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Greenwashing has been frequently reported in recent years, attracting the attention of governments worldwide. In response, the European Parliament passed the Empowering Consumers for the Green Transition Directive in January, prohibiting companies from using general environmental statements such as "net zero" and "carbon neutral." Meanwhile, the U.S.’ Green Guides has entered the revision stage to align with latest environmental standards. As international regulations against greenwashing become increasingly refined, companies should not only focus on reducing emissions but also identify the regulatory risks involved to maximize their competitiveness.
The EU began cracking down on companies involved in greenwashing in 2021, as depicted in Figure 1. With an increasing number of issues such as vague environmental claims or incomplete product information emerging, related regulations are being introduced.
Figure 1. Key findings of the EU’s greenwashing investigation, 2021[1]
International anti-greenwashing regulation overview
To prevent greenwashing, the participation of enterprises and the active involvement of government departments are both indispensable. Figure 2 below presents progress of anti-greenwashing regulations in major regions.
Figure 2. Anti-greenwashing policies in various countries
EU’s new anti-greenwashing legislation
The EU's Consumer Empowerment Green Transformation Directive is set to be implemented in 2026, prohibiting companies from using vague environmental statements, such as "eco-friendly" or "biodegradable."
Taking "biodegradable" as an example, the proportion of the biodegradable part of the product must be specified if the term is used in product promotion. In addition, if consumers have responsibilities during the recycling stage, companies must provide additional information.
Another regulation set to be enforced in the EU in 2026 is the Green Claims Directive, which aims to ensure the specificity, comparability and verifiability of the environmental claims used by companies. As this rule applies to any company selling products or providing services in the EU, it will also affect future exports to the region.
Anti-greenwashing actions in other regions
Apart from the EU, other regions are also tightening their grip on greenwashing. In response to the growing complexity of environmental issues, the revision of the U.S.' Green Guides, which focuses on the accuracy of environmental claims, is expected to be released this year. For instance, the use of vague environmental declarations such as "natural" or "eco-friendly" are not allowed, and the terms like "recyclable" or "biodegradable" must be verified and verifiable.
The most notable case is the lawsuit in 2022 against Walmart, a US supermarket chain, and Kohl's, a department store, which claimed that their bamboo textiles were environmentally friendly, when in fact toxic chemicals were used in the process of converting bamboo into rayon. Such a promotional label was considered misleading and resulted in fines. Consequently, the revision of the law is expected to address situations where product labels are ambiguous or confusing for the public, while also providing clear guidelines for businesses.
The U.K.'s Green Claims Code requires businesses to clearly disclose their environmental claims, including but not limited to advertisements, packaging, or product names. The fashion industry, accounting for 2-8% of global greenhouse gas emissions, is the first to be affected by the implementation of the scheme. Meanwhile, industries such as electronics, energy, finance, and agriculture are also subject to these guidelines. With regulations becoming increasingly stringent, it is expected that more industries will face restrictions in the future.
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How can businesses prevent greenwashing
How can companies protect themselves from greenwashing? Behind the anti-greenwashing measures taken by countries, there are four key principles to avoid getting into the greenwashing risk.
I. Accuracy: Using real data and disclosing details
While the data used may be accurate, care should be taken during the product promotion process to prevent providing biased information that leads to misconceptions among consumers. That said, environmental claims made by companies should truthfully represent the sustainable value brought by their products or services.
II. Specificity: Avoiding the use of vague and confusing environmental claims
Specificity in environmental claims is a key principle for countries to combat greenwashing. Companies should pay more attention to the use of vague terms such as "carbon neutral" or "eco-friendly" in the future. Taking "carbon neutral" as an example, under the EU's Empowering Consumers for the Green Transition Directive, products using carbon offsetting will no longer be allowed to claim carbon neutrality. However, this is not to encourage companies to reduce the use of carbon credits. Instead, it's about clearly stating the source of carbon offsets and using precise language to demonstrate the environmental benefits of the product.
III. Comparability: Benchmarking should be fair and equitable
To demonstrate product competitiveness, some companies may choose to emphasize their advantages through comparison with competitors. In such cases, clear, objective, and up-to-date information should be used for the comparison, adhering to the principles of fairness and impartiality, to avoid conveying misleading messages to consumers.
IV. Verifiability: Choosing transparent and verified environmental labels
Taking the EU's Green Claims Directive as an example, in pursuit of information reliability, environmental labels must be verifiable through scientific methods and undergo regular scrutiny. Additionally, the regulation prohibits companies from establishing private labeling systems with external partners, and mandates the use of EU-approved environmental labels to ensure product credibility.
While anti-greenwashing policies of various countries may seem intricate, companies can effectively avoid the risk of greenwashing by grasping the key principles. In fact, the cost of preventive measures is far lower than the cost of remediation. The establishment of anti-greenwashing policies provides concrete and actionable guidelines, enabling companies to foster more transparent communication with consumers and avoid falling into the greenwashing controversy.
[1] Data from the European Commission