EU crackdown on greenwashing

For some time now, there has been growing market interest and appreciation of brands which declare their concern for the climate and the environment. Customers, often driven by a deep-seated need and personal conviction, want to consciously support manufacturers of products produced with respect for the environment, who pay subcontractors fairly, do not exploit child labour and pay attention to the use of resources. Companies and investors, on the other hand, whilst being legally obliged to do so, sometimes take steps to circumvent these laws, and as a result, there is growing talk of greenwashing.

What is greenwashing?

Although greenwashing has no legal definition, it is understood to be an unfounded claim that a product or service is green, environmentally friendly or environmentally neutral. That it has been produced with respect for the rights of local communities, with raw materials of fair trade origin, with attention to the whole chain of sustainable business. Unfortunately, we encounter manifestations of greenwashing at almost every turn, when we use hotel services, transport, buy clothes or cosmetics. Sometimes it is difficult to spot because companies only publish information which puts them in a positive light.

Brands in a time of climate crisis

Patagonia is a brand known not only for its quality outdoor clothing, but also for its commitment to climate protection. Caring for the planet is in its DNA, as it has long boasted that the Earth is its sole shareholder and that 1% of its profits are donated to environmental organisations. Recognised as one of the most transparent fashion brands, it relies on recycled raw materials for almost 90% of its products.

In 2022, the profits from Black Friday, a veritable celebration of consumerism, a not inconsiderable $10 million, were donated to grassroots environmental groups. In addition, Yvon Chouinard, founder and owner of the brand, surprised the market by donating 98% of the shares he and his family had in his company to the Holdfast Collective, an NGO working to combat climate change.

However, a journalistic investigation revealed that Patagonia was making its clothes in the same factories as fast fashion brands, where working conditions are very poor.

In its defence, the company claimed that it had no control over the wages of garment workers and that working with these factories had a positive impact and raised standards. Of course, a strategy to raise wages has been announced, but the accusations of greenwashing caused huge damage to Patagonia’s image and reputation.

Outlawing the practice of greenwashing: new EU legislation

The amendment of Directive 2013/34/EU in the form of the CSRD (Corporate Sustainability Reporting Directive) represents a revolution in non-financial reporting.

It is estimated that this amendment will affect around 3,500 Polish companies and around 50,000 companies across the EU.

This is an important step towards standardisation and comparability of sustainability data and minimising the risk of greenwashing. However, it will be several years before the regulations directly and indirectly cover a wider group of companies and become part of the supply chain. Work is therefore under way at EU level to ensure that consumers receive reliable product information and to prohibit misleading advertising. A study[1] by the European Commission found that across the EU, up to 50% of brand-claims contain unclear, misleading or unsubstantiated information about the environmental characteristics of products, and up to 40% are completely unfounded. The proposed rules are designed not only to protect consumers from misleading practices, but also to help them make better choices. As with non-financial reporting, metrics will be introduced to verify claims made by manufacturers and service providers.

What will be banned?

• Generic environmental claims, such as ‘environmentally friendly’, ‘natural’, ‘biodegradable’, ‘climate-neutral’ or ‘eco’, without proof of recognised excellent environmental performance relevant to the claim
• Commercial communications about a product with a feature that limits its durability if information is available on the feature and its effects on the durability
• Claims based on emissions offsetting schemes that a product has a neutral, reduced or positive impact on the environment
• Sustainability labels not based on approved certification schemes or established by public authorities
• Durability claims in terms of usage time or intensity under normal conditions, if not proven
• Prompting the consumer to replace consumables, such as printer-ink cartridges, earlier than strictly necessary
• Presenting software updates as necessary even if they only enhance functionality features
• Presenting goods as repairable when they are not

Final votes are expected later this year. The European Parliament and the European Council have recently reached agreement on the wording of the new provisions. Member States will have 24 months to transpose them into national law, giving businesses time to prepare and review current practices.

Poland joins the fight against greenwashing

In Poland, greenwashing is being tackled by the President of the Office of Competition and Consumer Protection (UOKiK), who is conducting a series of investigations into whether businesses using environmental claims in their communications may be harming the collective interests of consumers.

If found guilty, companies will be fined up to 10% of their turnover in the financial year preceding the year in which the fine is imposed.

The UOKiK President may also impose a fine of 2,000,000 złotys on a person managing a business who intentionally harms the collective interests of consumers.

The Advertising Council has also expanded the Code of Ethics in Advertising to include provisions aimed at developing correct pro-environmental attitudes in the activities of advertisers. The new provisions are self-regulatory for industry organisations and companies.

EU steps up consumer protection

Consumers appear to be critical when shopping, increasingly questioning the claims brands are making, and are more likely to point out issues they feel are not transparent. However, the Impact of Trends on the Sustainable Development Goals report published in 2023 by the Infuture Institute shows that 57% of Poles do not know anything about sustainable growth.

To illustrate this situation more clearly with an example from business, if we compared this to a company, it would be as if it had adopted a business strategy for the next eight years, but over half of its employees knew nothing about it.

It is particularly worrying that the poorest results in terms of knowledge of sustainability goals are seen in the 25-34 age group and among women.

Poles prioritise goals that can have a direct impact on their quality of life and well-being. These are:

• Good health and wellbeing
• Clean water and sanitation
• Zero hunger
• Economic growth
• Decent work
• Quality education

To raise awareness of the 2030 Agenda, it will certainly not be enough to run education programmes in business circles alone. Social action based on partnerships between companies and organisations will be needed.

The promotion of greener lifestyles, in tandem with the growing awareness of the dangers of global warming, will also mean that consumers need more protection. Hence the need for action at the EU level.

[1] Commission Staff Working Document, Impact Assessment Report/Proposal for a Directive of The European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, SWD(2022) 85 final