Disclaimer: This Insight is provided for informational purposes and is not intended to be relied upon or used as specific legal advice.
Greenwashing occurs when a company presents itself or its products and services as more “environmentally friendly” than they truly are, often through misleading marketing strategies. In today's increasingly sustainability-focused market, identifying and avoiding greenwashing has become a critical concern for consumers and businesses alike.
Greenwashing can drive consumers to purchase products and support businesses that aren't as sustainable as they claim, while businesses can suffer reputational damage and legal repercussions if their claims are found to be misleading.
Therefore, it is important for you to understand what greenwashing is and how it can be avoided, particularly if you are a retailer that communicates about environmental aspects of your business, products or services.
The Business Case for Environmental Claims
Retailers are in the business of selling products, and marketing is a critical tool to increase sales. Evidence shows that making claims based on the environmental aspects of products and services are particularly effective (McKinsey, 2023). It’s for this reason that greenwashing is particularly harmful, as it risks driving increased consumption based on the goodwill of consumers (and therefore increased environmental impacts) into products and businesses that are not as sustainable as they’ve claimed.
One way to avoid greenwashing as a retailer is to simply not communicate about the environmental features of your products or your sustainability achievements as a business. While this is appropriate for businesses that are not making tangible efforts to reduce their environmental impacts, it sacrifices a valuable tool for driving sustainable business practices for companies that are serious about tackling climate change and sustainability in general.
Communicating credibly about the environmental aspects of your products or business requires a multifaceted approach rooted in firm and reliable product data, like life cycle assessments (LCA), a company-wide strategy for managing and reducing impacts, and careful adherence to a range of existing and emerging requirements and guidance for making credible environmental claims in different jurisdictions.
Key Takeaways
- Understanding the implications of greenwashing is crucial for maintaining trust and transparency.
- Genuine sustainability requires clear communication and verifiable environmental practices.
- Knowledge of regulations and collaborative efforts within a company are critical.
Understanding Greenwashing
Greenwashing can mislead consumers into believing that a product, service or company is more environmentally friendly than it actually is. This section will clarify what greenwashing is and discuss the common pitfalls often encountered.
Greenwashing Definition
Greenwashing is the practice where companies unfairly or misleadingly advertise or imply that their products, services, or business as a whole are environmentally friendly or otherwise embody environmental qualities they do not. This can happen through any channel of external communication that may influence a consumer’s transaction decision. For example:
- Product Labels: Companies may use green or environmentally-themed imagery (such as plants or the color green) or tags that imply a product is more beneficial to the environment than it actually is.
- General Communications: Statements made (whether on social media or on a product itself) may be vague and susceptible to many reasonable interpretations like “sustainable” or “conscious”, leaving room for misunderstanding.
- Poor Quality or Irrelevant Certifications: Certifications imply credibility, meaning poor quality or irrelevant certifications may inflate the perceived environmental quality of the product or business.
To understand whether a statement may be considered greenwashing, it is critical to understand how environmental claims are assessed. In the European Union and other jurisdictions (like the UK and the United States), regulators assess claims from the perspective of the “average consumer,” and seek to protect them from any claims that may unfairly or misleadingly influence their transactional decisions.
There are a variety of ways that a claim can be considered misleading, though at the core, it is the principle that retailers can only make claims for which they have strong evidence to back them up. In the United States, in particular, it is well established that you must have evidence to support all reasonable interpretations of your claims (again, from the vantage point of the average consumer), meaning it is critical to be specific about what you intend to communicate.
Common Greenwashing Pitfalls
There are several pitfalls you should watch out for to help avoid engaging in greenwashing.
Exaggerated Claims: Companies may overstate the environmental benefits of their products or services or improperly inflate the importance of minor features.
Example: An "energy-saving" device that has very minimal impact on actual energy consumption.
Vague Statements: Describing your company or product as “sustainable” or “green” is susceptible to too many conceivable interpretations that are impossible to substantiate with evidence.
Example: A cleaning product with non-toxic cleaning agents labeled as "green" might be viewed by an average consumer as a claim that the product has a lower carbon footprint or is recyclable when it is not.
Hidden Trade-Offs: A focus on one positive aspect may obscure negative environmental impacts in other areas.
Example: A product labeled as "made with recycled materials" might have a large carbon footprint due to production and shipping emissions.
Inadequate Proof: Companies might claim that their products are better for the environment than alternatives without holding sufficient evidence.
