Sustainability or sanction: the EU and its partners tighten their rules against ‘greenwashing’ and the effects are already noticeable

The Directive 2024/825 of the EU aims to “empower consumers for the ecological transition, providing them with better protection against unfair commercial practices and greater information”, as its own title states. Although this regulation will not come into force until 2026, the growing social concern towards what is known by the English term greenwashing has resulted in companies taking greater care of their communications in order to not be accused of ecopostureo and condemned for it. This is evidenced by different studies carried out, among which are the Transparency Index 2024 of Connected Impact and Ringer Sciences.

This report specifies that, after reviewing more than 600,000 notifications from the largest 100 UK companies and 100 US corporations, only 5% of environmental claims were not supported and could therefore be classified as eco-bleaching. In the same line, another recent study of RepRisk recorded a decrease of 12% between July 2023 and July 2024 worldwide, which represents the first contrasted drop in this phenomenon since it began to be monitored in 2019. This study also reveals that the effects of directive seem to be evident, with a reduction in cases of 20%.

However, the negative extreme also grows and forces us not to let our guard down: the aforementioned RepRisk report warns that there is a 32% increase in cases of greenwashing high severity, those that involve deliberate actions to hide violations of environmental, social and governance standards, what is known as ESG criteria. Although they continue to represent less than 8% of the total registered cases, their increase is of significant concern to the authorities.

Improve resources to combat ‘greenwashing’

The deadline for member states to adopt and publish the provisions necessary to comply with the regulations ends in March 2026, while it will be from September 27 of that same year when it comes into force in the European Union. From then on, any environmental declaration that is misleading, inaccurate or exaggerated in consumer communications will be penalized. To prevent this from happening, the law clearly defines how companies must communicate, avoiding, for example, the use of imprecise terms such as biological origin either environmentally friendly without providing verifiable and concrete evidence to justify such statements.

In this sense, the European Securities and Markets Authority (ESMA) has recently presented its reflections in response to the European Commission’s request on risk management of eco-bleaching and the supervision of sustainable financing policies. The body warns in its report that, despite the regulatory framework, the supervisory authorities of each member state are finding limitations in their ability to identify and act on the ecopostureo due to the absence of clear signals, limitations of experience or restricted access to quality data. As a recipe, ESMA proposes to improve human resources, adapt organizational structures for supervision related to sustainability, invest in data and technological tools, integrate risks of greenwashing in risk monitoring and deepen critical thinking skills.

In parallel, the EU’s main partners are also promoting similar measures. This is the case of the United Kingdom and its Green Claims Code. This text establishes guidelines to avoid false claims regarding the environmental impact of products and services. Although it does not have the status of law, there is an organization in the country that can issue orders to modify or withdraw campaigns that do not comply with the standards of the aforementioned code. This is the Advertising Standards Authority (ASA, in English).

So far, 230 litigations have been reported in that country since 2015—47 new cases were filed in 2023 alone—according to the Grantham Research Institute of the London School of Economicswith nearly half of the files resolved in favor of the plaintiff. In this sense, analysts highlight that this situation represents a significant change, since traditionally accusations in the United Kingdom focused on governments and public administration.

Finally, the data also reveal that the movement against eco-money laundering has also had an unexpected guest: such is the effect of social pressure and future legislation that some analysts are already talking about the opposite effect or greenhushing. That is to say, there is a certain tendency for companies that are making progress in terms of sustainability to avoid promoting it for fear of being accused of whitewashing. Its impact would reach, according to the FTSE100 index, 63% of the organizations that are part of its list and 67% of North American firms, which would not be publicly disclosing their improvements in terms of sustainability.