News and Insights

Doing and saying the right thing – the EU gets to grips with greenwashing and misleading claims

January 24, 2024

During last week’s plenary session, the European Parliament approved Empowering Consumers for the Green Transition Directive, with a strong majority. The new Directive sends an important signal to all organisations that are ramping up their green and environmental, sustainability and governance (ESG) credentials, by providing greater certainty for consumers in their interaction with brands.

Under the Directive, unfounded claims such as “environmentally friendly”, “natural”, “climate neutral”, “biodegradable” or “eco-friendly”, will be banned unless they can be proved. It also aims to enable consumers to make informed decisions about products and to contribute to a circular economy, one of the pillars of the EU Green Deal. Environmental and social impact, durability and repairability would be added to the list of product characteristics about which traders are forbidden to mislead consumers.

A reputation risk that is increasingly becoming a legal issue

The EU Commission decided to act to stop companies from making false and unsubstantiated claims because it recognised that overall there was a lot of interest from consumers in supporting greener production and consumption, as well as a willingness to pay more and reward companies that behave responsibly, but not enough trust in the claims and labels.

For example, the Commission found that 75% of consumers would consider buying green products, but only 17% actually go for products with green labels for various reasons, including trust. The Commission also conducted a survey with national consumer authorities about green claims online and found reason to believe that in 42% of cases, claims were exaggerated, false or deceptive.

This sentiment is confirmed by a more recent YouGov poll published in February 2023: a majority of global respondents (60%) agree that they are sceptical about green claims made by brands, suggesting brands have work to do to gain their trust.

Greenwashing, when companies claim products, practices or credentials are more environmentally sustainable then they are, isn’t just a reputational risk for brands. It increasingly becomes a legal risk. For example, in October 2023 the Court in Berlin prohibited HelloFresh from advertising itself as “the first global climate-neutral cooking box company” and from claiming to offset 100% of its direct emissions through purchased rights, instead of actual CO2 reduction. In the UK, the Competition and Markets Authority launched an investigation in January 2023 into ASOS, Boohoo and George at Asda about their fashion products, including clothing, footwear, and accessories.

The Directive will work together with the Green Claims Directive, currently being discussed at committee stage in Parliament, which will spell out the conditions for using environmental claims in greater detail. The Green Claims Directive will have to be approved before the EU general elections in June.

A business opportunity to seize

Although the first reaction from many companies could be of concern, this new legislation represents an opportunity for those players in the market who are already complying with the new rules.

The competitive advantages are huge, and it is now the right time to position your company and products as key players, with significant rewards in terms of reputation as well as business profits. As public and legal scrutiny grows, companies must be prepared to communicate their green and sustainability credentials so they comply with new regulations. Although it is outside the single market, pressure is mounting in the UK to be more transparent and thoughtful as well. Those companies that are trading with the EU will have to comply with the Directives if they want to continue to do so.

Adopting a responsible and sustainable approach to business is no longer debatable – but with the bar being driven ever higher, meeting expectations becomes ever more complex.

FINN Partners’ 10 top tips for communicating sustainability include being:

Sincere: communicating sustainability isn’t about point-scoring or winning fans through virtue signalling. Audiences will see through ESG publicity stunts. A sustainability strategy must be about bringing about real change.
Clear: sustainability can mean many things, and different things to different people. Avoid woolly promises, jargon and non-specifics. Define the goals and the actions and be consistent in language.
Action-led: each communication should have a goal, for example to encourage customers to engage with a sustainability initiative to bring about actual change.
Informative: products or services with a genuine environmental benefit appeal to an eco-conscious market so do communicate sustainability but do it responsibly. Back up your ESG campaign with detailed information that explains your actions, their objectives and the issues behind the actions.

For the full set of tips, download our white paper.

Please do get in touch if you have any questions or would like to discuss how the communications and public affairs team can support your business.

CONTACT

Terri Bloore, Senior Partner: terri.bloore@finnpartners.com

Carolina Gasparoli, Vice-President: carolina.gasparoli@finnpartners.com

TAGS: Sustainability & ESG

POSTED BY: Carolina Gasparoli