Example: Making environmental claims without credible LCA impact calculation data to authenticate the claim. (Top tip: Accuracy Scores can help you understand and transparently disclose to your customers how reliable and robust your LCA calculations are!)
By staying alert to these common greenwashing pitfalls, your business is one step ahead when it comes to making better informed decisions around claims.
Roles and Responsibilities
In the fight against greenwashing, each stakeholder — from corporations to consumers — has a distinct set of roles and opportunities to ensure the promotion of truly sustainable practices.
Corporate Accountability
Companies bear full responsibility for their environmental communications, so before embarking on an environmental communications campaign, it is critical for companies to develop and integrate sustainability into their business strategy. While the form may differ for different retailers, in general, companies should consider:
- Measuring and establishing a transparent corporate carbon footprint baseline across all “Scopes” and crucially within Scope 3, which is responsible for up to 95% of a retailer’s emissions.
- Setting a science-based reduction target consistent with the Paris Agreement and measure progress against that target on an annual basis.
- Reducing waste, including materials, plastic and water, by revisiting packaging and supply chain management and offering products that are easily recyclable.
- Encouraging consumers to make better choices, such as only buying what they need (reducing overconsumption), lowering return rates and improving product care and repair within the use phase of the product life cycle.
- Avoiding misleading marketing and align advertising claims with actual defined sustainability efforts and data to uphold business integrity, reputation and trust.
Regulators
Regulators are responsible for enforcing increasingly stringent legal requirements designed to ensure that green claims are credible and accurate, among other roles:
- Enacting and revising the policies themselves that restrict greenwashing and incentivize fair sustainability communications.
- Establishing clear and understandable guidelines for the industry on how to convey environmental information credibly and fairly.
- Encouraging the development of standardized measures to assess and disclose the environmental impact of products to enable easy consumer comparisons.
Consumer Awareness
Consumers are also well-positioned to play a vital role in combating greenwashing:
- Scrutinize and second-guess the sustainability assertions made by brands, particularly claims of “carbon neutrality” which will soon be banned in the EU.
- Use social media, online company review sites and product reviews to hold companies accountable for misleading messages. In some jurisdictions, consumers are also permitted to participate in litigation challenging companies in court.
- Support businesses that demonstrate genuine environmental stewardship — vote with their wallet.
The Anti-Greenwashing Regulatory Landscape
Environmental marketing is governed by an evolving regulatory framework that governs not just green claims but misleading marketing of all types. Over recent years, jurisdictions across the world have released guidance designed to help reduce the proliferation of greenwashing, as well as new laws that will explicitly prohibit certain practices.
Existing Requirements
In the European Union, environmental marketing claims are governed by the Unfair Commercial Practices Directive (“UCPD”), which has long prohibited misleading marketing claims that could influence a consumer’s transactional decision. In 2021, the European Commission released targeted guidance which, among other things, detailed how the UCPD should be applied and interpreted in the context of environmental marketing.
Similar requirements apply in the United Kingdom as well as the United States, where the U.S. Federal Trade Commission’s “Green Guides” have long provided instruction on how to avoid misleading environmental marketing claims.
Given the continued proliferation of greenwashing, however, governments have proposed and adopted a series of more explicit and proscriptive requirements in recent years.
New Legislation that is Cracking Down on Greenwashing
At the forefront of these initiatives is the European Union, which in 2024 adopted the Empowering Consumers Directive, a law set to take effect starting in 2026. Among other things, this Directive establishes a clear prohibition on “carbon neutrality” claims that are based on offsetting (for instance, companies offering carbon neutral shipping), which the EU has effectively concluded are by definition misleading. Additionally, Empowering Consumers establishes firm rules for making “aspirational” claims, meaning companies will no longer be able to capitalize on bold commitments for the future without a real plan and demonstrated progress toward achieving them.
The European Union has also proposed the Green Claims Directive, which is slated to require companies to take a more holistic and well rounded approach to validating their claims, including obtaining some form of pre-verification before displaying them to the public.
Within France, carbon neutrality claims have been strictly regulated since 2023, while other jurisdictions across the EU have issued new and specific guidance on how to avoid greenwashing under existing laws.
Elsewhere, the United Kingdom is set to update its Green Claims Code with specific content and guidance relevant to the fashion sector, while the United States is expected to update its Green Guides in 2024.
