Cracking down on greenwashing once and for all?

Today the European Commission, the European Union's executive arm, proposed rules to protect consumers from businesses advertising and selling goods incorrectly labelled as green. The Green Claims Directive (GCD) aims to crack down on greenwashing by regulating how companies substantiate and communicate their green claims. If done right, this proposed new law, could bring some order in the wild west market environment of green advertising, and help protect EU consumers from misleading claims. For the first time, legislation will oblige companies to make supporting evidence available alongside a green claim. Inflated claims by firms about their products’ environmental bona fides have grown along with public awareness of global heating in recent years.

At Reputation Inc, we have been advising clients for over 20 years helping them to drive sustainable value creation for business performance, societal impact and environmental change. We’ve conducted countless interviews with stakeholders of many different businesses to help them better understand perceptions and expectations in relation to their key environmental, social, governance, responsibility, and community topics.

The line between genuine and meaningful sustainable impact and greenwashing is one that, when crossed, can cause serious reputation issues. From damaging customer trust and harming relationships with other stakeholders to legal implications, the risks of greenwashing far outweigh any short-term benefits. Companies that are serious about their environmental sustainability practices and products will focus on genuine and transparent communication with their customers and stakeholders, rather than attempting to deceive them with false or misleading claims.

But unfortunately, there are many businesses out there that are purposely or inadvertently misleading their stakeholders. A recent study by the European Commission found that more than half of green claims are vague, misleading or unfounded. In addition, almost half of the 230 ecolabels available in the EU have very weak or no verification procedures.

We help organisations develop and communicate their sustainability positioning, while embedding it across functions and geographies, and here is some of our key advice to make sure you are doing the right thing when it comes to shaping your sustainability reputation:

To prioritise sustainability, companies need to make investments in renewable energy, reduce waste and emissions, and source materials sustainably. This can be achieved by implementing sustainable practices and technologies, such as using renewable energy sources, reducing single-use plastics, and implementing waste management systems. Companies can also prioritise sustainability by incorporating it into their business strategy and decision-making process, ensuring that environmental impact is considered alongside financial performance.

By understanding the perspectives and concerns of stakeholders, companies can prioritise actions that have the greatest positive impact, improve stakeholder relationships, and enhance their reputation. Reputation Inc’s framework for managing sustainability programmes for our clients is grounded in proactive, transparent, and mutually beneficial stakeholder engagement.

Credible certifications and labels can validate environmental claims and assure customers that a company is genuinely committed to sustainability. Companies should ensure that they use certifications that are reputable and have strict verification processes. To find out more on sustainability certifications and why they are only a small part of effective sustainability, read our recent blog by my colleague Noora Ylijoki.

Companies should be as open as possible on their sustainability practices and report on their progress regularly. This can include publishing sustainability reports that disclose environmental impact data and showcasing sustainability initiatives on their website and social media platforms. To avoid greenwashing, companies should avoid vague or unverifiable claims such as "eco-friendly" or "green" and instead use clear and specific language. This means avoiding buzzwords and jargon that are not clearly defined and providing specific information about the environmental impact of their products and practices. Companies should be using clear and specific language that outlines their environmental impact. This includes providing data on all that they are doing to improve their environmental and societal impact.

By taking these steps, companies can avoid greenwashing and build a genuine reputation for environmental sustainability.  Companies that value sustainability tend to perform better with stakeholders, including customers, investors, and employees. This is because sustainability is increasingly becoming a priority for stakeholders, who want to engage with companies that are committed to addressing environmental and social issues. By prioritising sustainability, companies can enhance their reputation, attract new customers, and build long-term success.