Greenwashing – Avoiding the Pitfalls whilst Going Green

“Greenwashing” is the exaggeration or overselling of environmentally friendly or climate mitigation actions meant to appeal to the consumer without any actual contribution to the environment. “Greenbotching” is the backlash against companies that try to go green but do this badly, and “Greenwishing” is the charge against corporates for thinking big but underachieving. All the greenbashing has even led to “Greenhushing” – a deliberate attempt by corporates to under-communicate or under report progress towards ESG objectives. At the heart of it, Greenwashing and its derivative practices need to be stamped out, as they enable corporates to:

• Persist with bad practices;
• Set less ambitious targets;
• Weaken investor trust; and
• Limit knowledge sharing.

Greenwishing could include, for instance, the use of plastic bottles for making a product, which removes plastic from the usual recycling loop. It could include claims of using sustainable wood or cotton, which in fact was produced in a way which denuded forests or eroded land. Even carbon mitigation measures such as carbon credits and carbon capture and storage (CCS) are not immune to the charge of greenwashing.

Europe has had a headstart in trying to eradicate greenwashing and the list of commercial practices which are considered unfair in all circumstances, in Annex I of Directive 2005/29/EC, is already extended to four practices associated with greenwashing:

• Displaying a sustainability label which is not based on a certification scheme or not established by public authorities. 
• Making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim.
• Making an environmental claim about the entire product when it concerns only a certain aspect of the product.
• Presenting requirements imposed by law on all products in the relevant product category on the EU market as a distinctive feature of the trader’s offer.

As a comparison, Australia prohibits misleading and deceptive statements and conduct, and enforces disclosure obligations. For instance, the Australian Competition and Consumer Commission (ACCC) released, on 2 March 2023, its findings from an internet sweep for misleading 'green' claims, which found that concerning claims were most prevalent in the food and drink, cosmetic and clothing sectors. ACCC raised concerns with the use of vague, unscientific terms such as “green”, “kind to the planet”, “eco-friendly” and “sustainable” which imply that the product is environmentally beneficial. Greenwashing investigations in Australia are already underway and all indications point to upcoming economy-wide and sector-specific regulatory guidance to address greenwashing concerns.

Singapore has not seen a surge in greenwashing claims but clearly corporates are watching the space carefully and taking precautions to avert any such claims. The Singapore Consumer Protection (Fair Trading) Act 2003 (CPFTA) protects consumers against false or misleading claims, including those related to greenwashing. The CPFTA is administered by the Competition and Consumer Commission of Singapore (CCCS) and CCCS will likely be the responsible agency having oversight of any greenwashing concerns.

CCCS is likely still evaluating the empirical impact of misleading sustainability claims (i.e. greenwashing) on consumers and competition . To date there are no specific regulations on greenwashing and neither CCCS nor the Consumers Association of Singapore has not received any specific complaint of greenwashing). However, the regulators are likely monitoring developments on greenwashing, and will develop measures against the practice if necessary.

For corporates seeking a blueprint to avert greenwashing and concomitant claims, EU’s proposed new law on green claims (Green Claims Directive) is instructive. The Green Claims Directive seeks to:

• protect consumers and companies from greenwashing;
• improve the legal certainty as regards environmental claims; and
• boost the competitiveness of economic operators that make the effort to go green.

 I. Substantiation of explicit environmental claims

• relies on recognised scientific evidence and state of the art technical knowledge;
• demonstrates the significance of impacts, aspects and performance from a life-cycle perspective;
• takes into account all significant aspects and impacts to assess the performance;
• demonstrates the claim is accurate for the whole product/only parts or whole life/partial stages;
• demonstrates the claim is not equivalent to requirements imposed by law;
• provides information on whether the product performs environmentally significantly better than what is common practice;
• identifies whether a positive achievement leads to significant worsening of another impact;
• requires greenhouse gas offsets to be reported in a transparent manner;
• includes accurate primary or secondary information.

II. Communication of environmental claims

• shall only cover environmental impacts, aspects or performance that are assessed in accordance with the substantiation requirements laid down in the directive and are identified as significant for the respective product or trader;
• where relevant for the claim made, shall include information on how consumers may appropriately use the product to decrease environmental impacts;
• shall be accompanied by information on the substantiation of claims such as:
  • information on product or activities of trader
  • aspects, impacts or performance covered by the claim
  • underlying studies and calculations
  • how improvements that are subject to the claim are achieved
  • the certificate of conformity and coordinates of the verifier
  • other recognised international standards, where relevant.

III. Environmental labelling schemes

• transparency and accessibility of information on ownership, decision-making body and objectives;
• the criteria underlying the award of labels are developed by experts and reviewed by stakeholders;
• the existence of complaint and resolution mechanisms;
• procedures for dealing with non-compliance and the possibility of withdrawal or suspension of labelling in case of persistent and flagrant non-compliance.

A conscientious effort to undertake business in a way which minimises environmental impact, and careful adherence to the principles set out in the above guidelines where possible should put a corporate in good standing with consumers and avert any taint of greenwashing.