What is Greenwashing, and why should businesses take caution?

Businesses must ensure they do not paint themselves in artificial shades when pushing their environmental credentials.  

It follows the news that Shell has been found guilty of 'greenwashing' with an advertising campaign themed 'ready for cleaner' that breached advertising guidelines. The Advertising Standards Authority (ASA) ruled that the petrochemical giant's campaign was misleading as it omitted essential information on Shell's work with harmful fossil fuels. The adverts were banned from appearing in future media.  

It's the latest such breach to be confirmed by the ASA. Other big-name brands have also faced recent bans on their adverts, including Tesco for a plant-based burger ad, Persil, and two HSBC adverts, all of which were found to be misleading in their claims of environmental benefits. 

The ASA is the UK's independent advertising regulator responsible for ensuring that ads across UK media stick to the advertising codes.  

"Action like this to tackle inflated environmental sustainability claims is only likely to increase in future, as we see rising consumer and investor demands for products and services that fulfil sustainable objectives," said Torion Bowles, Partner and Dispute Resolution Litigator at Warner Goodman LLP.

"Companies who may have selectively highlighted some actions over others, or perhaps slapped a green label on a product, need to be aware their customers will look below the surface to be sure they are not being offered empty promises by brands." 

Corporate greenwashing has also been in the spotlight in the financial services sector recently. The Financial Conduct Authority has anti-greenwashing rules on its agenda and is set to be reviewed later this year for inclusion in its Sustainability Disclosure Requirements (SDR). 

Torion added, "Certainly, larger organisations need to be focused on Environmental, Social, and Governance (ESG) ratings, as this increasingly drives investment decisions in financial markets. This attention will inevitably filter down to smaller enterprises regarding consumer demands."

The term 'greenwashing' was first coined by an environmentalist in the USA during the 1980s but only recently entered common use. Some of the examples highlighted as corporate greenwashing tactics include: 

• Claiming positive ESG processes before progress or results are achieved.
• Cherry-picking product attributes or data and ignoring others which would be deemed 'negative' in environmental terms.
• The misuse of labelling schemes.

The ASA and sister organisation CAP has published guidance to help businesses comply with their codes for broadcast and non-broadcast advertising, sales promotions and direct marketing communications, including postings on social media.   

For more information on the rules and regulations for advertising environmental credentials, please do not hesitate to contact our Commercial Legal team. We will be able to help ensure your business abides by the rules of the Advertising Standards Authority and provide advice should a complaint or claim be made against you. 

Call us on 023 8063 9311 or email our team at enquiries@warnergoodman.co.uk.