourcing data to maintain credibility and authenticity in their sustainability claims.

How BanQu Can Help: BanQu gets you the sustainability, sourcing, and supply chain data you need along your value chain to multi-solve and report on the measures that matter most to your business. Whether your marketing team wants to run a locally-sourced campaign, your sustainability team needs data power their yearly ESG reports, or your sourcing department needs to improve forecasting, BanQu has your back.

Data, Data, Data (You Can Trust): Utilizing reliable data to substantiate sustainability claims and track progress towards environmental goals is essential for credible reporting and improvement.

How BanQu Can Help: BanQu’s platform provides an immutable record of transactions and interactions within the supply chain. This capability ensures that the data used to track sustainability initiatives is accurate and trustworthy - from source to shelf. Businesses can use this data to generate transparent sustainability reports and real-time dashboards that reflect their environmental impact. The accountability and transparency offered by BanQu help businesses not only defend against accusations of greenwashing but also make informed decisions that enhance their business decisions.

BanQu: Traceability Data You Can Trust to Avoid Greenwashing and Back Up Sustainability Claims

As greenwashing regulations continue to evolve and consumer expectations rise, businesses must prioritize authenticity, transparency, and accountability in their sustainability efforts. By adhering to best practices, leveraging reliable data, and partnering with trusted solutions like BanQu, companies can navigate the complex landscape of greenwashing with integrity and confidence. Together, we can build a future where sustainability is not just a marketing buzzword but a genuine commitment to environmental stewardship and social responsibility.BanQu is a leading provider of supply chain traceability solutions, offering transparent and verifiable data to support your sustainability claims. Ready to fortify your business against greenwashing allegations and build a more sustainable future? Contact us today to schedule a consultation with our responsible sourcing experts. Together, we can leverage the power of transparency and integrity to drive positive change and ensure a more sustainable tomorrow.

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Download The Greenwashing Regulations Guide: What You Need To Know

In this guide, we cover the concept of greenwashing, explore the regulatory landscape surrounding it, discuss its implications for businesses, and offer strategies for navigating this complex terrain.

Download the Guide

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