Green claims: the impact of regulation on sustainability communication

Sustainable, conscious, green, carbon-neutral, eco-friendly. Just a few of the many claims companies make to market their brand, product, or service in a positive way. Unfortunately, many of these so-called green claims are not or only partially true: also called greenwashing. Greenwashing causes confusion among consumers, creates unfair competition in the market and can have major reputational implications for companies. With the Initiative on Empowering Consumers in the Green Transition ‘ announced on March 30 by the European Commission, the Commission is taking a serious step toward counteracting greenwashing by companies and strengthening the consumer’s position.

Green claims as a marketing tool

While consumers need honest and reliable information as a basis for making sustainable choices, many companies still prove to be underperforming when it comes to their sustainability communications. Or even worse, they use false green claims as a means of marketing. Research by the European Commission in which company websites were screened for possible misleading sustainability claims showed that 59% of the assessed green claims were not or only partially substantiated with facts. In 42% of the cases, claims were even found to be wholly untrue or misleading.

To achieve the goals of the EU Green deal (a market in which sustainable products, services, and business models are the norms), the quality of information on sustainability for consumers must be further tightened. An important step toward making Europe the first climate-neutral continent in the world.

The road to fair and transparent sustainability communication

In recent years we have seen the urgency for transparent sustainability communication increase. Governments, consumer organizations and action groups are all making themselves heard in order to further ban greenwashing and the use of misleading green claims in marketing and advertising.

The ‘Empowering Consumers in the Green Transition Initiative’, announced on March 30, is an important step forward. The initiative, which is expected to be discussed and implemented by the European Council and Parliament at the end of May, proposes a revision of European consumer law. When purchasing a product or service, consumers will soon have the official right to obtain accurate, relevant, and reliable sustainability-related product information. There will also be minimum requirements for sustainability labels, logos, and other communication methods.

Another legislative proposal that is expected to have a significant impact on the way sustainability is communicated is the Legislative Proposal on Substantiating Green Claims. With over 200 active eco-labels in the EU and more than 450 worldwide, the call for a unified universal standard is getting louder. At the end of 2021, the EC adopted a revised recommendation requiring organizations to start substantiating their claims using the standardized EU methodology: the Product Environmental Footprint (PEF). Want to know more about what this will mean for your organization and by when? Don’t hesitate to reach out to us.

Not only the EU is pushing for more transparent and substantiated sustainability communication. Regulators such as the ACM, the British counterpart CMA, the ASA and the (Dutch) Advertising Code Committee, are doing their utmost to nip misleading green claims in the bud. CMA recently created the Green Claims Code, which allows companies to check for themselves whether the claims they make are genuine and not misleading. The ACM also came up with guidelines to help companies with creating fair sustainability communication.

The impact of false green claims on your reputation

However, providing non-binding guidelines is not enough anymore. Regulators can now also impose a charge, fine, or worse: publicly name and shame the company, potentially resulting in reputational damage. We saw this recently with oat milk producer Oatly. In its January 2022 marketing campaign, Oatly compared its own CO2 emissions to those of cow’s milk and made false claims about the impact of the dairy and meat industry versus the transportation sector. After over 109 complaints about the campaign poured in at the ASA, Oatly was publicly rebuffed by the regulator. Several media outlets, including BBC and The Guardian, picked up on the news. Consequently, it spread like a snowball across the net. For Oatly, which is seen as a truly sustainable brand, this was a marketing campaign that cost them dearly.

Communicate about your sustainability journey

Now we can hear you thinking: where and when do I start communicating? And should I want to do so in the first place with all the legal and reputational risks? We strongly encourage you not to wait any longer. Concrete results may make your story more convincing but engaging your stakeholders in the journey is equally important. Show that you are aware of and intentional about your impact, even if you are at the start of your sustainability journey. Involve your stakeholders in your findings, the challenges you face and your ambitions going forward. At the same time, ask them what they expect from you and what topics they find relevant to be informed on. In addition, make sure your data is in order and that you understand your impact before you communicate about it. This will ensure that your communication is fair, relevant, and substantiated.

Do you need assistance with drafting or rolling out a sustainability strategy, consulting your internal or external stakeholders, or understanding your impact? Or are you looking for an inspiring, authentic way to communicate about your sustainability journey? We are happy to support you in all your sustainability efforts.

Authors
Vivian ten Have

Vivian ten Have

Senior Consultant, Sustainalize

Jaimy Adriaanse

Jaimy Adriaanse

Consultant, Sustainalize

Don’t hesitate to reach out to our colleagues if you need any help or assistance in the process.

Published on: 19 May 2022

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