Making Communications both Credible and Compliant
While staying on top of evolving greenwashing legislation may feel like chasing a moving target, there are a number of important steps that businesses can take to position themselves for credible and compliant communications. This requires first establishing a foundation which embeds sustainability as a core business imperative and developing a consistent and transparent mechanism for tracking and achieving reductions overtime.
How to Set a Good Foundation
The best approach to avoid greenwashing is to “walk-the-walk” before you “talk-the-talk” – meaning, establishing a sustainable business strategy rooted in authenticity and transparency as a core foundation before communicating to your stakeholders about environmental matters.
Implementing Genuine Sustainable Practices
Authenticity is central when you start implementing sustainable practices, and that means taking a hard and honest look at the impact of your business across not just your direct operations but throughout the full value chain.
For many businesses, that means calculating your full organizational footprint across all of Scopes 1, 2 and 3 to ensure that you have a complete understanding of your impacts or otherwise collecting and calculating reliable impact data. From this foundation, it becomes possible to:
- Identify core areas within your business where you can tangibly reduce your climate and other environmental impacts.
- Implement practices, such as using renewable energy, sourcing lower-impact materials, or encouraging more responsible product consumption and use to drive a real and measurable impact.
Setting Realistic Sustainability Targets
With comprehensive data, it becomes possible to set realistic goals and targets, which are crucial for driving real and long-term sustainability progress. This means companies should:
- Set ambitious but plausible targets that reflect their capacity for change over the short, medium and long term.
- Align these targets with recognized sustainability frameworks to benchmark and track your progress over time through programs like the Science-Based Targets Initiative (SBTi).
Clear benchmarks will guide your journey and help you measure your success without overpromising. At Vaayu, we like to think about targets and SBTis as needing to be ambitious yet achievable.
Transparent Operations and Reporting
Transparency builds trust in your sustainability commitments, which is critical in an era where many brands are quick to make bold commitments and claims without much visibility into the data that supports them:
- Clearly communicate both your successes and challenges on your sustainability journey, speaking first about your impacts before celebrating any achievements.
- Maintain open channels for stakeholder feedback and scrutiny of your goals and progress.
Consistent reporting is the bedrock of transparency, allowing you to build a body of evidence demonstrating your progress or increases in emission overtime and commitment to honest communication with your stakeholders.
Choosing a Good Climate Tech Partner
Partner wisely to enhance your sustainability stack, crucially when it comes to your climate tech partner:
- Research potential partners' reputation and track record in aiding sustainable transformation.
- Look for partners with a transparent approach that complements your sustainability ethos.
Collaborative efforts with the right climate tech partner can not only propel your agenda but also provide credibility to your claims both now and in the future.
How to Avoid Greenwashing in Your Communication Efforts
Crafting a credible and transparent communication strategy is paramount to avoid the negative impact of greenwashing. Focus on making clear, specific, factual and verifiable claims to avoid confusion and reinforce your company's commitment to sustainability.
Vaayu recommends that companies always consider the following three top-level “golden” rules when formulating their environmental communications to external stakeholders.
1. Clarity: Would my grandparents understand this?
Regulators assess claims from the perspective of the “average consumer” to determine whether the claim may be misleading. Explain things in a way your grandparents could understand – clearly and directly.
2. Specificity: Can my claim be taken the wrong way?
You are responsible for all of the reasonable interpretations of your claims. Ask your colleagues what they think the claim means and add clarifications where necessary to ensure you are saying only what you mean. Also, check that you are making the right claim for the right context – a fact about the company isn’t necessarily true about an individual product, and vice versa.
3. Evidence: Do I have the data to back up my claim?
All claims must have credible evidentiary support, and additional context about the source of the evidence should be provided to consumers through a link to prevent confusion. Don’t claim something without proof and don’t inflate numbers to make them sound better.
While there are numerous more specific pitfalls to watch out for, adhering to these three principles for all of your environmental communications will put you on sound footing for crafting communication strategies that convey valid environmental information rather than greenwash.
Avoiding greenwashing isn't just about protecting your brand's image — it's about contributing to a truly sustainable future. So, aligning your business practices with these principles not only helps in earning customer trust but also contributes to the broader goal of preserving the environment. Together, by adhering to the same set of rules and responsibilities, the retail industry and the world can lower its impact on the environment.
Protecting yourself and your business from the pitfalls of greenwashing starts with solid data. Learn more about LCA in retail and its benefits for businesses, or if you’re ready to get started on your journey to understanding impact, get in touch.
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