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Sep 21, 2023

EU parliament to crack down on greenwashing claims

Proposed ban expected to be voted into law in November

The European Parliament has reached a provisional agreement to implement new rules banning misleading greenwashing advertisements in a bid to protect consumers.

The ban is expected to be voted into law by both the EU parliament and the European Council in November. It proposes excluding key phrases in adverts such as ‘environmentally friendly’, ‘natural’, ‘biodegradable’, ‘climate-neutral’ or ‘eco’ that are used without proof of excellence from a rating agency.

Negotiators at the parliamentary meeting have also agreed to proscribe sustainability labels not based on approved certification schemes or established by public authorities, as well as claims that a product has neutral, reduced or positive impact on the environment without further proof.

Parliament rapporteur Biljana Borzan says: ‘A new extended-guarantee label will show clearly which products last longer, so it will be easier to buy more durable products.

‘We have also negotiated a strong stance on early obsolescence. We shouldn’t advertise products that fail too early. In addition to that, we are clearing the chaos of environmental claims, which will now have to be substantiated, and claims based on emissions offsetting will be banned.’

Increased scrutiny

More regulation coming into effect to tackle greenwashing claims has led to the new phenomenon of ‘green hushing’, whereby companies may deliberately undersell their progress in the ESG area to avoid scrutiny.

How to tackle green hushing was a key theme at this year’s ESG Integration Forum, held in London. Greenwashing allegations are ‘perhaps pushing us into green hushing,’ said Carla Stent, independent non-executive director and board chair at Marex Group, who took part in the opening panel discussion.

Elly Irving, director of stewardship for sustainable investing at Lazard Asset Management, who spoke on a later panel about ESG data, said she was trying to get a sense of the trend. ‘We’ve gone through a phase of greenwashing and perhaps over-marketing or exaggerating some of the commitments,’ she said.

‘We seem to be entering this era now of increasing scrutiny and backlash around reporting from various stakeholders. I do get a sense that perhaps corporates are going to start disclosing a bit less or stick more closely to the minimum requirements.’