The practice of making deceptive or misleading environmental claims, also known as ‘greenwashing’, is poised to face stringent regulations after a recent directive by the European Parliament. On Jan. 17, the assembly voted in favor of a law set to ban businesses from making misleading or unclear environmental claims to consumers. The Federal Trade Commission is also expected to issue an update to its guidance on responsible environmental advertising, which hasn’t been changed since 2012. These recent regulatory developments serve as a signal that the green-marketing era for businesses is coming to a close, with stricter evaluations in store for companies selling ‘green’ products.
While the new EU anti-greenwashing law is awaiting the European Council’s approval, the regulations would need to be implemented nationally by member states within a two-year time frame. The legislation emphasizes transparency and accuracy, calling on companies to thoroughly validate any environmental-based claims. Phrases such as “environmentally friendly”, “biodegradable”, “sustainable”, and “climate neutral” will be banned from use within advertising or as product labels without concrete evidence backing such claims.
This move to eradicate greenwashing is significant, with advertisers increasingly using environmental marketing as a method to establish their brand. While consumers have shown a clear interest in purchasing sustainable products, the market has been flooded with misinformation and misleading claims. For instance: vague terminology surrounding products and services, unclear or misleading claims regarding packaging recyclability and compostable capabilities. The EU estimates that about 75% of the products sold within its borders carry some form of ‘green’ claim, with over half of these specified as vague or misleading.
A study conducted by Harvard in 2022 exposed a significant level of greenwashing on social media, particularly among oil and gas companies. The study discovered that approximately 72% of social media posts relayed some form of greenwashing content, often highlighting small-scale, low-carbon projects to improve their public environmental image, even as they continued expanding their core businesses of oil, gas, and coal.
Once the regulatory frameworks comes into effect, their enforcement is expected to be a priority for regulators. Investigations would likely be public, involved, and time-consuming, with heavy penalties enforced for violations. With green marketing forming a crucial part of advertisements for companies of varied sizes, adjusting to these regulatory changes would undoubtedly be a substantial task.
The corporate adjustments are likely to encompass updated policies regarding labelling, social media campaigns, and marketing strategies, with a significant workload landing within the legal departments of affected companies. With the pending EU directive posing a potential impact, global companies are urged to consult their marketing teams about upcoming changes, while also keeping a keen eye on updates to the FTC Green Guides.
All in all, the swiftly approaching regulatory changes to the evaluation of products’ environmental claims brings along a time of reckoning for companies—especially those that have publicly pledged their commitment towards environmental responsibility and sustainability.