27 February 2024

Impact of Anti-Greenwashing Legislation on Businesses and Consumers

With the climate crisis prevalent across global media, and a growing proportion of the public suffering from eco-anxiety, consumers are continuing to make a stance by “voting for sustainability through their pockets”.

Snowballing since the 1960’s, green consumerism has made waves in our capitalist society, with the public making active choices to support companies that minimise their environmental harm and give back to the planet. With this ideology being prevalent across many consumer types, businesses across all industries have had to adopt new practices to ensure they continue to have customer support.

In 2023 even amid a global recession, 71% of consumers are searching for sustainable goods. And in this information age, where consumers can research more about which companies they support, the pressures for businesses to go further with their environmental missions have become adjacent to their overall business success. 

Yet, with consumers' behaviour changing, and them strengthening value-led business practices, it has inadvertently caused inauthentic marketing tactics for some businesses to monetize from this “trend”.

Although not a new concept, Greenwashing, the practice of misleading consumers about a product/company's environmental properties, has grown in recent years. From the traditional framing tactic (not giving the full lifecycle of their products), using green iconography to connote the product being environmentally friendly to more modern concepts, to modern techniques like carbon offsetting or hiding fossil fuels behind biofuels; greenwashing is still hindering the environmental movement. 

The devastation behind greenwashing, not only means that the environment is being harmed under the green mist, but it also causes mistrust from the public even for businesses that are authentic in their environmental missions. Once believing that regulatory boards like the ASA will stop greenwashing tactics from entering the market, consumers have been shown by countless exposes that greenwashing is writhe within the market. As a result, 7 in 10 British consumers don’t believe environmental claims made by businesses. Overall leaving individuals to feel there is no hope to conquer our environmental crisis.

Tightening businesses eco-claims: EU parliament signs off on anti-greenwashing legislation

Due to the severity of the climate crisis and the difficulties for consumers to navigate through the over-saturated market space of green claims: the EU parliament has signed off on a new anti-greenwashing legislation.

The passing of this new legislation hopes to stop popular corporation greenwashing tactics, making it easier for consumers to make purchasing decisions without the complexities behind misleading and hard-to-understand eco-claims.

This stance from the EU parliament should help more businesses and consumers to authentically align with environmental targets. 

What does this legislation mean for businesses?

This crackdown on greenwashing tactics will come into force by 2026 and will affect all industries from food all the way to travel. This widespread legislation needs to be enforced across all industries as the climate crisis needs unified efforts, regardless of specific industries. If a business is found to be non-compliant with these regulations, it will face penalties of up to 4% of its global annual revenue. 

What are the new rules?

To enhance clarity for consumers, the recently approved legislation will proactively restrict the use of commonly employed "eco" terms that often lead to misinterpretation regarding the environmental impacts of products and services. These restricted terms are: 

  • Generic environmental claims such as "environmentally friendly," "natural," "biodegradable," "climate neutral," or "eco." These terms can only be used with verifiable proof. 
  • Sustainable labels that lack endorsement from approved EU certification schemes or those established by public authorities. 
  • Practices that pressure consumers to prematurely replace consumables. 
  • A comprehensive ban on the terms "carbon neutral" and "carbon positive" is supported through a carbon emission offsetting scheme. 
  • And more 

These regulations are not designed to penalise and discourage businesses that are genuinely committed to environmental responsibilities. Instead, they aim to mitigate the risks associated with greenwashing practices, particularly with the deadline of NetZero targets approaching.

As part of the scientific analysis supporting these claims, companies are prompted to assess their environmental impact comprehensively, providing a thorough and accurate depiction of their products throughout their entire lifecycle. This approach facilitates streamlined comparisons among competitors, ensuring businesses evaluate like-for-like aspects rather than basing claims off averages or inaccurate data/information. 

Why are they zeroing in on carbon offsetting? 

The EU's dismissal of carbon offsetting could be attributed to concerns about the accuracy of carbon offsetting claims. A recent investigation revealed that a major certifier for numerous multinational corporations found that 90% of carbon offset projects fail to genuinely offset the CO2e emissions produced by these companies.

Termed "phantom credits," many offsetting initiatives struggle to accurately quantify authentic carbon reductions. This scrutiny aligns with the new legislation, ensuring that terms like "carbon neutral" are not misleading consumers, reinforcing the commitment to genuine environmental accountability from all businesses. 

How these rules should help 

By brining in this legislation it can help consumers regain trust in eco-purchasing habits within Europe. By tightening the rules and creating a clear repercussions of greenwashing, it will also push more businesses towards greener practices. Although this legislation will not come into effect in the UK, businesses should adopt these practices, and UK legislators should follow this initiative to stop greenwashing tactics from harming consumer trust and the environment.  

 “We have also negotiated a strong stance on early obsolescence. We shouldn’t advertise products that fail too early. In addition to that, we are clearing the chaos of environmental claims, which will now have to be substantiated, and claims based on emissions offsetting will be banned.” Biljana Borzan (S&D, HR)